Accepted books of account defeat arbitrary labour deduction caps and unsupported remand on alleged hire charges in works contracts.

Accepted books of account, including labour registers, vouchers, cash book, muster rolls and audited trial balance, could not be overridden by a contractual percentage to cap labour and service deductions at 34% in the first year of a works contract; in the absence of defects in the accounts, the restriction was unsustainable and the issue was decided for the assessee. A remand for recomputation of alleged hire charges was also unjustified because the Department produced no prima facie material to show receipt of such charges; the assessee's denial therefore stood and the issue was again decided for the assessee.

---

---

Issues: (i) Whether the deduction towards labour and service charges could be restricted to 34% of the gross bills in the first year of execution of the works contract. (ii) Whether the alleged receipt of hire charges warranted remand to the assessing officer for recomputation.

Issue (i): Whether the deduction towards labour and service charges could be restricted to 34% of the gross bills in the first year of execution of the works contract.

Analysis: The assessment and first appellate authorities had accepted the assessee's books of account, including labour payment register, vouchers, cash book, muster rolls and audited trial balance. The percentage figures in the contract were only indicative of escalation permitted under the agreement and did not establish the actual expenditure incurred. In the absence of any defect in the accepted accounts, there was no basis to cap labour and service charges at 34% merely by relying on the contractual clause.

Conclusion: The restriction to 34% was unsustainable and the issue was decided in favour of the assessee.

Issue (ii): Whether the alleged receipt of hire charges warranted remand to the assessing officer for recomputation.

Analysis: No material was produced by the Department to even prima facie show that the assessee had received the alleged hire charges. The assessee had denied receipt of such amount, and in the absence of supporting evidence there was no justification for remanding the matter for fresh determination.

Conclusion: The remand on the hire charges issue was unjustified and the issue was decided in favour of the assessee.

Final Conclusion: The remand order of the Tribunal was set aside and the revision was allowed, with both disputed issues conclusively answered against the Department.

Ratio Decidendi: Where accepted books of account establish actual expenditure in a works contract, contractual percentages cannot be used to arbitrarily cap labour and service deductions; a remand on an alleged receipt cannot stand without at least prima facie supporting material.

---