Works contract turnover must be computed only under the statutory deduction rules; arbitrary valuation methods are not permitted.

Taxable turnover in a works contract under the Tamil Nadu VAT Act, 2006 must be computed strictly under Section 5(1) read with Rule 8(5) of the Tamil Nadu VAT Rules, 2007. Only the deductions expressly permitted by the rule, including labour and other charges actually incurred or the prescribed percentage where those charges are not ascertainable, can be allowed. An assessee cannot use an arbitrary estimate or add a notional gross profit to purchases, and deduction for payments to sub-contractors depends on proof of the statutory requirements. The assessment was upheld, and no interference in writ jurisdiction was warranted.

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Issues: Whether the assessment of taxable turnover in a works contract under the Tamil Nadu Value Added Tax Act, 2006 and the Tamil Nadu Value Added Tax Rules, 2007 was liable to be interfered with in writ jurisdiction.

Analysis: The taxable turnover in a works contract has to be determined strictly in accordance with Section 5(1) of the Tamil Nadu Value Added Tax Act, 2006 read with Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007. Only the deductions specifically permitted under Rule 8(5), including labour and other charges actually incurred or, where not ascertainable from the books, the prescribed percentage, can be allowed. The dealer cannot determine taxable turnover by adopting an arbitrary estimate or by merely adding a notional gross profit percentage to purchases without furnishing the particulars required by the rule. The deduction for amounts paid to sub-contractors is also conditioned upon proof of the statutory requirements. On the facts, the petitioner failed to show any legal infirmity in the assessment, and the additional TDS adjustment and issuance of a corrigendum were directed only as consequential administrative steps.

Conclusion: The assessment was upheld and no interference in writ jurisdiction was warranted.

Ratio Decidendi: Taxable turnover in a works contract must be computed only in the manner prescribed by Rule 8(5), and an assessee cannot claim an arbitrary or notional method of valuation contrary to the statutory scheme.

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