TAX VALUE BASED ON PROFIT & LOSS ACCOUNT OR ACTUAL COST

[RV PERUMAL]

MY CLIENT IS ONE OF THE WORKS CONTRACT SERVICE PROVIDER. FOR THE YEAR 2016-17, HE PAID THE TAX IN 60:40 BUT AS PER THE AUDITED PROFIT & LOSS ACCOUNT THE DEPARTMENT DEMANDED TO PAY SERVICE TAX BECAUSE THE COST OF MATERIAL IS LESS THAN 60%. THE DEPARTMENT HAS ASCERTAINED THE PURCHASE VALUE FROM THE BOOKS OF ACCOUNTS. ACTUALLY THE PURCHASE IS CORRECT. WHETHER ANY WAY TO PROVE 60% IS THE RIGHT ONE OR NOT? IF ANY JUDGMENTS OR NOTES AVAILABLE PLEASE PROVIDE

AI Summary

Tax Department Demands Additional Service Tax from Contractor for 2016-17; Dispute Over Valuation Method and Exemptions A works contract service provider faced a demand from the tax department to pay additional service tax for the year 2016-17, as the cost of materials was less than 60% according to the audited profit and loss account. The provider had initially paid tax using a 60:40 method. A respondent explained that the valuation should be based on actual figures, and if not possible, the deemed sale method can be used. The burden of proof for exemptions lies with the taxpayer. Another respondent argued that the purchase price in the profit and loss account should not determine additional tax liability.