2014 (7) TMI 321

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....ce is termed as a works contract, and the consequence insofar as the Act is concerned, is when the dealer like the petitioner executes a works contract, the value of the taxable goods involved in the execution of the works contract attracts tax liability under the provisions of the Act and the machinery for determination of the tax liability is set in motion and quantified, and the dealer called upon to pay the corresponding tax. The petitionerdealer, who was assessed by the Commercial Tax Officer I, Kadapa, for the years 1998-99, 1999-2000 and 2000-01 was granted exemption in the turnover of Rs. 8,79,695 under the following heads: 1. Depreciation on vehicle : Rs. 1,41,855 2. Maintenance expenses on tipper : Rs. 3,37,423 3. Consumables : Rs. 4,00,417     : Rs. 8,79,695 The Deputy Commissioner, Commercial Tax, Chittoor Division revised the order of the assessing authority and issued a show-cause notice, dated April 21, 2003, proposing to restrict the deductions allowed by the Commercial Tax Officer on the ground that the petitioner is not eligible for deduction in the turnover under the heads, viz., depreciation on vehicle....

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.... of the Rules, since the same has to be interpreted strictly. The petitioner/assessee has not put any efforts to establish the depreciation on vehicles, the expenses incurred and the cost of consumables. Under rule 6(2)(f) of the Rules, exemption can be claimed to the cost of establishment of the contractor to the extent it is relatable to supply of labour and services. Under rule 6(2)(d) exemption can be claimed towards the charges paid for obtaining the machinery and tools used in the execution of the works contract on hire, but not otherwise. Therefore, the impugned order does not call for any interference. The question that falls for consideration in these tax revision cases is whether the dealer, who is executing the works contract, is entitled for the deduction of amounts pertaining to the depreciation on trippers, maintenance expenses of trippers and consumables, used in the execution of works contract under rule 6(2) of the Rules or not? Section 5F of the Act, which deals with levy of tax on transfer of property in goods involved in the execution of works contract, is as follows: "5F. Levy of tax on transfer of property in goods involved in the execution of works c....

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....ccepted the contention advanced by the assessee/contractors, that the value of the goods for levying the tax can be assessed only on the basis of the cost of acquisition of the goods by the contractor. It was further held that the assessing authority has to take the value of the works contract as a whole and deduct therefrom the cost of labour and services rendered by the contractor during the course of execution of the works contract. Similarly, for the purpose of ascertaining the value of goods which are involved in the execution of a works contract for the purpose of imposition of tax, the cost of transportation of the goods to the place of works has to be taken as part of the value of the said goods and ultimately concluded under conclusion Nos. 4 and 5 as under: "(4) The tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract falling within the ambit of article 366(29A)(b) is leviable on the goods involved in the execution of a works contract and the value of the goods which are involved in the execution of works contract would constitute the measure for imposition of the tax. (5) In order to determine t....

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....inery and tools as a consequence of using them for the execution of the works contract, the value of the proportionate wear and tear of the machinery which is otherwise identified as depreciation has to be necessarily permitted as a deduction on the premise that it is equivalent to the hire charges as it otherwise provided in clause (d) and for such purpose one has to understand the same even in terms of the language of Explanation I as quoted above and particularly, to be one within the scope of other similar expenses relatable to supply of labour and services."; and further, rejected the contention advanced by the learned Additional Government Advocate that the rule not having expressly enabled the dealer to claim a deduction of this nature, the assessing officer was not right in permitting a deduction of this nature and the revisional authority was right in allowing the deduction; and, accordingly, answered question No. 1 in favour of the assessee. In the case on hand, we are concerned with the interpretation of rule 6(2)(d), i.e., the charges for obtaining on hire or otherwise machinery and other tools used for the execution of the works contract. Normally ejusdem generis....