TaxTMI 
TaxTMI 
TaxTMI 
2014 (7) TMI 700
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....a, North Kannada District, for construction of project for M/s. Nuclear Power Corporation Ltd., a Government of India undertaking. As per the then existing provisions of section 12E of the KST Act, 1957, a separate registration was obtained for the unit deployed at Kaiga and tax compliance was being furnished to the Deputy Commissioner of Commercial Taxes (Assessments), Dharwad. The petitioner has filed returns in respect of the execution of the works contract. Apart from other deductions claimed, the petitioner claims (i) disallowance of deduction claimed on expenses relating to own machinery and equipments deployed in the execution of works contract for construction of the project for the Nuclear Power Corporation Limited at Kaiga, from the total turnover under rule 6(4)(n)(iv) read with Explanation-I of the KST Rules, 1957; (ii) Disallow ance of claim to deduction of establishment expenditure of the head office at Chennai and the regional office at Mumbai relatable to supply of labour and services in connection with the execution of the aforesaid contract under rule 6(4)(n)(iv) read with Explanation-I of KST Rules 1957; (iii) for the assessment years 1998-99 disallowance of dedu....
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....sons, the order requires to be interfered with. Per contra, the learned Government Advocate supporting the impugned order contended that the word "otherwise" after the word "hire" has to be understood in the context of the rule of ejusdem generis as rightly held by the Tribunal and if so interpreted, the assessee is not entitled to any deduction in respect of the machinery and equipment employed by them as owners. Though under Explanation-I, the assessee is entitled to charges for planning, designing and architect's fees, assessee has not put forth any claim. The assessee is claiming a percentage of the total extent incurred in the head office and regional office, which is not permissible in law. Rightly, the authorities have rejected the said deduction. Lastly, it was contended that though the excess labour charges can be carried over to the next year, the condition precedent for such course is, first there should be a claim by the assessee and the assessing authority should pass a specific order for carrying over the excess amount, which in this case is missing and therefore, she submits no case for interference is made out. In the light of the aforesaid facts and the rival....
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.... or (v) such amounts calculated at the rate prescribed in column (3) of the table below, if they are actually incurred towards 'labour charges' and other like charges and are not ascertainable from the books of accounts maintained and produced by a dealer before the assessing authority: ... Provided that where the turnover of a dealer claiming deduction under clauses (m) and (n) in any year is not sufficient to cover the deduction, it shall be allowed to the extent of the turnover of the dealer in that year, and the balance shall be carried forward to the year following next and so on." From the aforesaid provision, it is clear that for the purpose of clauses (m) and (n) of sub-rule (4) labour and other like charges include charges for obtaining on hire or otherwise machinery and tools used for execution of works contract. The argument is the word "otherwise" should be interpreted to include only charges in the nature of hire and nothing else. When an assessee purchases machinery and uses the same for execution of works contract, he is not entitled to any deduction towards labour charges as he has not paid any amount by way of hire-charges and therefore, the assessee is....
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....g of the general words. It is essential for application of the ejusdem generis rule that enumerated things before the general words must constitute a category or a genus or a family which admits of a number of species or members. It is requisite that there must be a distinct genus, which must comprise more than one species. The specific words must form a distinct genus or category. If the specified things preceding general words belong to different categories, this principle of construction will not apply. Further, mention of a single species does not constitute a genus. If the preceding words and the general words in question constitute description of two categories or general or the general words in question in themselves constitute description of a distinct category, the rule will have no application. The rule of ejusdem generis has to be applied with care and caution. It is not an inviolable rule of law, but it is only permissible inference in the absence of an indication to the contrary and where context and the object and mischief of the enactment do not require restricted meaning to be attached to words of general import, it becomes the duty of the courts to give those word....
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.... hire or by paying charges. Therefore, the assessee is entitled to such amounts equal to labour charges and other like charges. That may be measured with reference to the hire-charges paid and in the case of machinery acquired by purchase, the labour charges are to be calculated. Keeping in mind the hire charges paid for such machinery if it had been taken on hire and also the labour charges, which would have been incurred if the assessee does not possess the said machinery or equipment, the same could be calculated. Therefore, the word "otherwise" clearly signifies that entitlement of the assessee to the deduction of labour and other like charges as the machinery was actually involved in the execution of the works contract. Any other interpretation would run counter to the law declared by the apex court in the case of Gannon Dunkerley & Co. v. State of Rajasthan reported in [1993] 88 STC 204 (SC). In fact the relevant portion of the said judgment is as under (pages 233-235 in 88 STC): "With regard to the determination of the value of the goods which are involved in the execution of a works contract the submission of the learned counsel appearing for the State is that a more conve....
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....oods in the execution of a works contract is not different from that of a dealer in goods who is liable to pay sales tax on the sale price charged by him from the customer for the goods sold. The said price includes the cost of bringing the goods to the place of sale. 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. The charges mentioned in item No. (vii) relate to the various expenses which form part of the cost of establishment of the contractor. Ordinarily the cost of establishment is included in the sale price charged by a dealer from the customer for the goods sold. Since a composite works contract involves supply of materials as well as supply of labour and services, the cost of establishment of the contractor would have to be apportioned between the part of the contract involving supply of materials and the part involving supply of labour and services. The cost of establishment of the contractor which is relatable to supply of labour and services cannot ....
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....ks contract and under article 286 (3) (b) Parliament has been empowered to make law specifying restrictions and conditions with regard to the system of levy, rates and other incidents of such tax. Therefore, in the case of a works contract, it is now possible to tax the value of the goods involved in the execution of the works contract and therefore, what the assessee has to pay under the Act is only tax on the value of the goods and the assessee is entitled to the benefit of deduction in respect of the remaining portion of the cost involved in the execution of the works contract. If that principle is kept in mind, when an assessee instead of taking the machinery and tools on hire, he purchases the machinery and tool and employs them in the execution of the works contract, he is entitled to deduction, which represents the labour charges, in substitution of which the machinery and tools were employed. The same cannot be denied to him. Therefore the findings recorded by the authorities on this aspect cannot be sustained and the assessee is entitled to deduction even in respect of his own machinery employed in execution of the works contract. However, the question is; when own machine....