Karnataka High Court
Larsen And Toubro Limited vs The State Of Karnataka Rep By The ... on 2 September, 2009
Bench: D.V.Shylendra Kumar, Aravind Kumar
IN THE HIGH COURT OF KARNATAKA,
"an.
DATED THiS THE 2ND DAY OF SEPTEMBER, 20Q9.:<i=fW'
PRESENT ' R
THE HONBLE MR. JUSTICE D.V.SHYLENDRA--..RUM..§R" '
AND . V
THE HONELE MR. JUSTICE ARAV-IND ' S'
S.T.R.P. No.8 or éooiet '
BETWEEN
Larsen 8: Toubro Limited,
19, Kumara Krupa Road. 1
Banga1ore~56O 001 R
Represented hereiniby '
Mr.V.Venkatara1na.t1a11, 1
Manager -- Indireizjt . J
Petitioner
[By Ad.§f0'Cate]
AND:
The State (it Katfnataizad,'
Represented b'y._the Commissioner
' . Of V-Cémimercial Taxes'.
.AVan_ijya Tizerige Karyalaya,
R .__K;al_ida S'a._Road Crandhinagar,
'13aI11ga1dré:'+56Q'O09.
Respondent
R H R R {By __Sri.A.M.Manjunath, Add1.GoVt. Advocate.)
This petition is filed under Section 23(1) of the KST
Act against the Judgment and order dated 3043-2005
passed in STA.Nos.1263/2001 8: 1264/2001 on the file of
the Karnataka Appellate Tribunal Bangalore, partly
allowing the appeals.
This petition coming on for hearing}:V:Vtiiis.V"'~«day
SHYLENDRA KUMAR J , made the followingfl "
Revision petition underlie 7.the
Kamataka Sales Tax Act, (het=eiriaf_ter:"referred to
the Act, for short) by a registeredliunder the
provisions of this Act the order passed
by the Kainatalga Bangalore order
dated r3o4'6;2£jo5l£§;'i 3263 and 1264/2001.
orders which had come to be
passed by 'the in exercise of its powers under
V. the Actlwherein the assessee's appeal against
order dated 10-9-2001 passed by
the---JoirrtCornmissioner of Commercial taxes in exercise of
under Section 21(4) of the Act had come to be
alioxxied in appeal in the sense that while the Tribunal had
§/
granted some reiief to the appellant dealer in respect of the
subject matter of appeal and in respect of the otheripart of
the appeal which had not been allowed by as
against the order of the Joint Cornrnissio'1ier:;». the p_rese'nt
revision petition.
3. The revision petition been *-a_d'mi:tte'dvitohexainine
the following questions of 1.aw'iasI 'arising outvldofdvthe order of
the Tribunal :
"\?}!"'nether Egon in the
contentions
in:
_ al.1o'w_i_12g; while computing
V ' deduction in
" of depreciation on
H' A' and machinery owned
and used by the Petitioner for
V ll executing the works contracts?
Not aliowing deduction in
V respect of:
(a) Interest charged by
clients;
4
(b) Postage, telephone and
telex expenses; and
(C) Vehicle tax V
(iii) holding that TOT would be.'
leviable on materials supp'li:e<:§jV'e~.:
by clients for 1:;se~in.
of the works contra§e'ts: A i l V
(iv) not taking' note'loft"restrie;ti;jgg§"v
legal scope"'uo'1"» the H
provision of "Se(:'tion _ . 5B A' of ' the I
Act ialag. '6(V1;)(g§'} of the
._ Rulestoh _ levy
tax is""'pei"Ini'a'sib.l.eA without
_ ailoiviiig deduetion of various
veix*pen_eie$4" including those
" _ vlreierr-ec:1.'a'above?
'wrap havxfuelliivheard Srisuryanarayana, learned
for the petitioner and Sri.l\/ianjunath,
lea'1=ned.__v Adfdtional Government Advocate appearing for the
A." 4" * -. respondent State.
a/
5. The brief facts leading to the above petitions are
that the petitioner--assessee/dealer is a construction
company registered under the Companies Ac_t..___ The
petitioner in the course of its business":v:'V"aCtiyi.ties
undertakes various civil construction 9' a,
competitive price quoted by it:"fo'r'"thp_e"._exeention--fofx.'thef'. it
entire work which in the Sales tenned~.»as--.a
works contract and the consecgttience. inso. the Actis
concerned, is when they' dealer'."petitioner'vVexecutes a
works contract, the 'goods involved in
the execution flthe tworliis c«ontraC..t.:V.§étttracts tax liability
underhthe "the Act and the machinery for
determination, o'f_1t'ho" liability is set in motion and
deaier called upon to pay the
V7 2 'cor'resporiding tax.
6.,___'in.,ithAe present case we are concerned with the tax
of the petitioner determined by the authorities for
period 1991-92 i.e., from 1-4-1991 to 31-3-1992 and
~»i992-93 i.e., from 1-4-1992 to 31-3-1993.
V/1
Section, every dealer shall pay for each
year, a tax under this Act on his taxable
turnover of transfer of property in go0ds4.._l~.
(Whether as goods or in some other forjin}: it
involved in the execution of 'A
contract mentioned in column. y(2)7_:ofl_, A
Sixth Schedule at the rates
the corresponding entries in Vcolumn
the said Schedule." S V V S
9. The nature 'e.ffiworksVi_ identified for the
purpose of tax and the~~ra.t:e» at goods involved in
the executioyniof to be subjected to
tax is found ii-1? Scl§i;edu1.e"'JI tdtiié Act.
10: so? activity of the petitioner is
concerried, hmijg regard to the nature of Works contract
«executed by them, the said activity is without
falling within entry Vi of Schedule VI to
V «V thel'.4'Act"--V:gV. Civil Works like construction of buildings,
" Lmidgesyllllroads etc and during the relevant period attracted
-- the rate of 8%.
e//
''*..-4o}
11. The entire exercise being one of ascertaining the
value of the goods passing from the contractor to 7h_iS._client
on the execution of the works contract, A of
which constitute the taxable turnover of*ith-e':deal.er_as:
expression occurs not only in $ecti:onf'5u(b)1 but ii
under Section 2(u)(i) reading as under}
2. Definitions:- (1) Ix:_1__l_l:th.:i_s-..4Ȏ_\ct.," unless?
the context A V
(11-1) "Taxablel the
turnover Ea « be liable
to payas~ de_term.i.nefd making
such' "his:j.tota1 turnover
as may be
13:i*es'c4rib&%:dl,l:l:'." .not include the
turriovervof' or sale in the course
or ti.nter~State trade or commerce or in the
l'co"urs'"e__of of the goods out of the
VA "of India or in the course of
it l the goods into the territory of
In'dia;"l
:f_*alnd'"'-for the purpose of determining the taxable turnover
the legislature having enabled. its delegate to prescribe the
mu)
" . lpijblications.
manner in which it can be arrived at and for such
purposes is designed Rule 6 of the Karnataka Sales Tax
Rules 1957.
12. In the present context as it is
ease of the petitioner as wellfaeeseltheV1feveni1eu.th'at Vthe7.__
relevant provision of the Rulesis'vspiil:1ec1a1ise.'[iv]"
(n) of sub--:ru1e (4) of Rule 6 i§'e:Rule he 6(4j1(i1;{e:v)VlV'ia;;f the main
purpose of ascertaining is sub-
clause (4) and the 'AA-e.1it:'..'-prevailed at the
relevant time' "ivhich'=._inip all '"opeifate..§ in conjunction for
achieving" the _Vdes.i1*ed"«.purpose. We may conveniently
extract only the _1felevantp__epro"visions of the rule as under:
_ f'Rn1eau6(lV]'(C}';7' 6(4](n](iv] and explanation I as
em; page 28'4"(R'u1e 6], 285 (Sub-rule 4), 288 (Clause
iv] and at 291 (explanation - I) of the
20eC3-4;-Of§'[5!t'15¥"edition] of the KST Act edited by Sfi Sathpal
and published by Karnataka Law journal
V
I0
6. Determination of total and taxable
turnover:-
[1] The total turnover of a dealer, for the
purposes of the Act, shali be
aggregate of :-
(a) xxxxxx
(b) xxxxxx
((3) the total amount ..or
dealer as the consideratiori for of}
property in gog.d:S....(wh_ehth_er"asfgoods or
some other form)' it i'vi1ivo1ved the
execution :of__ works iricludes
any paidas. padxfargce dealer
as a"'p<f:1:1""ji of" s;u--ch-- consideration;
6.Détermii1atieia;»:'::_'of total and taxable
_;t"vzr.nove"r.2) :'i'he totai turnover of a
AV'dea]er,.¢Afor thewpurposes of the Act, shail
.. . of :~
he «,[-4) In determining the taxable turnover, the
-- amount specified in clauses (a) to (p) shall,
subject to the conditions specified therein,
ll
be deducted from the total taxable turnover
of a dealer as determined under clauses
to (e) of sub~«ru1e[1].
[a] to (In) xxxxzooor
(11) in the case of works contracts .
in serial numbers 6, 13, 14, 1i_5~,,176,'re.1_8~, :19,*[*i__
20, 21, 22, 23, 24, , ?§8,"29], iV%3i,l V
32, 33, 34,[37,38,39 an[a,4n "o'f.the M
Schedule; . , V . is
(1) to (m)xxxm<xh % 2
(iv) Such» . labour
charges: l not
property in goods
con11'e'ction with the
execution 'of-Wcrks._contract, or
_Explanation.~IA:?_»l For the purpose of
~3,clausVes .an__d[n] of sub--rule (4), labour
other like charges include, charges
A113r:'«~...Vobta:ir1ing on hire or otherwise
i' and tools used for execution of
'Works Contract, charges for planning,
designing and architects fees, cost of
V' -'consumables used in the execution of the
Works Contract, cost of establishment to
12
the extent relatable to supply of labour
and services and other similar expenses
relatable to supply of labour and services:
13. In respect of the detenninationplvjiflofpv
turnover of the dealer for A
referred to above, while the>proces's.of--
tax liability was on, the claimed the
following allovved even in
terms of the Rule, frorni of the works
contract to goods involved
in the worllis ton to the client for the
accounting _period_ 9 .1 -'.~')2':' - __ _ '
f'The revisedv"as'sessment order in respect of ]E'3.C.C
5?Const_ructior1V--Group is as under:
'= 0 _ Total 'c,ont_Ifact receipts Rs. 26,06,10,562-O0
A 1) considered for the
" 'pi-e--assessment order
M dated:20-6~»94
Rs.17,27,65,026-O2
i/
I 3
2] Add:Labour charges
Collected for quarrying,
and extraction of stones
from M/s NFC, kaiga, . _ _
North Kanara Rs. 1,»41,36,213--OQ r
3] Items of expenditure re1etiné'--_tV_
to cost of consumablettrriateriais V
service charges tools .'
tackles, consumijeiifie ._be_ting'
cost of estd., cost of
labour 'V _ V .
RMto9,5s,s»/6.00
- i ii; "Rs. 22,73,59,915«oo
Ta§:ai$1e%5i;;-n;§i;,éi~ Rs. 3,32,50,647--0O
C_1assifi*c:atior1._ cat!'-._'i"ar;xable Turnover:
xjaiue of CiVi'}CQ_1_1t1'aCt
' . _»xrcc_ei:pt_:'iiab1e at 8%
%iRgt;»2,3o,1o,o72~oo 8% Rs.18,»4O,806~0O
'' 'o:fV.I1*;on and Steel used
in the execution of works
" I eoontract
Rs.1,02,40,570v00 4% Rs. 4,09,623-00
RS.3,32.50,647~O0 Rs.22.82,429--0O
U}
14
T.O.T u / s 6«~B on the following Turnovers:
1) Taxable turnover
Rs.2,30,10,072--0O
2)S<=:cond saies of II
schedule items
Rs. 17 57 meg
T.O.Tat1.75°/o 1 t '
" 1is:,'_26F95,864~00
Rs. 2,42,'6t?;7.38-00 A «$35-00%
Total Taxes payable
Adc1:Taxes payabIe"--aS ~, _
in the order};/s 12A_dt, 26g€3--921; 1 1-
in case 0£~Ba;1g'a10ife V.
B'10re \r»r€j1;}:s,ifv'{3?:;c§réj:s%0r1:é§'t A Rs. 2,21 ,61,419--OO
Total Taxes A V Rs.2,48,57,283- 00"
for the accoufiting'periocfi*--.i'¥4§tV1992 to 31«~3~1993:
"Thél faviaadvassessment relating to ECC
I is finalised as under
b'_y_4"V the above facts and
TV reasoris;
I5
Gross receipts Rs. 47,60,51,640~O0
Add: Sales of Scrap
Materials Rs. 25,49,4s1--o§)g
Rs. 4'7,86,01. 1.2_L§0'dAcjis»Vss pp
Less Exemptions Rs. 46, A 4_
Rs, _ 1,67','63;-i?E34V¥C)0* _ it it
Add: Excess expenditure over recaeipitsllp ; '
Admitted to tax during _ _ it p _ '
199293 A
Taxable Turnover ..Q,78,9'5..§8H3L00
Qassification of
l)Works c0ntre,c't._rece1pts' is; 1«s3l~l00 4% Rs. 76,527~0O
relating to_Vl'l';£/s¥EKlE'C. p j. V A'
Limited," 'V-id"e.Vp A A
Govtfil V4 '
dt: 1 1~»'?~'8'6»and-- 3'1{3.--t1"9.S'7.
2) Wcrkrs Coi'1tract"rec'eipts
1-l=s1st:n.g to KER," '''''
A7 ' VBa:{iga.l0I'j'e. -. Electronic
" Rs. 1,55,031-00 10% Rs 15,50:-mo
s3)cost pfstssl used in
Contract works Rs. 5,63,39,798--OO 4% Rs. 22,53,592-00
16
4)Civi1 Contract
receipts RS. 3,60,88,207~00 8% RS. 28,87,057~00
B/F RS. 9,44,96,219--OO RS. 52,32,'6_79--0O
5)W0rks contract Vt
receipts of Structurai
works Rs. 8,49,883--0O 7% 59;V49é.+edO$
6)Sa1e of Steel Scrap &
Items Rs. 24,35,36i;=:4O0:;'4<%$ Rs; fi97}§;ae;a4:uo
7)Sale of Un--servicab1e
articles Rs. 1,14§1a'0-00 zK:7,§88-00
Rs. 9;%?__8.95A,583500'evat._ R§.t53.9t7,573--00
TOT on tl__;e foi1owing""£';I:;rri.:_)_vf'er: if 'A ' _
1]Cost of II dealer "
goods oth.ei"t't3;1a1f_i:' 'dec1taj.1=;g}_ _'
goods'mvo1ved_in]tj<th'e~
executiori' of VVJQvI'1{SA'C0VI1"t.TaCt
the Value
icV:%lec1v._a.r e::<§_ goods out
of thzetaidmitted taxable
V. "va1_ueVV" Rs. 3,90,06.304--00
17
3)Sa1e of un-serviceable Rs. 1,14,120--OO
articles
_ Rs. 5,41,23,546~0O 7
T.O.T 0 2.5% works out to Rs. 1,3,
Total Taxes 4_
Abstract of total taxes payable;
Taxes assessed in case of I ' V
Bangalore Branch for Bangalore
Mysore works as per the n V
Assessment Order
Taxes now assessedi1rcas'e _
ECC--Works Coritract
Total: N _':*Rs;L3",2?;2.Q;'8'22i00
Less:F:V0rrI3-'37'V sale
of Electronicscornpiiterijjeriinherals for
which ..Fonfi33.7 now filed at set off of
'V " _'2°/cv-E O €30/bvide page No. 52,Si.No.2
ofdthis pag¢FAo on P.T.O
'of 1'0;'1_vQ,6:_95--OO) Rs. 20,214-00
Total Tgxeséiayable. Rs.3,27,00,608-O0
.A Th-ed excess payment of taxes if any shall have to be
forward to next year of 199394,
V" Revised Demand Notice shall issue accordingly."
we
\..?'J:
18
14. Even the determination as above by the
Assessing Officer has a history in the sense the Assessing
Officer had not aliowed all such deductions'initialiyiand
the two assessments had made the stibjectijnatter
appeal before the Joint Coinmi.ssioner'i4._'in.voking_:ethe':
provisions of Section 20 of the Actllland
come to be allowed but by is on such
remand the Assessing passed orders
indicating computation'. ja.s.lV--V" above and the
assessee gettiVngf's"ubsta.ntial relijef;
15. timers téhepturn. of the Joint Commissioner to
Exercise his s'uo'r§1otu._A_revisional jurisdiction being of the
opiniong that._:Vthe7' as-selssment orders as passed by the
-Assessing Authoritv on remand were not correct and that
"prejudicial to the interest of the revenue and
therefore' proposing exercise of jurisdiction under Section
:p'"21_ofztihe Act to revise the two assessment orders of the
'Assessing Authority [later done as per the show~cause
..««uotice dated 10--l--200}), (produced as Annexures F1 and
19
F2] as the revisional authority was of the View that the
assessee was not entitled to claim deduction in of
the following expenditure/claims even
provisions of Rule 6(4)(n)(iv} Explanation ~~I-,»
cause notice to the dealer as
permitted by the Assessing__V.Autho1ity =
excluded but to be added the goods
which in turn will _ Atlte %.:_»ei;'l.i"ei31l5l,':lA increasing the tax
liability:
"{b] The assessing. efitemption of tax under
section 63-8 on duty and bank
charges etc; inlallw as indicated below.
1)Sales tax and Rs. 14,58,127.00
2}B?flk,C5.a?"§e9oo . Rs. 3,66,517.00
3)£')_Ve'p;Ifeciationlonjplant and machinery Rs. 96,39,825.00
4)Inte'1'e.s'ti'chaf§ed..s1hy clients Rs. 117,929.00
_ Pohstages ..an§:i telephone,teleX Rs. 5,138,986.00
niti%eie)V*sni¢1ewtsx Rs. 1 79 245.00
Total Rs.1,29,00,624.00"
s/
20
and in respect of the year 1992-98 the following
proposed to be disallowed: it by
" 2.F'ol1oWiI1g are the reasons for 3
Conclusion as noted in para (1) j; l. V
(a) The assessing au.th..ority" yirliile
asst. order in questiolinlias eitemption of
tax on the _ A it
i)Sales tax, _h V. ,
and tax para : is 28,59,383.oo
Rs. 1.71,83, 168.00
V i Rs. 2,00,42,551.o0"
Not yVi'th.st_anding the dealer making a brave effort
*to"avoi--r.:l_'the:lAdditional Tax liability in terms of the show-
cause notice by filing objections etc., was not successful in
fhdoinlg ..so:_ as the revisional authority was of the View that
A {if'thVei'defence raised by the assessee in terms of the reply to
the show--cause notice -was not Very satisfactory for varying
2}
the showwcause notice and the additions to be made to the
Value of the taxable goods and therefore the
proposition and raised demand for ..,Qf
commensurate tax by the dealer," In
dated 10--9«~2001 .
17. Against these Vijwo
authority the appellant dealers' to the
Tribunal under Section}?-2 _
18. Before the dealer again
met with thought it fit to
set aside reyisional Commissioner, in so
far as it dis_al1ovifed'4Vt}_1eexpenses in the nature of sales tax,
on the machinery and the bank
'charges_V4'thereon but did not agree with the contention of
the"assesse'eV..dea1er that the dealer can claim a deduction
towardsthe depreciation also and did not deem it fit even
A Cf Vd'i'scuss the deductions in respect of interest charged by
ciients by advance, postage, telephone, telex expenses and
§/
22
vehicle tax. The above three items are relatable only to the
period 1991-92 but did not Vary the addition tovpvthieyaiue
of the goods as was done by the revisional so
far as the Ievy of turn over tax,
that the Value of the material "
the execution of the works=co.ntract-should':
calculating the turnover not find
acceptance and the V the Tribunal in
this aspect as question"t\E:eQ:;'e:3 as under:
_ .'--'. they justified in
levying theiralue representing
by tHheClient for use in the
exgcuuoniemitsscram;-act:>»
was ansv{fe.red.Vin affiimative and against the petitioner
«_ deaierivfol]owing"-thfzjiidgment of the Supreme Court in the
case, of.__Cooch.._Bihar Contractors Association Vs. State of
WeSt'Ben:§a]Vi'i'eported in 103 STC 477. it is in respect of
such ..orciers passed by the Tribunal in the two appeals
A v~:tj'*hefo1=e it for the two accounting periods the present
23 d
revision petitions on the questions as extracted above for
the examination of the same.
19. Appearing on behalf of the revisicnm» peti'ti:oner
dealer, Sri.Suryanarayan.a, learned counseifép'wou.1dn_subn£1it*__
that in so far as question No.3 or} V
exciusion of the value ofgthe
clients to the contractors dvebdadtable issue
between the ireeping the
question open Awou1d".}.i.1:{e--.. on the
same as S_rii.M§'1junath, dtdlearned it iflovemment Advocate
wou1d:V'dsuVb1*nit»V_by outthat so far as this question
is concerned, it._is':.jnoW..not"on1y covered by the judgments
referjreduto 'Tribunal as indicated above but is finally
. it ""'conciuEded"h.y thevvdjdudgment of the Supreme Court in the
Palak Engineer, C.P.W.D. Bikaner Vs.
Ra}"asth_ari-ifaxation Board, Ajmer and others reported in
1.36 STE L641 holding that such Value of the goods supplied
by"i;h'e client to the contractor which goes into execution of
*-the works contracts though for the very client is
24
nevertheless to be included in the taxable turnover of the
contractor as What is supplied is in the form of as it
is a saie in the first instance by the client to
20.We have examined the facts it
and in the context the applicagbilitvgpfof
judgment of the Supreme Court A..E_§a:jya
case we are of the View that legal position
enunciated by the case there is no
scope for on this aspect by
this Court further into this
question, qu"estion.e'_' is answered in the affirmative
against the assesses. d'ea__Ier'."
_.21. a"That'...1eaves"'.. us with the remaining three
' ."'-qguestions which essentially revolve around the exercise of
of the value of the goods involved in the
exe-c__uti_o=n the works contract by computing the total
zoftother components of the works contract and by
'deducting this total value from out of the value of the
a/
25
works contract. This exercise is necessarily one
warranting the ascertainment of such other deductions to
be made from the value of the works contract of
the statutory provisions and as indicated aboiirel
rule 6(4)(n)(iv) explanation. l V [V l
22. Contentions urged
revision petitioner are as under;
Sri T tcounselllby drawing
reference to thepstatutorjr submit that the
deductions blypthie' dealer and which
have not 'beeln'f---even by the Tribunal are all
deductions_4_lv.rhich'4V'arelilwithin the contemplation of the
p_ statutory pro.ivision__pi11 terms of the explanation I to sub
' r::I'3;use~v.('"v) '_clau.se (n) of sub rule 4 of Rule 6. Submission is
thatlthel the depreciation on plant and machinery
utilised}_ by the petitioner for the purpose of execution of
A the"'~works contract is a part of expenditure which the
aissessee would have otherwise incurred if the contractor
26
should have hired such machinery from an outside source
and for which the contractor has to necessarily "pay the
hire charges within the meaning of the exp}an.:ati_on I
relatable to charge on obtaining on hirefiori
machinery and dealers znachinerjmgsed
Submission is that the
par with this hire charges
explanation I and though isiliotfl:necessaril3r,..an,.item which
was subject matter of the Supreme Court
in 2nd Denke.riey'S_ Supreme Court
was not ce~ase>dV in the context of
--fof reducing the value of other
componeritshh onxw_orks~c:ontract other than the value of the
p_ good}:-3 in p'rin_c1'_ple an expenditure of the like nature
'is"orxe:"covered by clause (cl) of the difference tax on
ded;lutctiori:"perrnitted and as indicated in clauses (a) to (h)
';__of vvllljudgment of the Supreme Court in the case of
A ":lf"'Ciari1jon Dunkerley 8: Co. and others Vs. State of
..«=-V5':
27
Rajasthan and others reported in 88 STC 204 and the
relevant clause is as follows:
" (d) charges for obtaining on_:i1ire"..__orl'
otherwise machinery and tools useCi.._:for'_i=tlll'1.ei' C
execution of the works contract.
and therefore would submit' that it.i_s"a titeni
expenditure both in terms ofl}sub~ciause
(iv) of clause (n) of sub.._r:u1_e'l4 of as per terms of
the judgment of therefore the
Tribunal is _in_ error in «takingp.-tlfielviefi} that as it is not an
expenr_iitlurei'A~ 'dealer in the sense no
payment is" -outside agency by the Contractor it
is not -to be 'allowed for the very reason would submit
Cthat the Joint Commissioner is also in error in thinking
of the Supreme Court in 2116 Dunkerley's
case. did' not enable allowing deduction of this nature. It is
W Mtherefore submitted that both on the ratio of the judgment
"'25d Dunkerley's judgment and the express statutory
"provisions and even on a principle of interpretation such
9%'
28
as what is taxable in an amount attributable to the
execution of works out to be the value of the goods':an<i not
any other components and if it of a profit the
goods alone to be included in terms of _th-eby
the Supreme Court in 2nd Denlgerlieyfs casepla-s'figures.'at
paragraphs 4, 5 and 6 of the-._conclu_sions oli:cur
page 237 of the judgment whixch.l,Va1'e\to lltlielifollovvring effect:
"ii. The on, property in
goods {Whether as in~.sort;vel--l"other form)
involved V the llexecution ., ajvorks contract
falling"xi}iitlii.n':7_the:_anibit~-"ofArticle 366 (29-A)(b)
is__p__levialf)le1.; " involved in the
exec_1J.Atio'n_of_l':ap contract and the value of
goods involved in the execution of
_wor1l{s«.contract-._dvvouid constitute the measure
~ '-ipfor'irnponsiiionof the tax.
In order to determine the value of the
p are involved in the execution of a
it contract for the purpose of levying the
it tee referred to in Article 366 (29-A)(b), it is
permissible to take the value of the works
--'contract as the basis and the value of the goods
involved in the execution of the works contract
29
can be arrived at by deducting expenses
incurred by the contractor for providing labour
and other services from the value of the
contract. _ it V.
6. The charges for labour it
which are required to bev"JdelciucVted
value of the works contract:'.-yiould' cover "
labour charges for the
amount paid to a sub-contractortfordlabour and
services. (iii) charges on hire or
otherwise machinery used for
execution_:of__the:"vvor1ts cjonftract, charges for
planning fees, and (V)
cost {of the execution of
{vi} of establishment of
extent it is relatable to
suplplydtcf services. (vii) other similar
expenses.urelatable supply of labour and
(viii) profit earned by the
to the extent it is relatable to supply
Vof labjcur and services."
Learned counsel would submit that such
p:."V'e2'{p_eriditure incurred by the dealer though is quantified
reference to the depreciation as recognised under
30
other enactment and as computed under other enactments
is nevertheless a deductible expenditure in terms of clause
((1) of the items of expenditure identified by the
Court for such deduction and the assessee--..':If1aVs.e'restricted4_
the claim under ciause (cl) even'-on 'ivt=iiiiVe~.'.iof j
depreciation, only to the
machinery having been depljeyied the puiiposellj of
execution of the works..V_contractt_:inV'th_e sense such portion
of the period during is deployed for
the execution"af':yj' "co'i'ii:ra_l(:1;:Vcfvis-a-vis the entire
year. So far the expenditure such
as vehicle .tax'f, dcphncerned, which was expressly
disallowed by reyisional authority and not even
A_ adyrested to by"the_ _____ "Tribunal, submission is that these are
ail ._expensesv clearly forming part of the cost of
and therefore not only in terms of
expllanaition I which allowed such a deduction as :
" ............. ..cost of establishment to the
_ extent relatable to supply of labour and sewicey
31
and other similar expenses relatable to supply of
labour and services."
but also in terms of the judgment of the Supremecourt in
2nd Denkerley's case and as is indicated in the
deductible charges permitted and as occurred
of the judgment and t1jiereif"ore it
Commissioner was in error in 7._not 'p;erri1itting'vr the
deduction.
24. It is further" ub3Vff_Sri;Suryanarayana by
pointing out to_jth__e leggisla'tiVepjliilstozfik offlule 6 of the Rules
that stands as of now, and at the
relevant lWas"V.on_e"'-in'terms of amendment carried out
by notific"ati_on No.FD 83 CSL 95 dated 5-8-»1995 giving
it._plllretrospective effect from 1-4-1986 and the said
'hailing been brought about only in the wake of
the" judglmelnt of the Supreme Court in the case of 2nd
D'u,nkerIey case and if one should read the explanation as
lllitllprevailed at the relevant time applicable to the two
2 "periods v\n'th which we are concerned, it is virtually
9/
32
verbatim reproduction of the contents of the situation (a) to
[h) discussed by the Supreme Court as at page and
therefore any meaning that can be to
explanation I can only be and should AV
consonance with the understandigngiofd
in terms of clause [a] to (h].»of..tl1e
discussed in 2nd Gannon STC 204)
and as it occurs at therefore submit
that the dealer be entitled
to claim Commissioner
was in_erro_r'* and the Tribunal has
comrnitted 'a "its inaction on this aspect by
not evento' contentions urged on behalf of
p_ theassedssee on"--this_Aaspect. It is therefore submitted that
'the' --..three;'«vother questions amongst the 4 questions
deterrninedi';_ for answering should also be answered in
favour of;_tl3e appellant dealer and in the negative.
":25. On the other hand, appearing on behalf of the
"State, Sri. Manjunath, learned AGA submits that the
.i/
33
Commissioner was fully justified in revising the order
passed by the Assessing Authority; that such a correction
was warranted even in terms of the judgm«eiitf"--«of,,'4the
Supreme Court in the decision of
DUNKERLEYS case (supra); it
the nature of depreciation was A' ddccntenipiation._of
the discussion before the'--v.,:S"uprerne.. . the 121"
GANNON DUNKERLE~Yfs 'Ve_Isiu1"pra); it that" have been
indicated as plausibie d:edi:1etic;'nsLi2ir'riici'i_ can be claimed
from out of Etlie of' for arriving at the
Value of the of the Work
undergfl the all expressly discussed in
paragraphs of tIie.'j':idg.ir:ent:
V 'V regard to the determination of the
u¥a,I_n.e A' the goods which are involved in the
a works contract the submission of
the.'leg1fhed counsel appearing for the State is
it ..tho7tV a more convenient mode for such
' " determination is to take the value of the works
contract as a whole and deduct therefrom the
cost of labour and services rendered by the
(1')
(ii)
(iii)
(iv)
Iv) ,
V. ' V . ty, figtel' etc.'
ii_.(vz)c_ l. f
V -- V (viijfi
34
contractor during the course of execution of the
works contract. The submission of the learned
counsel is that this mode would prevent
of tax. The learned counsel for the "
have submitted that in that event l
deductions should be madefrorn gch¢u;1'ué 'qf'il'l.e, it
entire contract in order to arrive if
the goods involved ekecvution
contract: l V V. l i H
labour charges for exec-u.tion"of works;
amounts for labour
and Semicesyggggg . ., _.
charges; 'for: A " 'designing and
arichiiect"s'_fees';~j\~:.,, at . '
hire the machinery
the execution of the works
ucost V consumables such as water,
_trarc.s:portation charges for transport of goods
place of works;
"'-lggoverhead expenses of the head office and
hrlaranch oflice including rents, salary,
electricity, telephone charges, etc., and
interest charges to banks and financial
institutions:
95/
35
(viii) profits expected on such contract; "
and none of the deductions enumerated asvw..Vpi'ausib1e
deductions as abovehi.e., from Item at
way providing for a deduction in__respect _-of
depreciation even on the basis-pof;'_'_'t'rie it
Supreme Court. Submits 'th_atV..the"
for claiming a deduction attributable depreciation,
even in respect of proipor'-tionete of the plant
and machineiy:emp1cfjred'_by in the course of
the even when oniy
the quantum.defer'-depreciation is claimed by
way hp .' h
26. VVLearned-_AC}£X'v}ould also submit that even Rule 6
,_(4) Expianation I, does not enable the assessee to
of this nature for the simple reason that
thesivord.'depreciation' is not to be found anywhere in the
'*._submru1e':.r/W Explanation I. Learned AGA would therefore,
that neither on the basis of the judgment of
it .'vS5upreme Court in 2116* DUNKERLEYS case (supra) nor on the
@/
36
basis of the statutory provision, the assessee is entitled to
claim a deduction in the nature of depreciatioTn.c.while
computing the value of the goods passing
the course of the execution of a
such deduction being statutorilyziregulatedpand
no scope for claiming a fijiither tldeducticqyi
nature, there is no way of iofficfer allowing .
such a deduction Comrnissioner has
rightly revisedothe order. Authority and
equally to interfere with
the
of such submissions we
are required to questions.
It is V"r1ow«~'history that the Constitutional -48"?
iibygwhich the 'Article' providing for defining the
Words antilphrases used in the Constitution viz., Article
388 to be amended by way of insertion of clause (29
this was in the wake of the various judgments of
Q/
37
the High Court and the Supreme Court indicating the
scope of levy of sales tax in Entry 54 of List 11 in Schedule
VII to the Constitution oflndia. The is:
(supra) viz., originating from the thpég
case of GANNON it
Vs. STATE OF MADRAS 1195;] piss;
Mad. 1130 affirrned by in the
judgment of the s»tm Vs. GANNON
DUNKERLEY at ca. 9 STC 353
and as Courts, while
interpreting"*VtfheV'1.:" of the respective
StatesitgwasdAadvlstibjjecté for considerable heart burn
for Statéx_ who have been eyeing for
bas»}§ettii'igVa better___yi,e1d from levy of sales tax, drawing on
'their p=ower.:frorn Entry 54 of List {I Schedule VII to the
India. The other developments of many
assessetes/'dealers escaping the net of taxation by resorting
' fto Vtnitany avoidable transactions also had attracted the
S" attention of the State Legislatures and it is as a result of
3}»
38
collective thinking on the part of State Governments and
the Union Government that ultimately the definitionof 'tax'
on the sale or purchase of goods came to be
definition of tax on the sale or purchase--~of-- was
inclusive one, which was inserted ass3ubeaI*tic1e"'[2e9--A}tin
Article 366 by the 46th Vtlionstittu-tional :
enable State Governrnents of the
value of the goods 'eveniur:respect of transactions
of the followingynature.':'_>'":h-"' it i l V
"[(366:--. purchase of Iv
it
otherwise than in
of property in any goods
for payment or other valuable
iconsidéravagn; t
- "{5}" tax transfer of property in goods
it goods or in some other form)
.""l'inootiieti1' the execution of (1 works contract:
tax on the delivery of goods on hire--
.. yurchase or any system of payment by
it T.-'installrrtents;
(d) a tax on the transfer of the right to use
any goods for any purpose (whether or not for a
é/
39
specified period) for cash, deferred payment or
other valuable consideration;
(e) a tax on the supply of goods
unincorporated association or body of A4
a member thereof for cash, deferredhlor T'
other valuable consiczleratioir-1;""' A it it ii A
U) a tax on the supply, 'ofor 7-if
any service or in any.'oth_er rncznxrz-er
of goods, being food for
human consurr1p"tio_n oriany:flcZrifz!«;' (whetherhor not
intoxicating}, eeoreservice, is for
cash, deferredi.*"payme':1t-__ valuable
and supply of any
be a sate of those
yoods making the transfer,
delivery,' or and a purchase of those
yyfihgoodshl person to whom such transfer,
or is made;]"
such a definition was found in sub-
V fy article it was obviously corresponding to and linked
it it " to' 54 of the List 11. This amendment by itself was not
significance, unless the State Legislatures gave
expression to this, in their respective sales tax enactment
40
and that is the history of finding Section 5-13 of the Act in
the statute, with which we are directly concemedfln this
Case.
30. Section 5~--B itself was introd'acede'~. T'
Karnataka Sales Tax Act, 1957 of
in terms of Karnataka Act I§§of27 given effedct
1.4.1986. For the purpos§§'~e«e..§f. a5cer'ta.ir1ing taxabte
turnover from out of in terms
of the very Section phras'e..'taxab1e turnover.
Ruie 6 of the 1957, provided
for atuthe same after making the
deduct.t'ons'*pennittted of the Rules. Rule 6 reads
as follows: -4"
V. '£3: "Deter'rniiiation of total and taxable turnover
1}. ».tCta'E_.turnover of a dealer, for the purposes of the
Act,"'shaIl'«':5e aggregate of -
V -- [{aJ".4'the"--Vtotalt amount paid or payable by the dealer as the
Jcortsideratzbn for the purchase of any of the goods in respect
of tax is leviable at the point of purchase under one or
t more of the provisions specified hereunder, where such
9/,
" furchase has taken place inside the State --
-41
(1') Clause (b) of subsection (3) of Section 5;
(ii) Subsection (4) of Section 5;
(iii) Section 6:]
(iv) xxxxxxx;] . _ _ _ T y
(b) the total amount paid or payapie to the
consideration for the sale, idol: any
goods other than those where
such sale, supply or inside
the State: [xxxxxx] eh
(c) the total amount or the 'dealer as the
consideration for goods (whether
as goods ortn .. in the execution
of works» amount paid as
advance to such consideration;
{cl} the ' or to the dealer as the
the right to use any goods for
any purpose not for specified period);
{e} '' total payable to the dealer as the
.VconsE{deratton in respect of goods delivered on hire
V system of payment by installments;] [
(f) . the aggregate of the sale prices received and receivable
'the "dealer in respect of sales of any goods in the
.. Vlcourse of interstate trade or commerce as determined in
it * .accordance with the provisions of the Central Sales Tax
Act, 1956 (Central Act 74 of 1956}, as also in respect of
. 561168 of any goods in the course of export out of th%/
42
territory of India and also in respect of sales of goods in
the course of import into the territory of India. I
[(2) xxxxxx T
(3) xxxxxx] __ A y_ _y y
(4) [x x x x x I In determining the taxableix
amount specyied in clausesffllajlito to
the conditions specified' therein,'-'--Abe deducted
total taxable turnover ofolealer
clauses Had to (e) ofsub--r'ufile'.{:1'}}.,_V l' 2 "l
(n) in case of specified in serial
number.si€i, 1~4,_« ;2f:_il8,,l1"é, 20, 21, 22, 23,
3124, s;4{2s,1":::9_j'2c, 31' , 33, 34,[x x x] 513 7m 38,
i4?i»j_V of schvedule;
7[ A) or receivable in respect if any
good§s,Qf}:erx'than yoods taxable under sub-«section
4A}, or ('1=l3')V'of 'Section 5 which are purchased from
V" dealers liable to pay tax under the Act. I
received or receivable in respect of
."g§oods.V-"specified in second, third and fourth schedules
.""lvhich"are purchased from registered dealers liable to
.. , pay tax under the Act].
it iii) [all amounts received or receivable in respect of
goods] which are specifically exempted from tax under
any of the provisions of the Act;
§/
43
(iii) all amounts paid to sub-contractors as the
consideration for execution of works contract vwhether
wholly or partly: T' T
Provided that, no such decution shall
the dealer claiming deductionyproduzjesi thatnthe
subcontractor is a registered dealer junder~'.,,_
the Act and that megymrnéuerrlicof am¢,tm-is
included in the monthly st:a~terrte'nt»_of returnv'of'turnover,'
as the case may he, f1led_byfsuch sul§4'congtrja5ctor,
(iv) such amounts 'la.b\ol1r»..c'harges and other like
charges 'not of property in
goods connection with the
execution_ or
_.ExplanVa£ioir1 1.; --V~""Il'V'or the purpose of [clauses (m) and
subwuler (4) labour and other like charges
_ include',~. charges for obtaining on hire or otherwise
and tools used for execution of Works
_V charges for planning, designing and
'~arc:hitects' fees, cost of consumables used in the
it eztecution of the Works Contract, cost of establishment
to the extent relatable to supply of labour and services
V
44
and other similar expenses relatable to supply of
labour and services."
As discussed in the earlier part of this as
the appellant/assessee is concerned,
it becomes liable to pay tax on
the execution of a works contracté,'
nature as indicated in Vlvgtolllthe Act.
The subject matter ' that only by
employing and__as ofl...ltP'i'e---l'l'Rules and after
providing for therein, to arrive at
the taxable turnover.
'BUILDERS case in that series of
cases, cha;lleriged._thevalidity of the provisions introduced
in State ""'Ers_aetment's as a sequel to the 46*"
to-the Constitution providing for the definition
as Article 366 (29A) it was made clear by the
lfi_SupI'€'3Tlll1A€1 Court that even after the 4631 amendment, the
of Entry 54 in List ll has not changed in any way,
,, 'fut it remains the same and the only improvement if at ally
45
is to enable State Legislatures to levy tax in respect of
transactions wherein the value of the goods passing in the
execution of an activity such as a works contra+::jt'as:'l.in, the
present case was earlier not possible even
lst DUNKERLEYS case, but
enabled by a combination of '
further amendment to the Sales but
all that can be done eiriercise for levy of
sales tax is within the on the value
of the goods
suchdldhistorical background and
legislative subsequent judgment of the
Supreme law on the subject in the
- the charging Section found in the
of the States will be sustainable only
if it"««confines' the charge, on the value of the goods involved
eziecution of the work and levy is only when such
goods are sold and nothing beyond.
BE/
47
absent either in Rule 6 particularly, Explanation 1 to sub-
rule [4] of Rule 6 or even in the judgment of the $i1pr.eme
Court in the 2nd GANNON DUNKERLEYS
on this aspect at page 233 and
inclined to examine the
Sri.Surya:'1arayana, learned' for
assessee, for the reason .V_Ventire--VV:e:;:ercise for the
purpose of levy of tax 9(5)' of the Act is only
to ascertain the in respect of
which title to the client on the
executionVoI'~the:«1.:yorlt,:'.' cannot be on anything
over the goods, not even by a pie !
Even assuzniiig tl1_att.Ri1le 6 when read in its entirety does
A' n.ot_;*3coniain the...__W0rd 'depreciation', but nevertheless
should-~.__neces'sarily take the hue from the permitted
deductionsf indicated by the Supreme Court in Clause
'~.__{d) at page 235 of the judgment which reads as
A ":f""chEuj_ges for obtaining on hire or otherwise, machinery and
tools used for the execution of the works contract" and
@/
48
examining the scope of Explanation I to sub--rule (4) of
Rule 6 of the Rules construed in this backgrouhridpg and
answer the question. We say so, for the reason.'
the goods of the assessee for of
the works contract, which the
have hired the machinery and..tools;~
own. machinery and tools execution
of the work, the worn down and
depreciates in value the value of
the contractfi. by the contract
factoring._thi's..tXrear machinery and tools as
a for the execution of the works
contract, Val'u._e'o_f proportionate wear and tea}: of
g_ thenaachinery vvhic_h.is otherwise identified as depreciation
has-i:v'necessariiy permitted as a deduction on the
piertiise it is equivalent to the hire charges as is
'i._ppotherwis'e provided in clause (d) and for such purpose one
"has"t«o understand the same even in terms of the language
Explanation I as quoted above and particularly, to be
9/
49
one Within the scope of "other similar expenses relatable to
supply of labour and services. "
35. We find the submission of Sri.Suryanyaraya,r1a,
learned counsel for the appellant for
acceptance,' for the reason that Section'5ffi.::Q1'fthe'
only as a sequel to sub~c1ause:::[bH)::of of
Article 366 which reads as a the
property in goods {whether forth}
involved in the executiorlof Cl. works Cyontract:
86. Whi1e.:a1evy;_'of of natnre, as indicated in
clause'r,[b) 'is Vriejv-erlth4eles's 'a' tax on sale or purchase of
goods, though tnay not be identifiable for such
é_ purfinose' on 'the,,__e_xecution of the works contract. A
r coInbination:"of_ Article 366 clause (2923) (b) r/W Section as
of iihe enabled such a levy to be sustainable
but the limits of Entry 54 of List 11, the provisions of
A $ect~i_on 58 remains sustainable and does not become
unconstitutional. This is achieved only if the charge is
50
confined to the property in goods involved in the execution
of the works contract and nothing more than that.'e'Tlte.is for
this reason, than for any other thing, such
been factored in determining the value
than the value of the propeirtyl j.
necessarily excluded and to * the
for deduction towards proportion_ate_deijreciation is a claim
even akin to and the charges for
obtaining on hire or and tools used
for the notwithstanding
the fact__the does not figure either
in the the course of the judgment
of the Sufnfenie GANNON DUNKERLEYS case
, é_ V.Ru;le,_6_.of the Rules.
_ for this reason that we cannot accept the
._ learned Addl. Govt. Advocate that the
'V rulehééllngotgghailring expressly enabled the dealer to claim a
V' '..fdedu.ction of this nature, the assessing ofiicer was not
in permitting a deduction of this nature and the
@/
51
revisional authority was right in allowing the deduction.
We have to bear in mind that the exercise in Rule
6 is only for the purpose of
section 5-13 of the Act and for effectuatingv
under Section 5--B and that éexetepedivvthe
limits of Entry 54 of List II.-.___u Until_"'and
components in the value of contr5actVf:other than
the value of the __passing from the
contractor to the client' of works contract
are all _'-:~_ttie:; does not fit into the
definitiOflVv9f~s::i1t}<:iiiliticle 366 and if it is not
so, the judgment and the law as
declared VVin_6ttheVV' 1_~°.ii'il§};1l£l;\I!1'\lON DUNKERLEY's case, springs
intot, aefion _____ lenders Section 5-13 of the Act
' uncons_titution.a1 I On the accepted Rules of interpretation,
Rule 6 is expressly provided for effectuating the
chargeyllunder Section 5--B has to be necessarily understood
A "16.' "_and"~«interpreted within the scope of Section 5% of the Act
and only for the purpose of effectuating it as per the
®/
52
Section but not to so interpret it to render it ultra vires the
Section. If we should understand the Explanatioirto sub-
rule (4) of Rule 6 as contended by the learned-
no doubt such a contention is a very live
any other situation perhaps
been accepted, but the subn1i_$S1§;1.céinnot»pfi§:'#&?gp;ted
the purpose of Section 5-B Act, has anfjunderstanding
of this nature would ':'5jpB ofid the Act itself
unconstitutional. _ V
38. it reason such a limited
meaning to accept the meaning to the
explanationas by Sri. Suryanarayana, learned
counselp for 'the 'petitioner. Therefore, We are of the definite
. "*.rieWV.th'at Both theméommissioner and the Tribunal were in
the claim made by the dealer, towards
proportionate depreciation of the machinery and tools to
the extent they have been exclusively used for the
"'eXecution of the Works contract and owned by the dealer.
53
39. While the extent of usage of machinery and tools
in the execution of any contract is dependent on facts and
has to be worked out in each case and on
ail aspects of the matter, it is it
Suryanarayana, learned counseiq in it. ,,
the instant case such exercise hadflheen
accepted by the assessing _ . l
40. Therefore, tofnecegssarily proceed on
such finding of fact --~ Joint
Con1rr1issio_Ii1.er4 » it appellate authority ~
assessing officer on their
understanding' of the Supreme Court in
GAI\ZNQI_V case [supra] read with the
provisionlsllof ru1e--6 of the rules and as we have
A"'i.nt?'§lCEtt€vCi'*«.J&bOEi'€ such an understanding having the
possibiEity'~uo'fl rendering the section itself unconstitutional
it "being a settled principle of interpretation that any
'statutory provision should be so understood so as to
l "render it constitutional if that is one way of understanding
a/"
54
a statutory provision and if there is no way of
understanding the statutory provision -in that 'then
the section becoming unconstitutional and
to be avoided and there being a
the explanation -- [X] to sub--rule[r§']
discussed above, we accept'lthi_s opltion for
scope of the explanation in l_laWVLdeclared by
the Supreme Court in case [supra]
and accordinglygnswer"oiiiiestionphlgltulllll the negative, in
favour of the against revenue.
in the nature of interest
chargedirby' client postage, telephone and telex
expenses dealer as also the vehicle tax said
Vhavefbeen respect of the vehicles exclusively
A'-used byf-«tvhelV.i'contractor in the execution of the Works
contract' andlduring the period for which the vehicle had
Jb.eer_1 used, such charges undoubtedly come within the
,.'_scope of cost of the establishment of the contractor to the
"eirtent it is relatable to supply of labour and services. On
§/l
'\_v_'
55
this aspect of the matter, white the revisional authority
disallowed the same. in the appeal of the dealer, the
Tribunal has not even discussed about it, but
allowed the finding of the Commissioner to 5
42. Be that as it may, we have"'to.::examine this
question also with reference to the p1*;ncip1e's jlaidtidowigr in
GANNON DUNKERLEY's ca'se_"{supra} and it:iAse.i.p4reVciseiv as:
this reason Sri. learned Additionai
Government Advocate _ that while the
assessee -- cont:actcir';tti'1i1';: GAi\TNO?\F«v:iI}UNKERLEY's case
[supra] had.je1aim4ed_g'de'duct_ions of the nature such as
overheadexpenseses"occurring at S1. Nos. [vii] and [viii] in
subjparagraph at page 233 of the said Judgment
. ihanvd therefore' submit that the supreme court also
.A'at1owed such deductions to pass or to be
permittech-.iA«:'~'the claim towards deduction in respect of
interest' s charge, postage etc., being like or identical
*oh'arges, cannot be permitted and the Commissioner has
56
rightiy revised the assessment order to disallow the
deduction in respect of such charges.
43. Submission that non~examinatioI'i--«l..'_:
Tribunal is of no consequence asmonce
has taken the correct view, it
afilrmed by the Tribunal therefore
warranted etc., is not a accepted
for the reason that had occasion to
discuss the claim under. 1 [viii]. We may
indicate such charges
even of clause [fl which is
cost 'the contractor to the extent it is
relatable tohsupply of labour and services and also clauses
. fig] and at rate are all expenses in the nature of
covered under clauses [f], [g] and [h] occurring
at page__i23,i3' of GANNON DUNKERLEY's case [supra]. If so,
to be inevitably allowed as deductible expenditure
'fs1'"a;rriving at the value of the goods as otherwise there
it "inlay be possibility of levying tax under section 5~8 of the
$//
57
Act on an amount over and above the actual value of the
goods which should be avoided under all circumstances to
retain the section within the limitations as pre_Vscifib:e'du by
the constitutional provisions.
44. It is therefore we are of~the--vievv that 'thjettasisesvsee j
is entitled to claim deductions of_.such«.
charges and accordingly we ques.ti{)n"":}.§fo.2'V' in the
negative and against the reve'nue.§ 1'
45. We are of "jastsessing authority
was right .deiC.uctions. in the light of the
View taken', the@sw*e'rs'"to'questions 1 8: 2 as mentioned
above being .,answeredz_"..'i'in favour of the assessee, the '
'_ question *au_tomatica11y answers in favour of the
'assess'e¢"a{nd"a.gainst the revenue.
4.6.' the resuit, the petition is allowed. The
.vyy."Ju.dgment of the Tribunal is set aside to the extent
§/
'' 'indictated above. The parties to bear their own costs.
58
47. We place on record our great appreciation of the
erudite manner in which Sri. Suryanarayana,'e':'l'e=:a1'r1ed
counsel for the petitioner has presented thc~~-c'aVse__i'the
petitioner before us and has illuminated of
the entangled provisions of the s:ales.ita2; the
background of the constitutionaléwprovisions'
law. .. . . _ . .
48. We are to counsel for the
petitioner and the v;g:os2'ernznent advocate
for the Very effective
the ticklish questions
that arose' and we place on record our
appreciationof presentation.
.....
JUDGE Sd/3 JUDGE sbb/. pg 1.32, "'NG*,ANi-