2010 (4) TMI 976 - HC - VAT and Sales Tax

Whether the petitioner, a sub-contractor, is liable to pay tax on the particular turnover, which is ₹ 98,12,479? Held that - In the instant case, the dealer, i.e., the petitioner did not show subcontract executed by it in its annual return on the ground that the same was undertaken by it as a sub-contract and as such, was not liable to pay tax in such work. However, as observed above, rule 14(1)(c) of the Rules provides that such sub-contract work would be allowed as deduction from the turnover of the main contractor subject to production of proof to such contract. Thus, the petitioner having done the work as a sub-contractor, in my opinion, is liable to pay tax on the turnover. Appeal dismissed.

Summary

Issues:
Assessment order on sub-contracts not reflected in the return; Interpretation of rule 14(1)(c) of the Assam General Sales Tax Rules, 1993; Liability to pay tax on sub-contract turnover; Applicability of relevant case laws on sub-contract taxation.

Analysis:

The petitioner challenged an assessment order dated August 27, 2001, regarding 3 sub-contracts worth Rs. 98,12,479 executed with principal contractors in Assam, not reflected in the return due to perceived lack of tax liability. The Superintendent of Taxes held the petitioner liable for tax under rule 14(1)(c) of the Assam General Sales Tax Rules, 1993, despite the petitioner's contentions. The revisional and appellate authorities affirmed this decision, leading to the writ petition.

The petitioner argued that the assessing authority and subsequent bodies erred in misinterpreting the matter, emphasizing the absence of tax liability for sub-contracts. Citing relevant case laws like State of Andhra Pradesh v. Larsen & Toubro Ltd. and DLF Industries Limited v. State of Haryana, the petitioner contended that the turnover from sub-contracts should not attract tax.

Conversely, the standing counsel referenced section 2(9) of the Act and rule 14(1)(c) of the Rules to support the tax liability on the petitioner. The court analyzed the definitions and provisions, emphasizing the inclusion of sub-contractors in the term "contractors" and the deduction of sub-contract turnover under rule 14(1)(c) subject to proof of tax payment by sub-contractors.

The court referenced the apex court's decisions in Larsen & Toubro Ltd. and DLF Industries Limited to establish the legal principles regarding taxation on sub-contracts. It highlighted the importance of proof of tax payment by sub-contractors for deduction in the main contractor's turnover, affirming the liability of the petitioner to pay tax on the sub-contract turnover of Rs. 98,12,479.

Ultimately, the court dismissed the writ petition, upholding the impugned order based on the interpretation of rule 14(1)(c) and the legal precedents regarding taxation on sub-contracts. The judgment reinforced the tax liability of the petitioner on the sub-contract turnover, emphasizing compliance with the relevant tax laws and rules.