2016 (1) TMI 1420 - HC - VAT and Sales Tax

Adjustment of TDS - Adjustment of tax deducted of the amount so deducted from the main contractor towards tax arrears due by the petitioner - rejected on the ground that there is no provision under the Act for such adjustment of tax - HELD THAT - The amounts paid to the sub contractor by the principal contractor which had already suffered tax in the hands of the principal contractors and that therefore the turn over once again could not be subjected to tax in the hands of the sub contractor and if it is done it would be a case of double taxation. On that reasoning those petitions having been disposed of - The same principle will apply to the present case on hand. The respondents are directed to adjust the tax already collected from the principal contractor in respect of the liability sought to be fastened on the petitioner - Petition disposed off.

Summary

Issues:
1. Adjustment of tax deducted from main contractor towards tax arrears due by the petitioner.
2. Applicability of double taxation in the case of sub-contractor.
3. Availability of remedy through filing an appeal.

Analysis:
Issue 1: The petitioner sought adjustment of tax deducted from the main contractor towards tax arrears due by them. The court noted that the respondent authority rejected this request citing the absence of a provision under the Act for such adjustment. However, the court referred to a previous case where it was held that amounts paid to the sub-contractor by the principal contractor, which had already suffered tax, should not be subjected to tax again to avoid double taxation. Therefore, the court directed the respondents to adjust the tax already collected from the principal contractor in respect of the liability on the petitioner.

Issue 2: The court addressed the issue of double taxation in the context of sub-contractor payments. Referring to a previous Division Bench decision, the court emphasized that if the turnover had already been taxed in the hands of the principal contractor, subjecting it to tax again in the hands of the sub-contractor would result in double taxation. The court applied the same principle to the current case, highlighting the importance of avoiding double taxation in such scenarios.

Issue 3: The learned Government Advocate suggested that the petitioner could seek remedy by filing an appeal, implying that the petition may not be tenable. However, the court deemed the nature of the issue as one that could be resolved by the court itself. Despite the availability of an appeal process, the court decided to address the matter directly and directed the respondents to make the necessary adjustment regarding the tax collected from the principal contractor for the petitioner's liability.

In conclusion, the judgment emphasized the prevention of double taxation in the case of sub-contractors and directed the adjustment of tax already deducted from the main contractor towards the petitioner's tax arrears. The court's decision highlighted the significance of addressing tax-related issues to ensure fairness and avoid unjust taxation practices.