2016 (8) TMI 1116 - HC - VAT and Sales Tax

Levying tax at 4/5% on the contractee - failure to comply with Section 22 (3) of the Andhra Pradesh Value Added Tax Act 2005 in deducting TDS from the bills of the contractor - Held that - On a conjoint reading of Rules 18 (1) (bc) and (bd), it is evident that the contractor is required to obtain Form-501-A from the Assistant Commissioner, and supply the same to the contractee; the contractee is required to complete the Form and supply the same to the contractor within fifteen days from the date of each payment; and the contractor is required to submit Form-VAT-501 or Form VAT-501-A, duly certified by the contractee, together with Form VAT 200 by the 20th of the month, following the month in which the payment was received by them. On deducting tax at source from the bills of the contractor, the contractee is obligated to remit the tax deducted at source to the Government. Filing Form-501-A, along with their monthly returns, would enable the contractor to adjust the tax deducted at source, from their bills by the contractee, with the tax payable by them on their turnover. That does not absolve the contractee to deduct tax at source as it is a statutory obligation cast on them under Section 22 (3) of the Act. Assessing authority, while examining whether a part of the turnover on which tax has been levied on the petitioner consists of Inter-State works contracts and pure service contracts, shall also consider whether, even in respect of local works contracts, the contractors had paid tax thereon and, if the petitioner furnishes proof of payment of tax by the contractors on the very same turnover, to then consider whether tax can be levied on the petitioner as it may then amount to taxing the very same deemed sale of goods twice. The amount already paid by the petitioner i.e., for ₹ 4.27 Crores, shall remain with the Department till a fresh assessment order is passed. The assessing authority shall, after giving the petitioner an opportunity of being heard and a personal hearing, pass orders afresh in accordance with law at the earliest, in any event within three months from the date of receipt of a copy of this order.

Summary

Issues involved:
Assessment order under Andhra Pradesh Value Added Tax Act 2005 for failure to deduct TDS from contractor bills, jurisdiction of levying tax on different types of contracts, obligation to deduct tax at source, double taxation concern, remand to assessing authority for fresh assessment.

Analysis:
The petitioner challenged the assessment order levying tax for failure to comply with Section 22(3) of the Andhra Pradesh Value Added Tax Act 2005. The petitioner argued that the turnover subjected to tax included Inter-State works contracts and pure service contracts not covered by the Act. They contended that even if local works contracts were taxed, their liability would be lower than the amount already paid. The petitioner highlighted Rule 18(1)(bc) to argue against double taxation, stating that contractors had already paid tax on the turnover. The Court noted that the Act only applies to Intra-State works contracts, not Inter-State works or pure service contracts. The contractor's failure to seek provisional assessment does not shift the TDS liability to the petitioner for non-Intra-State contracts. The Court rejected the argument that failure to furnish Form-501-A absolved the petitioner from TDS obligation, emphasizing that TDS deduction is a statutory duty under Section 22(3) of the Act.

The Court addressed the concern of double taxation raised by the petitioner. They acknowledged that taxing the same turnover twice could lead to double taxation. The Court decided to remand the matter to the assessing authority to verify if any part of the turnover involved Inter-State works contracts or pure service contracts and whether contractors had paid tax on local works contracts. The assessing authority was directed to consider the proof of tax payment by contractors and determine if taxing the petitioner would result in double taxation. The amount already paid by the petitioner would remain with the Department until a fresh assessment order is issued. The assessing authority was instructed to pass a new order within three months, giving the petitioner an opportunity to be heard.

In conclusion, the Writ Petition was disposed of accordingly, with no order as to costs. The Court's decision clarified the obligations regarding TDS deduction, the scope of the Act concerning different types of contracts, and the potential issue of double taxation. The remand to the assessing authority aimed to ensure a fair assessment considering all relevant factors and proofs presented by the petitioner.