2023 (5) TMI 753 - HC - VAT and Sales Tax

Levy of additional tax - valuation - works contract - deduction of depreciation on machinery and tools - claiming of excess deductions on account of expenses and profit elements or not - HELD THAT - It is crystal clear that notwithstanding the fact that there was no specific provision in the Act, 2003 qua deduction of depreciation in plant and machinery while computing taxable turnover on works contract at the relevant time still, keeping in view the principles as laid down in Gannon Dunkerley Co. s case 1992 (11) TMI 254 - SUPREME COURT which had been interpreted by different High Courts in the above cited authorities, the said provision is to be interpreted to mean that the deduction for a claim in the nature of depreciation on account of use of plant and machinery was in contemplation of the discussion before Apex Court in Gannon Dunkerley Co. s case. We also consider it relevant to mention here that the principles of law as laid down in Gannon Dunkerley Co. s case were not discussed in Thampi Company s case 2009 (6) TMI 960 - KERALA HIGH COURT . Therefore, the Tribunal while allowing the appeal filed by the respondent-assessee and allowing deduction on account of depreciation of plant and machineries made by the respondent-assessee by observing that the said deduction would cover charges for obtaining on hire or otherwise machineries of the assessee cannot be held to be at any fault and therefore the order passed by the Tribunal deserves to be upheld. Since this question of law had been raised in all the five instant appeals, therefore, the same stands answered in favour of the respondents-assesses of these appeals and against the appellant. Appeal dismissed.

Summary

Issues involved:
The judgment involves the interpretation of the Haryana Value Added Tax Act, 2003 regarding deductions claimed by the respondent-assessees in works contracts, specifically focusing on deductions for depreciation in plant and machinery, financial expenses, and other related expenses.

VAT Appeal No. 178 of 2017:
The respondent-assessee, engaged in works contracts, claimed deductions for depreciation in plant and machinery for the Assessment Year 2010-11. The revisional authority disallowed the deduction, leading to an appeal by the assessee. The Tribunal allowed the appeal, prompting the revenue to challenge the decision. The main issue was whether depreciation on plant and machinery used in works contracts could be considered for deduction. The court referred to previous judgments and held that such deductions were permissible, upholding the Tribunal's decision.

VAT Appeal No. 128 of 2019, VAT Appeal No. 267 of 2019, and VAT Appeal No. 281 of 2018:
These appeals involved deductions claimed by the assessee for financial expenses like bank interest, postage charges, telephone, fuel, and lubricants, which were initially disallowed by the revisional/appellate authority but later allowed by the Tribunal. The court determined that these expenses fell within the scope of the cost of establishment of the contractor and were relatable to the supply of labor and services, hence upholding the Tribunal's decision to allow these deductions.

Conclusion:
The court dismissed the appeals filed by the revenue, upholding the decisions of the Tribunal in allowing deductions for depreciation in plant and machinery as well as financial and related expenses incurred by the assessee in works contracts. The judgment clarified that such deductions were permissible under the principles laid down in previous cases and were in line with the interpretation of the law regarding works contracts under the Haryana Value Added Tax Act, 2003.