2019 (11) TMI 45 - HC - VAT and Sales Tax

Validity of re-assessment order - validity of endorsement issued on the rectification application filed by the petitioner - rejection of application on the ground that the said sub-contractor M/s. SSPDL Interserve Pvt. Ltd., is located in Chennai Tamil Nadu and as such no deduction can be claimed - HELD THAT - Merely for the reason that the head office of company is at Chennai, the prescribed authority has rejected the claim of the petitioner inasmuch as deduction towards sub-contractor s turnover. The same requires re-consideration by the prescribed authority. The matter is restored to the file of the respondent-authority to redo the re-assessment in accordance with law, taking into consideration all the documents placed on record by the assessee-petitioner, after providing an opportunity of hearing to the petitioner.

Summary

Issues:
Challenge to re-assessment order and demand notice under Karnataka Value Added Tax Act, 2003 regarding deduction of sub-contractor turnover.

Analysis:
The petitioner, a partnership concern engaged in construction business, challenged a re-assessment order and demand notice related to the deduction of sub-contractor turnover under the Karnataka Value Added Tax Act, 2003. The respondent authority disallowed the deduction due to lack of documentary evidence supporting the sub-contractor turnover. The petitioner filed for rectification, but the authority rejected the claim citing that the sub-contractor was located outside Karnataka and had not paid KVAT taxes in the state. The petitioner contended that the sub-contractor had executed the project in Bengaluru, and thus, the rejection was arbitrary and illegal.

The petitioner argued that all necessary documents were submitted, including details of the sub-contractor's work in Bengaluru. The respondent authority, however, claimed that insufficient evidence was provided to prove the execution of the sub-contract in Karnataka. The court examined the assessment order of the sub-contractor, which indicated work done in Bengaluru, and an invoice showing the project details in Bangalore. The court noted that the rejection of the claim solely based on the sub-contractor's head office location in Chennai required reconsideration by the authority.

In the final judgment, the court quashed the assessment order, demand notice, and endorsement. The matter was remanded to the respondent authority for a re-assessment considering all documents provided by the petitioner. The petitioner was directed to appear before the Assessing Authority without further notice. The respondent authority was instructed to conclude the assessment promptly and in accordance with the law. The writ petition was disposed of with these directions and observations.