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2021 (3) TMI 11 - HC - VAT and Sales TaxValuation - inclusion of amount of total TDS deducted in the exempted turnover - entitlement of tax to be deducted at the hands of the appellant while computing the tax payable - HELD THAT - From perusal of Rules 3(2) and (h) of KVAT Rules, it is evident that all the amounts collected by way of tax under the Act shall be deducted from the total turn over. In the instant case, the TDS has been collected from the appellant under the provisions of the Act. Therefore, the amount of TDS to the extent of ₹ 23,40,187/- cannot be allowed to be added in the total turn over and the revisional authority has rightly dropped the proceedings in respect of the deduction of tax on the aforesaid amount. However, the aforesaid aspect of the matter has not been appreciated by the Additional Commissioner of Commercial Taxes and it has been erroneously held that the amount of total TDS deducted cannot form part of the exempted turn over in the absence of such provisions of the Act and Rule. The Assistant Commissioner of Commercial Taxes failed to appreciate Rule 2(h) of the Rules. Therefore, in view of the preceding analysis, the substantial questions of law involved in this appeal are answered in favour of the appellant and against the respondent - Appeal allowed - decided in favor of appellant.
Issues:
1. Interpretation of provisions regarding deduction of tax at source from total turnover. 2. Authority of the Additional Commissioner to review orders passed by lower authorities. 3. Treatment of tax deducted at source in works contract turnover. Analysis: Issue 1: Interpretation of provisions regarding deduction of tax at source from total turnover The appeal involved the interpretation of whether tax deducted at source (TDS) constitutes exempted turnover and if it should be deducted from the total turnover. The appellant argued that the TDS amount should not be included in the total turnover as it was collected under the Act. Reference was made to Rule 3(2)(h) of the Karnataka Value Added Tax Rules, which allows for deductions of amounts collected by way of tax under the Act. The court agreed with the appellant's interpretation and held that the TDS amount of ?23,40,187 should not form part of the total turnover. Issue 2: Authority of the Additional Commissioner to review orders passed by lower authorities The Additional Commissioner of Commercial Taxes had set aside the order passed by the Joint Commissioner of Commercial Taxes and directed the computation of taxable contract receipts by disallowing the total TDS amount. The appellant challenged the authority of the Additional Commissioner to review the order of the Joint Commissioner. The court found that the Additional Commissioner had erroneously held that the TDS amount cannot be part of the exempted turnover. The court quashed the order passed by the Additional Commissioner, thereby upholding the appellant's position. Issue 3: Treatment of tax deducted at source in works contract turnover The case revolved around a works contract executed for the Ministry of Defence, where TDS was deducted by the contractee. The dispute arose regarding whether the TDS amount should be considered in the taxable turnover calculation. The court clarified that TDS collected on total contractual receipts should not be included in the turnover calculation, as it is collected on receipts and not on profits. The court's decision favored the appellant, emphasizing that the TDS amount was rightfully excluded from the total turnover. In conclusion, the court ruled in favor of the appellant, quashing the order of the Additional Commissioner of Commercial Taxes and allowing the appeal. The judgment clarified the treatment of TDS in the turnover calculation and emphasized the importance of adhering to the provisions of the Act and Rules in such matters.
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