Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2018 (1) TMI 1049

fficer is correct or not? - Held that: - It is the duty of the respondent dealer to furnish the value of materials used in the execution works contract with appropriate inclusion of gross profit relatable to those materials. In practice it is not humanly possible to cull out each and every item transferred along with related Gross Profit. Thus the liability on the part of the dealer have to be arrived notionally be calculating deemed sales taxable turnover. Hence, it has been a practice of the dealers to adopt 10% Gross Profit on the purchase value of the items used in the purchase value of the items used in the works contract and thereby arrived a deemed sales turnover for which tax at the respective rate is being paid to the Department. This conventional method of adopting 10% Gross Profit and working out the liability in respect of works contractors have also been accepted by the Department. This has been in in vogue ever since the introduction of Section 3B of the TNGST Act 1959 and continued to be in course even for the liabilities pertaining to Section 5 of the TNVAT Act 2006 - it could be deduced that while doing so, the tribunal has also verified the audited Profit & L .....

X X X X X X X

Full Text of the Document

X X X X X X X

, respectively. 2. Short facts leading to the Tax Cases (Revision) are that Tvl.ITD Cementation India Limited, Chennai / revision petitioner, was assessed for the periods between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 for the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively, were passed under the Tamil Nadu Value Added Tax Act, 2006. 3. Vide assessment orders, the assessment officer rejected the gross profit claimed by the revision petitioner. While arriving at the deemed sales turn over on the civil works contract executed, for the respective assessment years, the assessing officer adopted a notional gross profit of 10% and arrived at the corresponding deemed sales turn over under Section 5 of the Tamil Nadu Value Added Tax Act, 2006. The assessing officer also assessed sale of assets and reversed certain ineligible ITC. The Assessing Officer also levied penalty under Section 27 of the Tamil Nadu Value Added Tax Act, 2006. 4. Being aggrieved, the assessee / revision petitioner, filed appeals in A.P.Nos.101, 102, 4 and 5 of 2013 to the appellate authority viz., the Appellate Deputy Commissio .....

X X X X X X X

Full Text of the Document

X X X X X X X

s failed to consider a simple fact that the profit earned by a company is not always proportional to its professional capabilities, but it is mostly decided by a complex interplay of competing factors dominating the market. 10. Learned counsel for the petitioner further submitted that neither the assessing officer nor the appellate authority, has recorded any factual finding to the effect that the petitioners did not maintain proper accounts as stipulated under rule 8(5) of the TNVAT Rules, 2007. The Tribunal did not call for and examine the accounts maintained by the petitioners, and in such circumstances, the tribunal ought not to have held that "the petitioner did not maintain the proper accounts, as stipulated in the relevant Rules; that the petitioner have not maintained correct and complete accounts disclosing their purchase turnovers, salaries, wages, contract receipts and all other expenses and receipts and not a single purchase or other omission has been pointed out by any of the assessment, inspecting or appellate authorities". According to the learned counsel for the petitioner, adoption of Gross Profit of 10% by the assessing officer and the Tribunal, was &quo .....

X X X X X X X

Full Text of the Document

X X X X X X X

.03.2009 & 01.04.2009 to 31.03.2010 of the Assessment years 2006-07, 2007-08, 2008-09 and 2009-10, respectively), were submitted, the assessing officer / tribunal, ought to have considered the same, and allowed the claim of the petitioner, instead of adopting a thumb rule of 10% gross profit and working of the liability, in terms of the same. 15. According to the learned counsel for the revision petitioner, certificates issued by the Chartered Accountant ought to have been treated as proof of their trading account and gross profit earned. It is also his contention that books of accounts and annual reports were submitted by the Tax Case (Revision) petitioner, for the abovesaid assessment years. 16. Refuting the abovesaid submission and inviting the attention of this Court to the order of the tribunal, Mr.V.Haribabu, learned Additional Government Pleader (Taxes), submitted that the dealer has not maintained proper accounts, as stipulated under Rule 8(5) of the Tamil Nadu Value Added Tax Rules, 2007. Dealer has not produced any accounts for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2008, 01.04.2008 and 31.03.2009 & 01.04.2009 to 31.03.2010 of the Asses .....

X X X X X X X

Full Text of the Document

X X X X X X X

sel for the parties and perused the materials available on record. 22. After considering the rival submissions of the parties, on the aspect as to whether reliance can be made to the certificate issued by the Chartered Accountant for arriving at the gross profit, for the abovesaid assessment years, and whether adoption of 10% by the assessing officer was proper or not, the tribunal framed the following two points for consideration. "1. Whether the adoption of 10% notional Gross Profit on the purchases effected, while arriving deemed sale turnover by the Assessing Officer is correct or not? 2. Whether the order of the Appellate Deputy Commissioner (CT) is sustainable or not?" 23. The tribunal, discussed and answered the issue, in favour of the revenue, as hereunder. "The adoption of 10% notional Gross Profit: The one and only dispute is whether liability on the deemed sales turnover to be fixed by adopting 5% Gross Profit as being done by the respondent dealer or by adopting 10% Gross Profit as being levied by the learned Assessing Officer in the impugned order. The respondent dealer have opted to pay tax under section 5 of the TNVAT Act 2006, which is reproduced as b .....

X X X X X X X

Full Text of the Document

X X X X X X X

-wise. Estimation of profit would then be a matter for determination by the assessing authority after taking into consideration all relevant factors including the profits which are, ordinarily, made in similar works executed by other contractors; profits earned by the contractor-dealer in works contracts executed by him in the previous years; the profit percentage norms accepted in the industry for works contracts of a similar kind; etc. While the assessing authority may adopt any other reasonable method, judicial pronouncements and authoritative texts would serve as a useful guide in such estimation. Reference in this context can be made to A.T.Brij Paul Singh v. State of Gujarat [1984] 4 SCC 59, P.M.Paul v. Union of India AIR 1989 SC 1034, Mohd. Salamatullah v. Government of Andhra Pradesh AIR 1977 SC 1481, Dwaraka Das v. State of Madhya Pradesh [1999] 3 SCC 500, Government of Andhra Pradesh v. E.C.Techno Industries [1989] 2 ALT 320, Superintending Engineer v. P.Radhakrishna Murthy [1996] 3 ALT 1137, G.V.Malla Reddy & Co., Hyderabad v. A.P.State Trading Corporation Ltd., Hyderabad [2010] 4 ALD 331 and Hudson on "Building and Engineering Contracts" (Tenth Edition, by .....

X X X X X X X

Full Text of the Document

X X X X X X X

vide solution in the filed of Civil Engineering using new and innovative methods. The Company is credited with pioneering the art of integrating engineering and innovation with construction practices. ITD Cem has optimum human resources commensurate with the required expertise and major equipment required for successful execution of the projects it undertakes. The Company is accredited with ISO 9001:2008; ISO 14001:2004 and OHSAS 18001:2007 Certifications. Over the years ITD Cem has built may iconic projects; notable amongst these are the 2nd Container Terminal at Chennai, road projects for NHAI. The Company has build Maritime Structures in major ports in Chennai, Ennore and Tuticorin. Keeping in view of the nature of projects executed the Gross Profit of 5% is far below that the appreciable percentage." 24. From the material on record, it could be deduced that while doing so, the tribunal has also verified the audited Profit & Loss statement and Balance Sheet of the assessee / revision petitioner, for the relevant years. 25. Ultimately, the tribunal held as follows: " The Appellate Deputy Commissioner (CT) has erred in relying on the above all India Balance Sheet, an .....

X X X X X X X

Full Text of the Document

X X X X X X X

of above works contract was in addition to the value addition with innovative technologies. The estimation of Gross Profit at 5% is definitely at lower side. The adoption of 10% value addition towards Gross Profit and other expenses relatable to the purchases by the Assessing Officer is fairly in order. The Assessing Officer thus rightly levied VAT liability by adding 10% gross profit on the above purchase turnover reported under 4% and 12.5% commodities respectively. Thus the following difference of deemed sale turnover resulted due to difference of Gross Profit between 10% & 5% (i) for the year 2006-2007 (Jan 2007 to Mar 2007) is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.11,97,420.00 4% 47,897.00 Rs.2,04,664.00 12.5% 25,583.00 Rs.14,02,084.00 73,480.00 (ii) for the year 2007-08 is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.2,90,29,320.00 4% 11,61,173.00 Rs.49,73,491.00 12.5% 6,21,686.00 Rs.3,40,02,811.00 17,82,859.00 (iii) for the year 2008-09 is in order:- Difference in deemed sales taxable turnover Rate of tax Difference of VAT due Rs.5,41,85,444.00 4% 21,67,418.00 Rs.1,05,73, .....

X X X X X X X

Full Text of the Document

X X X X X X X

lance sheet and therefore, the certificates issued by the Auditor, ought to have been given weightage, for the calculation of gross profit, which according to him, was actually earned by the assessee, and further reiterated the grounds of challenge for reversal of the orders of the tribunal, this Court is not inclined to accept the said contentions, for the reason that the tribunal, after considering the audited Profit & Loss statement, balance sheet for the relevant years, revenue receipts and such other materials, and despite the fact that in a series of judicial pronouncements extracted supra, wherein 15% of the gross profit had been adopted, taking note of the fact that the dealer had not maintained proper accounts, as stipulated under Rule 8(5) of the TNVAT Rules, 2007 and failed to produce the related records, to arrive at a taxable turn, over under Section 5 of the TNVAT Act, 2006, and though, gross profit claimed to have been earned for the relevant years was between 2.89% to 3.56%, held that the approximation of the dealer at, 5% profit was merely on surmises, not supported by any proper accounts, for the period between 01.01.2007 and 31.03.2007, 01.04.2007 and 31.03.2 .....

X X X X X X X

Full Text of the Document

X X X X X X X

0" 31. Perusal of the same shows that the department has adopted the conventional method of adopting 10% gross profit, and accordingly has worked out the liability. 32. Though learned counsel for the revision petitioner submitted that in the absence of furnishing any material in support of the contention that adoption of the conventional method of arriving at 10% gross profit, there is violation of the principles of natural justice, and in that context, relied on a decision of the Kerala High Court in Income Tax Referred Case No.67 of 1966 dated 06.09.1967 in the matter of Joseph Thomas & Bros Vs. Commssioner of Income Tax, Kerala [reported in [1968] 68 ITR 796 (Ker)], this Court is not inclined to accept the said contentions, for the reason that in the reported case, the question referred was whether, on the facts of the said case, there was, non compliance of the provisions of Section 142 (3) and if so, whether the assessment order passed under Section 143(3), was vitiated. 33. Section 142(2) of the Income Tax Act, 1961, states that for the purpose of obtaining full information in respect of the income or loss of any person, the Income Tax Officer, may make such enquiry, .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||