TMI Blog2021 (10) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Larsen Toubro v. State of Karnataka [ 2009 (9) TMI 933 - KARNATAKA HIGH COURT ] while considering the provisions under the Karnataka Sales Tax Act, 1957 has held that the said charges undoubtedly come within the scope of the cost of the establishment of the contractor to the extent it is relatable to supply of labour and services. The issue was also examined with reference to the principles laid down in Gannon and Dunkerley [ 1992 (11) TMI 254 - SUPREME COURT ] wherein the Hon ble Apex Court has held that the value of goods involved in the execution of works contract has to be determined after taking into consideration the value of the entire works contract after deducting the charges toward labour and services. All th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and entertainment charges incurred by the respondent are establishment expenses relatable to labour and other like charges and are, therefore, eligible to be deducted from the respondent s turnover under Rule 3 (2) (l) of the KVAT Rules? 3. The assessee-respondent is a dealer registered under the provisions of the KVAT Act and is engaged in the execution of civil works contracts. During the period April 2011 to March 2012, the respondent had filed its returns under the KVAT Act claiming deduction of expenses namely, bank charges, guesthouse charges, fuel charges, computer expenses and entertainment expenses amounting to ₹ 32,41,037/-. The assessing authority passed a re-asseessment order dated 10.11.2014 under Section 39 (1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and tools used in the execution of a works contract, charges for planning, designing and architect s fees, cost of consumables used in the execution of the works contract, cost of establishment to the extent relatable to supply of labour and services. Thus, the expenses incurred by the assessee towards bank charges, guesthouse charges, fuel charges, computer expenses and entertainment charges do not fall with in the scope of the term labour and other like charges. The Tribunal grossly erred in treating the same as establishment expenses. 6. Learned counsel for the respondent-assessee submitted that the Tribunal, placing reliance on the judgment of the Hon ble Apex Court in the case of Gannon Dunkerley and Co. .v. State of Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other like charges include charges for obtaining, on hire or otherwise, machinery and tools used in the execution of a works contract, charges for planning, designing and architect s fees, cost of consumables used in the execution of the works contract, cost of establishment to the extent relatable to supply of labour and services and other similar expenses relatable to supply of labour and services. 9. Insofar as deductions in the nature of interest charged by the client towards postage, telephone expenses, etc. incurred by the dealer and also vehicles used exclusively used by the contractor in the execution of the works contract are concerned, a co-ordinate Bench of this Court in the case of Larsen Toubro .v. State of Karnata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee would certainly fall under clauses (e), (f), (g) and (h) enumerated therein. 10. In the case of Voltas Limited (supra), the Hon ble Apex Court has held that not merely the labour charges are deductible from the value of works contract, but all other charges/amounts relatable therein, except the value of the goods sold in the execution of works contract. The object of Article 366 (29A) of the Constitution of India is to levy sales tax on the transfer of goods involved in the execution of works contract. The Hon ble Apex Court in the case of Gannon and Dunkerley (supra) has examined the scope and effect of the said Article in extenso and enlisted the permissible deductions as per clauses (a) to (h) as aforesaid. 11. Follow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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