Facts of the case
1. Developer constructed the commercial complex in the State of Haryana and sold the same to the buyers.
2. Developer sub-contracted the contract for aforesaid construction and paid appropriate WCT under the law. Some of the sub-contractors were not registered under the Haryana VAT law.
3. Adjudicating authority neither allowed the deduction for assessed sub-contractor turnover nor for WCT paid towards unregistered sub-contractors.
4. On appeal being filed, the matter was remanded back for fresh adjudication.
Our Analysis
1. As per the theory of accretion, once the turnover of sub-contractor is assessed under the law, the same cannot be further offered to tax in the hands of Developer. This is also due to the reason that deemed sale can be taxed only once i.e. in the hands of sub-contractor in the present case [State of A.P. v. Larsen & Toubro Ltd. (2008) 9 SCC 191]. Therefore, the deduction for assessed sub-contractor turnover shall be allowed.
2. In respect of unregistered sub-contractors, the WCT has been deposited by the developer. Therefore, the WCT paid shall be appropriated from the tax payable on Taxable Turnover.
Note: Above view is without prejudice to the settled/sub-judice position of law that in respect of developers, tax shall be paid only on the value of material consumed, after the date of entering into agreement with buyers, as per the audited books of account. [CHD Developers v. State of Haryana, CWP 5730 of 2014, Punjab & Haryana High Court]
Our Action
1. Representation for re-adjudication of the case submitted and the matter was represented from time to time before the adjudicating authority.
2. Reasons for taking the deductions for sub-contractor turnover as well as for appropriating the WCT paid were explained at great length.
Department proceedings
1. Adjudication order passed after allowing the above benefits.
2. The matter was re-adjudicated in favour of client.