Authority For Clarification And Advance Rulings Vs Skyline Construction And Housing Pvt. Ltd (Supreme Court of India)
Supreme Court upheld the judgement of High Court and held that in case of execution of a works contract through a sub-contractor, the sub-contractor was liable to pay tax under the VAT Act and therefore the payment made by the main contractor to the sub-contractor was not liable to be included in the taxable consideration of the main contractor as this would lead to double taxation.
Facts- The respondent-assessee was a registered dealer under the Act, 2003. The assessee was engaged in the business of executing works contracts and part of the work was executed by the assessee through the sub-contractors. The assessee had applied for advance ruling on the question as to whether the amounts paid to the sub-contractors were liable to be included in its consideration for the purpose of liability of tax under the VAT Act.
The authority for advance ruling held that since there was no specific provision till 31.3.2006 in the VAT Act for providing deduction of payment made to the sub-contractors, no such deduction was admissible. The respondent-assessee being dissatisfied with the decision of the Authority for Clarification and Advance Rulings went before the High Court in appeal. The High Court allowed the appeal filed by the respondent-assessee.
