Developer entitled to sec. 80-IB relief for construction of housing project even if on behalf of som

IT : Where assessee claimed deduction under section 80-IB(10) on development of a housing project, it was entitled to get deduction though it did not own land

Service Tax on work contract

Work contractor definition:

 

“Works contract”, for the purposes of section 65(105)(zzzza), means a contract wherein,-

 

(i) Transfer of property in goods involved in the execution of such contract is livable to tax as sale of goods, and

(ii) Such contract is for the purposes of carrying out,—

 

a. Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

 

b. Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or

 

c. Construction of a new residential complex or a part thereof; or

 

d. Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or

 

e. Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;

 

Work contract service is declared service and not in negative list as per new service tax regime.

 

 

What is the manner of determination of value of service portion in execution of a works contract from the total contract?

 

As per sub-rule (i) of the said Rule 2A the value of the service portion in the execution of a works contract is the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract.

 

Gross amount includes:

 

a. Amount paid to sub contractor for labour and services

b. Charges for planning, designing and architect’s fees

c. Charges for obtaining hire or otherwise machinery and tools used for execution of work contract

d. Cost of the consumables such as water, electricity, fuel used in the execution of work contract

e. Cost of the establishment of the contractor relatable to supply of labour and services and other similar expense for supply of labour and services

f. Profit earned by the service provider relatable to supply of labour and services

 

Gross amount does not include:

 

a. Value of transfer of property in goods involved in the execution of the said works contract

b. Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract

 

 

Is there any simplified scheme for determining the value of service portion in a works contract?

 

Where works contract is for:                                        

 

a. Execution of original works* ---> Forty percent of the total amount charged for the work contract.

                                                                                                  

b. Maintenance or repair or reconditioning or restoration or servicing of any goods including such gross amount ---> Seventy percent of the total amount charged.

 

c. In case of other works contracts, not included in serial nos. (A) and (B) above, works contract  including contracts for maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings ---> Sixty percent of the total amount charged for the work contract

 

(*) Original Works mean:

• All new constructions;

• All types of additions and alterations to abandoned or damaged structures  on land that are required to make them workable;

• Erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise.

 

NOTE:

 

‘Total amount’ referred to in the second column of the table above would be

The sum total of

(i) Gross amount charged for the works contract; and (ii) the fair market value of all goods and services supplied in or in relation to the execution of works contract, under the same contract or any other contract,

Less

(i) the amount charged for such goods or services provided by the service receiver; and (ii) the value added tax or sales tax, if any, levied to the extent they form part of the gross amount or the total amount, as the case may be.

 

 

How is the fair market value of goods or services, so supplied, be determined to arrive at the total amount charged for a works contract?

 

The fair market value of the goods or services so supplied shall be determined in accordance with The generally accepted accounting principles.

 

 

Work contract in mega exemption:

 

Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -

 

a. Civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

 

b. A historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

 

c. A structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;

 

d. Canal, dam or other irrigation works;

 

e. Pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

 

Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

 

i. A road, bridge, tunnel, or terminal for road transportation for use by general public;

ii. A civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

 

Sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;

 

Services provided to Government, a local authority or a governmental authority by way of -

 

i. Carrying out any activity in relation to any function ordinarily entrusted to a municipality in relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and up gradation; or

 

ii. Repair or maintenance of a vessel or an aircraft;

 

Source: CA Tarannum Khatri

 

Time-limit for refund of ST to be determined from the date of filing of refund claim

ST : Claim for refund of service tax paid on services used in export filed after expiry of 6 months from April to June, 2008 was dismissed as barred by limitation; extension of time-limit to 1 year is not applicable to claims filed before 7-7-2009

Belated appeal can’t be rejected without considering reasons behind such delay

ST : Appeal cannot not be thrown at threshold to convert meritorious appeal into de-meritorious without considering reasons of delay in filing it; application for condonation must be decided reasonably and in accordance with law

Guideline value to be opted for sec. 50C if DVO's valuation report isn't available at assessment sta

IT: Where sale consideration stated by assessee was lower than guideline value and valuation report of DVO was not available at time of assessment, Assessing Officer rightly adopted guideline value

Capital gain from sale of property held in name of partner in all phases will be taxable in his hand

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Sale on behalf of AE couldn’t be treated as sale by assessee if it wasn’t routed through its books

IT/ILT : Where sale transactions did not pass through assessee's books and essential characteristics of distributorship were absent, sale made by Associated Enterprises could not be treated as sales of assessee, a commission agent