Works contract tax in Andhra pradesh

This query is : Resolved

Krishna Murty (Querist)
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03 September 2009 A Pvt.Ltd. Company is a dealer under APVAT act for executing works contracts.In execution of the above said work the Company has given a part of the labour work to the sub-contract, and if any material required that will be supplied by the contractor to the sub-contractor at free of cost. All the sub-contract payments are made by cheques and deducted Income Tax TDS and also the company is having the sub-contract agreements.As per the APVAT Act any labour work executed by the contractor/sub-contractor VAT registration is not necessary.The Commercial Tax department has issued a show cause notice if sub-contractor's books of accounts and vouchers are not produced before the Assessing Authority labour sub-contract will not be allowed as labour.How it is possible to produce the books and vouchers of the sub-contractor, by the contractor.What is the necessary evidence to produce before Assessing authority to prove, it is labour charges. Kindly give advise.

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)
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09 September 2009 Being the sub-contractor does not fall under the ambit of VAT, I don't think that his books can be called upon. However, being you are claiming the exemption on the basis of payment made to sub-contractor, you are supposed to establish your case before the authorities. It can be done in several ways;-
1. Providing the copy of ther Contract/ Agreement.
2. Providing the books of the su-contractor.

I think that if you can produce the contract/ agreement before the authorities, your part should be over. However, if the authorities find that the amount paid is at higher side, they can go for further enquiries relating to genuineness of your transactions.