My client has completed highway construction on BOT basis. Now the cess to be remitted.
1. My client has spent huge amount for purchase of vehicle and its spares, tax like service tax, licence and fees, value added tax, royalty charges, legal consultancy charges interest & finance charges, bank guarantee & bank charges, and finance and processing charges. Please clarify whether we are liable to pay cess for the above item in the road construction.
2. If answer is no, whether any court decisions to support it?
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Dear Vincent,
The BOCW Welfare Cess Act,1996 does not define the term " cost of construction". But its sec.2(d) enables to have the meaning of the terms which are not defined under the Act but defined under the BOCW Act,1996. Sec.2(1)(d) of the BOCW Act,1996 defines the term " Building or other construction work ". Again the term " cost of construction " has no where been defined in the latter too. Logically, therefore, one has to take the general meaning of the term "cost of construction" which would normally include only the cost of materials exclusively used in the particular construction activity and the cost spent on labor thereof. Any vehicle or construction equipment can not be termed as a material exclusively used in the construction of anyone project as it forms part of the movable assets of its owner and has substantially longer functional duration. Therefore, its cost cannot be added to construction cost of any particular project; but its rental value can be added.
Thank you for the prompt reply dated 29th January. Is there is any court order to substantiate the comments. If so please quote the Court Judgement.
Sorry, I have no idea. Besides I think that we cannot expect judicial pronouncements on each and every common transaction of our day to day life.
Even in the case of a construction project undertaken on BOT basis, as the newly purchased vehicle , if I presume correct, is most likely to be utilised for the operation purpose, its cost of purchase as well as operation costs cannot be added to the construction cost. Better ask your friend whether he had included such an item while computing his bid amount.
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