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Issues involved: Whether deductions of payments made to sub-contractors are justified for assessment year 1994-95.
Summary: The High Court of Kerala considered the appeal regarding the justification of allowing deductions of total payments made by the respondent to three sub-contractors. The Tribunal had allowed the claim based on the contract provision for payment to sub-contractors on receipt from the awarder, Cochin Port Trust. The appellant contended that the payment was voluntary without legal liability. The crucial question was whether the respondent actually made payments to sub-contractors during the relevant assessment year and if TDS was recovered on these payments. The Court noted that assessments of the same amounts in the hands of sub-contractors were not proven. The Tribunal's decision was based solely on the payment scheme in the contract, without considering the sub-contractors' income admission and tax payment. As there was no provision for sub-contractors to share the award amount in arbitration proceedings, the Court could not uphold the Tribunal's decision. The Court allowed the appeal, reversed the Tribunal's order, and remitted the matter to the Assessing Officer for verification of TDS deduction by the respondent and tax payment by sub-contractors. If TDS was recovered and assessments were made in the sub-contractors' hands, the department could not apply a different standard to the respondent. The Assessing Officer was directed to verify the TDS position and decide on allowing or disallowing the deductions accordingly.
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