TMI Blog1979 (3) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... cting it to state whether deductions under s. 194C of the I.T. Act for periods mentioned therein have been made in respect of contract work done by a contractor, S. P. Nag, and credited to the account of the Central Government within the prescribed time. It is further stated in it that if no deductions have been made cause should be shown why action under s. 226(3) be not taken for default as also penalty under s. 221 be not imposed and interest under s. 201 be not charged in respect of the default. Annexure 7 is a communication from the respondent No. 1, the CIT, stating that the denial of responsibility for making deductions under s. 194C was incorrect. The Associated Cement Company Ltd., the petitioner, is a public limited company, reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er deductions had been made as provided under s. 194C of the I.T. Act from the payments made to Nag and also whether the deducted amount had been deposited within the prescribed time in favour of the Central Government. If no such deductions and payments had been made the company was asked to show cause as referred above. On receipt of this notice the company moved the CIT, Bihar, and denied responsibility for making deductions under s. 194C. This was rejected by the Commissioner on the ground that the stand of the company was not based on the correct interpretation of the provisions of the I.T. Act. The first submission made on behalf of the company is that the payments made to Nag under the contract were not covered by s. 194C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral, State or Provincial Act ; or (d) any company; or (e) any co-operative society, shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to two per cent. of such sum as income-tax on income comprised therein." Under this provision, the responsibility for deducting an amount equal to two per cent. of the payment made to the contractor arises only when the contract is " for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract ". In the present case, it is not disputed that the contract was for supply of labour. It has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work and labour and materials are supplied in execution of such a contract there is no contract for sale of materials as it is a works contract. As it was only by bestowing work and labour upon them and by affixing them to the buildings in the case of window-leaves and wooden doors and windows that they acquire commercial identity, it was held that it was a works contract. In the present case, the contract was one which needed labour for its execution, namely, loading for which payments had to be made. Therefore, the only conclusion is that in the case before us the contract was for supply of labour for carrying out a work, namely, loading and, accordingly, the case would fall within the ambit of s. 194C(1) of the I.T. Act. It was next c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason why such subsequent payment should not also be clubbed with the earlier payment. As I have pointed out, the requisite deductions had to be made on " such sum " as is paid to the contractor. In this context, Mr. Chatterjee had relied upon the case of Brij Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524 (SC). In this case, the question that fell for consideration was whether in the execution of a work the cost of materials, supplied by the Government for executing the work, could be taken into consideration, while estimating the profits of a contractor. In the facts of that case, it was held that in cases of " lump sum contracts " where in substance and in reality stores and materials supplied to the contractor by the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r but upon the seller who has to collect the sales tax from the buyer or the consumer. Similarly, under s. 194C(1), although the tax is to be paid by the contractor, the obligation is upon the person, responsible for paying any sum to the contractor, to make the requisite deduction from the payments made. Sub-sections (3), (4) and (5) of s. 194C provide the circumstances in which such deduction need not be made. Therefore, in cases which are not covered by sub-ss. (3) and (4), it is the duty of the person, responsible for paying any sum to the contractor, to make the requisite deduction from such sum as income-tax on income. I am, therefore, of the view that it cannot be said that s. 194C(1) is violative of art. 31 of the Constitution. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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