Court rules tax deduction on payment, not total collections. Adjust petitioner's tax liability accounts accordingly.

The court ruled in favor of the petitioner, stating that tax should be deducted on the amount paid to the petitioner for the octroi collection contract, not on the total collected amount. The court emphasized that tax deduction should occur at the time of payment to the contractor, not on collections made. The respondents failed to justify the deduction from total collections, leading to the court directing the adjustment of the petitioner's tax liability accounts from the agreement date in accordance with statutory provisions.

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Issues:
- Incorrect tax deduction on collections made by the petitioner for octroi collection contract.

Analysis:
The petitioner, awarded an octroi collection contract, raised a grievance regarding the deduction of tax at 2.30% under section 194C of the Income-tax Act, 1961, on the collections made, not on the payments received. A previous case had directed a reduced tax rate of 0.5% on payments. The court noted that the respondents failed to justify the deduction from total collections. Section 194C mandates tax deduction at the time of payment to the contractor, not on collected amounts. Thus, the court directed that tax should be charged on the amount paid to the petitioner, not on the gross collected octroi amount. The adjustment of the petitioner's tax liability accounts was ordered from the agreement date, aligning with the statutory provision's requirements.

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