Court rules on taxation in works contracts under Constitution Amendment Act, 1982

The Court upheld the validity of the Constitution (Forty-sixth Amendment) Act, 1982, allowing taxation on transfer of property in goods in works contracts. Regarding the challenge to rule 26A of Bihar Sales Tax Rules, 1983, the Court ruled that deductions should only be made for transfer of property in goods in works contracts, not on total contract amounts or labor charges. The Court granted the writ application, instructing respondents to align deductions with the judgment and emphasizing the need for rule amendment to conform with section 25A. No costs were awarded in this case.

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Issues involved:
Challenge to validity of Constitution (Forty-sixth Amendment) Act, 1982 and rule 26A of Bihar Sales Tax Rules, 1983 regarding deduction under section 25A of Bihar Finance Act, 1981.

Validity of Constitution (Forty-sixth Amendment) Act, 1982:
- Petitioner challenged the validity of the Constitution (Forty-sixth Amendment) Act, 1982, specifically clause (29A) inserted in article 366 of the Constitution.
- The amendment allowed for taxation on transfer of property in goods involved in works contracts.
- Supreme Court's interpretation emphasized the amendment's impact on works contracts, making them divisible for taxation purposes.
- Tax to be levied only on transfer of property in goods in works contracts, not on total contract amount.

Validity of rule 26A of Bihar Sales Tax Rules, 1983:
- Section 25A of Bihar Finance Act, 1984 introduced tax deductions for works-contractors.
- Rule 26A prescribed the manner of deduction of tax from works-contractors' bills/invoices under section 25A.
- Petitioner argued that rule 26A(2) went beyond the scope of article 366(29A)(b) and section 25A by directing deductions from all payments, including labor charges.
- Court held that deductions should only be made for transfer of property in goods in works contracts, aligning with section 25A and Supreme Court's interpretation.

Conclusion:
- Court allowed the writ application, directing respondents to make deductions in line with the judgment.
- Emphasized the need for rule amendment to align with section 25A, but clarified that deductions should only apply to payments for transfer of property in goods in works contracts.
- No costs awarded in the case.

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