TDS in works contracts is limited to taxable turnover, excluding labour, declared goods and non-taxable transactions.

Tax deduction at source under section 27 of the Assam General Sales Tax Act, 1993 in works contract bills is confined to goods forming part of taxable turnover after applying the charging, exemption and inter-State trade provisions. Deduction cannot be made from labour and service components, declared goods, or goods involved in exempt, non-taxable, inter-State, import or export transactions. The certificate mechanism under rule 35 must also be considered when computing the deductible amount. Amounts wrongly deducted from non-taxable components are refundable in accordance with law.

---

---

Issues: Whether tax deduction at source under section 27 of the Assam General Sales Tax Act, 1993 could be made from the labour component, declared goods, and goods falling within inter-State, import and export transactions in works contract bills.

Analysis: Section 27 was upheld subject to reading it with the charging and exemption provisions. The taxable base for deduction at source is confined to goods liable to tax or included in taxable turnover. The provisions relating to inter-State trade, declared goods, exempted goods, and the certificate mechanism under rule 35 must also be applied while making deduction at source. Consequently, deduction cannot be made from labour and service components or from goods not forming part of taxable turnover.

Conclusion: The respondents were not entitled to deduct tax at source from the labour component, declared goods, or the specified exempt or non-taxable goods in the petitioners' works contract bills, and the petitioners were entitled to refund of amounts already deducted in accordance with law.

Ratio Decidendi: Tax deduction at source under section 27 in works contract cases is permissible only to the extent of goods forming part of taxable turnover after giving effect to the charging, exemption, and inter-State trade provisions.

---