Labour supply payments attract TDS where surrounding facts show a contract for carrying out work through mobilisation and disbursement.

Payments made to maistries for mobilisation and supply of labour were held to fall within section 194C because the arrangement was for carrying out work through labour supply, and a written contract was not essential where surrounding circumstances established such a contract-like engagement. On the facts, the maistries acted as labour contractors who mobilised labour and made disbursements for execution of the assessee's work. Since tax was not deducted at source on these payments, the statutory consequence under section 201(1) and section 201(1A) followed, and the assessee was treated as an assessee in default.

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Issues: Whether payments made to maistries for mobilisation and supply of labour attracted deduction of tax at source under section 194C of the Income-tax Act, 1961 and whether failure to deduct tax correctly rendered the assessee an assessee in default under section 201(1) and section 201(1A) of the Income-tax Act, 1961.

Analysis: The payments were made for arranging and supplying labour for execution of the assessee's work. The existence of a written contract was not essential if the surrounding circumstances showed an arrangement for carrying out work through supply of labour. On the facts found, the maistries functioned as labour contractors who mobilised labour, made disbursements, and were paid for that service. Such payments fell within the scope of section 194C, which covers sums paid for carrying out any work including supply of labour. Once tax was not deducted at source on such payments, the statutory consequence under section 201 followed.

Conclusion: The payments to maistries were subject to TDS under section 194C and the assessee was rightly treated as an assessee in default under section 201(1) and section 201(1A); the issue was decided against the assessee.

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