Tax deduction at source on direct construction payments was mandatory; penalty for non-deduction was upheld.

Where payments for construction work were made directly to the agency, the payer was required to deduct tax at source, and failure to do so could not be excused on the plea that the funds originated from the State Government. The revisionist did not produce supporting documents in remand proceedings to show that no deduction obligation arose, and the accountant admitted that tax was not deducted because the legal requirement was not understood. On those facts, the High Court upheld the penalty for non-deduction of tax deducted at source and rejected the revision.

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Issues: Whether penalty for non-deduction of tax deducted at source on payments made to the construction agency was justified.

Analysis: The revisionist claimed that the funds were transferred by the State Government directly to the agency and that no liability to deduct tax arose. In the remand proceedings, the Tribunal required supporting material to establish that position, but no documents were produced. The Tribunal also recorded the accountant's admission that payments were made directly to the agency and that tax was not deducted due to ignorance of the legal requirements. The Court held that once the payments were made directly for construction work, the revisionist was bound to deduct tax at source, and the failure to do so could not be excused.

Conclusion: The penalty for non-deduction of tax deducted at source was upheld and the revision was rejected.

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