TDS on works contract bills must follow statutory exclusions and cannot be deducted from the gross amount.

Tax deduction at source in works contracts under the Bihar Value Added Tax Act, 2005 must be confined to the taxable portion of running account bills and cannot be made on the gross amount. Section 41 and Rule 29 require exclusion of components not liable to deduction, including labour and other non-transfer elements identified under the rules. A direction to deduct on the full bill amount cannot override the statutory scheme or earlier binding directions. Authorities must apply the statutory exclusions and allow the prescribed benefit wherever the relevant particulars are available.

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Issues: Whether tax deduction at source under the Bihar Value Added Tax Act, 2005 could be made on the gross amount of running account bills in a works contract, or whether deduction had to be restricted in accordance with Section 41 of the Bihar Value Added Tax Act, 2005 and Rule 29 of the Bihar Value Added Tax Rules, 2005.

Analysis: The Court held that the issue was governed by its earlier directions requiring strict compliance with Section 41 and Rule 29. Deduction at source could not be made from the entire gross bill without excluding amounts not liable to deduction under the statutory scheme, including components such as labour and other non-transfer elements identified in Rule 29. A direction from the Accountant General to deduct on the gross amount could not override the statutory mandate or the binding effect of the earlier decision. The authorities were bound to deduct only from the taxable portion of the bill and to grant the statutory benefit wherever particulars were available.

Conclusion: Deduction at source on the gross bill amount was impermissible. The authorities were required to make deduction only in accordance with Section 41 of the Bihar Value Added Tax Act, 2005 and Rule 29 of the Bihar Value Added Tax Rules, 2005.

Ratio Decidendi: In a works contract, tax deduction at source must be confined to the portion of the payment that is legally taxable under the governing VAT provisions, and deduction cannot be made on the gross bill contrary to the statutory exclusions.

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