Court Upholds Section 194C: Contractor Deductions Valid

The Court dismissed the application seeking to quash certain annexes as illegal and without jurisdiction, and to direct a refund under the Income Tax Act. The petitioner, a public limited company, had disputed the applicability of Section 194C for deductions made to a contractor for loading cement bags. The Court held that the payments fell within the scope of Section 194C as they constituted work. It clarified that deductions should be made from the sum paid for work, not just income. The Court also upheld the constitutional validity of Section 194C, stating it did not violate the Constitution. The application was dismissed with no costs awarded.

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Issues involved: Application u/s 226 and 227 of the Constitution to quash annexs. 5 and 7 as illegal and without jurisdiction, and to direct refund of Rs. 39,480 u/s 226(3) of the I.T. Act, 1961.

Summary:
The petitioner, a public limited company, entered into a contract with a contractor for loading cement bags. The company subsequently made payments to the contractor in accordance with the Second Wage Board recommendations. The respondent directed the company to inform whether deductions were made u/s 194C of the I.T. Act from the payments made to the contractor. The company denied responsibility for deductions u/s 194C, which was rejected by the Commissioner.

Interpretation of Section 194C:
The company argued that payments to the contractor were not covered by s. 194C as it was a contract for service, not for carrying out any work. However, the Court held that loading cement bags constituted work, falling within the ambit of s. 194C(1) as it involved supplying labor for carrying out work.

Deductions and Income Tax:
The company contended that deductions u/s 194C(1) should only be made from income, not reimbursement amounts. The Court clarified that deductions are to be made from the sum paid for carrying out any work, not necessarily income. The case of Brij Bhushan Lal Parduman Kumar v. CIT was cited to support this interpretation.

Constitutional Validity of Section 194C:
The company argued that s. 194C(1) was ultra vires art. 31 of the Constitution, as it imposed liabilities on the company as a tax collector. The Court disagreed, stating that the obligation to deduct tax at source is a common practice in taxation laws and does not violate art. 31.

Decision:
The Court found no merit in the application and dismissed it, with no order as to costs. The Acting Chief Justice concurred with the decision.

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