TaxTMI 
TaxTMI 
2014 (8) TMI 633
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....ction 201(1A) of the Income-tax Act, 1961, by holding that there was no legal obligation cast on the Municipal Corporation to deduct at source surcharge on income-tax also in addition to tax at 2 per cent. on payment made to contractors ? Heard Sri S. R. Ashok, learned senior counsel appearing for the Revenue. None appeared for the respondent-assessee. The assessee is a local body constituted under the Hyderabad Municipal Corporation Act. During the financial year 1991-92, payments to the tune of Rs. 6.92 crores were made to the contractors after deducting TDS as applicable at 2 per cent. on the payments made to the contractors and credited the same to the account of the Central Government. The Incometax Officer (TDS), Visakhapatnam, felt....
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....re was no obligation on the Municipal Corporation to deduct surcharge at source at the relevant point of time, inasmuch as section 2(5) of the Finance (No. 2) Act, 1991, had imposed a liability, which would apply to the payment made during the financial year 1990-91. We have no hesitation to reject the contention of the learned counsel for the Revenue for the reason section 194C (1) and (2) of the Act as existed at the relevant point of time had cast no obligation on the assessee-Municipal Corporation to deduct any surcharge during the relevant years when payments were made to the contractors. Section 194C (1) and (2) of the Act as existed at that point of time may be noticed. It reads as follows : &nbs....
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....er mode, whichever is earlier, deduct an amount equal to one per cent. of such sum as income-tax on income comprised therein. Explanation.-For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) is credited to any account, whether called 'suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) . . . (4) . . . (omitted intentionally as they are not relevant for the purpose of this case)" The questions before us are whether there is obligation to collect surcharge on TDS from contractors for the....