High Court Of Punjab & Haryana
S.S. & Co., Octroi Contractors vs. State Of Punjab & Ors.
Section 194C
N.K. Sud & J.S. Narang, JJ.
Civil Writ Petn. No. 18100 of 2003
19th February, 2004
Counsel Appeared
L.S. Sidhu, for the Petitioner : Sachin Midha, A.R. Takkar & Dr. N.L. Sharda, for the Respondents
JUDGMENT
N.K. Sud, J. :
The petitioner, who has been awarded the contract for collection of octroi by respondent No. 3, complains that while making a payment to it, tax is being deducted at the rate of 2.30 per cent at source under the provisions of s. 194C of the IT Act, 1961 (for short “the Act”), on the collections made by it and not on the payments being made to it.
2. This issue had come up for consideration before a Division Bench in CWP No. 17983 of 1998, Darshan Singh & Co. vs. State of Punjab, which was disposed of vide order dt. 1st March, 1999, with the following directions :
“In view of the above, the writ petition is disposed of with the direction that the third respondent shall be entitled to charge income-tax at the rate of 0.5 per cent, of the amount paid to the petitioner and not on the basis of the gross amount collected by way of octroi. It is further directed that the accounts of the petitioner regarding its liability to deposit the income-tax shall be adjusted with effect from the date of the agreement.” In view of the above, we are satisfied that the grievance of the petitioner is genuine. Counsel for the respondents have not been able to refer to any provision of law under which such a deduction could be made from the total collections made by the contractor.
3. Sub-s. (1) of s. 194C of the Act, which is relevant for this purpose, reads as under : “194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and— (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under s. 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any firm, shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to— (i) one per cent, in case of advertising; (ii) in any other case two per cent, of such sum as income-tax on income comprised therein.” A bare perusal of the above section shows that the tax has to be deducted from the payments made to a contractor at the time of credit of such amount to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode. Thus, it is clear that the tax has to be deducted only on the payments which are made to the contractor and not on the amount which is collected by it on behalf of the municipal committee.
Accordingly, the writ petition is disposed of with the direction that respondent No. 3 shall be entitled to charge income-tax under s. 194C of the Act on the amount paid to the petitioner and not on the basis of the gross amount collected by way of octroi. It is further directed that the accounts of the petitioner regarding its liability to deposit the income-tax shall be adjusted with effect from the date of the agreement.
[Citation : 268 ITR 398]
