Income Tax Act, 1961
Section 194C. PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS.
(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 section 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.
(2) Any person (being a contractor and not being an individual or a Hindu undivided family), responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-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 one per cent of such sum as income-tax on income comprised therein.
Explanation I : For the purposes of sub-section (2), the expression “contractor” shall also include a contractor who is carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a foreign enterprise or any association or body established outside India.
Explanation II : 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.
Explanation III : For the purposes of this section, the expression “work” shall also include – (a) Advertising;
(b) Broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
(c) Carriage of goods and passengers by any mode of transport other than by railways;
(d) Catering.
(3) No deduction shall be made under sub-section (1) or sub-section (2) from –
(i) Any sum credited or paid in pursuance of any contract the consideration for which does not exceed twenty thousand rupees; or
(ii) Any sum credited or paid before the 1st day of June, 1972; or
(iii) Any sum credited or paid before the 1st day of June 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society.
(4) Where the Assessing Officer is satisfied that the total income of the contractor or the sub-contractor justifies the deduction of income-tax at any lower rate or no deduction of income-tax, as the case may be, the Assessing Officer shall, on an application 1742 made by the contractor or the sub-contractor in this behalf, give to him such certificate as may be appropriate.
(5) Where any such certificate is given, the person responsible for paying the sum referred to in sub-section (1) or sub-section (2) shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be.
Related Judgements
MITTAL STEEL LTD. v. ASSISTANT COMMISSIONER OF INCOME-TAX & ANR.
