54. Deduction of Tax at source from payment to works contractor.
(1)Notwithstanding anything contained in section 50 or any other law of contract to the contrary, any person responsible for making payment of any sum to any contractor (hereinafter referred to in this section as deducting authority) for carrying out any works contract, which involves transfer of property in goods, 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 authority or corporation established by or under a statute, or(d)Any company incorporated under the Companies Act, 1956 (1 of 1956) including any State or Central Government undertaking, or(e)Any co-operative society, or any other association registered under the Societies Registration Act, 1860 (21 of 1860),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 any other mode, whichever is earlier, deduct, subject to the certificate, if any, produced by the contractor in pursuance of sub-section (5), an amount towards tax equal to four per centum of such sum in respect of the works contract, if the value of works contract exceeds rupees fifty thousand.(2)While making deduction as referred to in sub-section (1), the deducting authority shall grant a certificate to the contractor in the form prescribed and send a copy thereof to the assessing authority within whose jurisdiction the work contract is executed within a period of thirty days of such deduction:Provided that where the tax is deducted from a registered dealer, the assessing authority who receives the certificate shall forward the same, alongwith the payment received, to the assessing authority under whose jurisdiction the dealer is registered in the manner prescribed.(3)The amount deducted from the bills or invoices shall be deposited into Government Treasury within one week from the date of deduction in such form or challan as may be prescribed.(4)Such deposit into Government Treasury shall be adjusted by the concerned assessing authority towards the tax liability of the contractor and shall constitute a good and sufficient discharge of liability of the deducting authority to the contractor to the extent of the amount deposited.(5)(a)Where, on an application being made by the contractor in this behalf, the assessing authority is satisfied that any works contract of the nature referred to in sub-section (1) involves both transfer of property in goods and labour or services, or involves only labour or services and accordingly, justifies deduction of tax on a part of the sum in respect of the works contract or as the case may be justifies no deduction of tax, he shall, after giving the contractor a reasonable opportunity of being heard, grant him such certificate as may be appropriate, in the manner prescribed:Provided that nothing in the said certificate shall affect the assessment of the tax liability of the contractor under this Act:Provided further that where the assessing authority, in consideration of the facts and circumstances of the case, is of the opinion that such certificate of no deduction or deduction of tax on a part of the sum as claimed is not justified he may, after allowing the dealer a reasonable opportunity of being heard, refuse to issue such certificate.(b)Where such a certificate is produced by a contractor before the deducting authority, until such certificate is cancelled by the assessing authority, the deducting authority shall either make no deduction of tax or make the deduction of the tax, as the case may be, in accordance with the said certificate.(6)If any person contravenes the provision of sub-section (1), (2) or (3) or of clause (b) of sub-section (5), the assessing authority shall, after giving him an opportunity of being heard, by an order in writing, impose on such person a penalty equal to twice the amount required to be deducted and deposited by him into Government Treasury.Explanation. - Nothing in sub-section (5) or any other provision of this section shall be construed as to authorise deduction of any amount towards tax on the value of any property in goods transferred in the course of inter-State sales, sales outside the State or sales in the course of import.(7)Where any certificate issued under sub-section (5) is found to have been obtained on incorrect or fraudulent representation of facts, the assessing authority shall cancel the certificate with direction to the deducting authority to recover the tax, not deducted on the strength of such certificate, from the subsequent payment due to the works contractor:Provided that no such order of cancellation shall be issued without giving a reasonable opportunity of being heard to the works contractor.
