Law:

Section:

Section 194C of the Income-tax Act, 1961 - Deduction of tax at source - Payments to contractors - Whether when respondent firm had not entered into any contract for carrying out any work or for supply of labour for carrying out any work with any entity specified in section 194(1), it could not be treated as contractor under section 194(2) and payments made by it to any person could not be treated as payments made by a contractor to a sub-contractor, so as to attract provisions of section 194C(2) - Held, yes Facts A partnership firm which was an assessee under the Act constituted of nine partners. The ITO filed nine different complaints pertaining to the relevant assessment years under section 276B read with section 194C, against all the partners and that firm, alleging that the provisions of section 194C had been violated as the respondents failed to deduct amount of tax out of the payment made to sub-contractor and thus were liable for punishment under section 276B. The Chief Judicial Magistrate observed that the respondent firm were only the purchasers of certain quantity of scants of timber and they could not be called as contractors and, the persons to whom they were alleged to have made payments were not their sub-contractors under section 194C and, thus, discharged the respondents in all the complaints. On criminal revision : Held The provisions of section 194C(2) have to be read along with the provisions of section 194C(1). In the instant case, admittedly, that respondent firm had not entered into any contract for carrying out any work or for supply of labour for carrying out any work with any Government, local authority, corporation, company or co-operative society. The respondent, thus, being not a contractor, the payments made by it to any person could not be treated as payments made by a contractor to a sub-contractor so as to attract the provisions of section 194C(2). Thus, the Chief Judicial Magistrate was right in discharging all the complaints against the respondents. Inder Singh for the Applicant. ORDER 1. Respondent Nos. 1 to 9 are the partners of the firm respondent No. 10, Rama Nand & Co., which is an assessee under the Income-tax Act,…

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