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Section 44AD of the Income-tax Act, 1961 - Civil construction business - Assessment year 1994-95 - Whether section 44AD is applicable not only to contractors but also to sub-contractors - Held, yes HELD Applying the ratio of the decision of the Supreme Court in Union of India v. A. Sanyasi Rao [1996] 219 ITR 330/ 85 Taxman 321, in the context of section 44AC, it was to be held that section 44AD cannot be said to be in any manner arbitrary or violative of article 14. [Para 3] The argument that section 44AD does not apply to sub-contracts and applies only to a contract, cannot be accepted. The mere fact that in the matter of deduction at source, a distinction is made in section 194C between a contractor and a sub-contractor, does not enable the assessee to contend that section 44AD does not apply to the case of a sub-contractor. The section speaks of any assessee engaged in the business of civil construction or supply of labour for civil construction and provides for a presumptive profit from such business. On the wording of section 44AD, there is no doubt that a sub-contractor will also come squarely within the purview of that provision. Therefore, the argument that a sub-contractor is not covered by section 44AD, cannot be accepted. [Para 5] CASES REFERRED TO East India Tobacco Co. v. State of Andhra Pradesh AIR 1962 SC 1733 [Para 2] and Union of India v. A. Sanyasi Rao [1996] 219 ITR 330/ 85 Taxman 321 (SC) [Para 3]. Jagabandhu Sahoo, M. Das and S.K. Mohanty for the Petitioner. JUDGMENT P.K. Balasubramanyan, CJ. - In this writ petition, an assessee under the Income-tax Act, 1961 ('the Act'), challenges the constitutional validity of section 44AD of the Income-tax Act and on that basis seeks the issue of a writ of certiorari to quash the order of assessment made for the assessment year 1994-95 and the demand made pursuant thereto. Admittedly, the assessee is a sub-contractor of Tata Robin Frasers Limited and during the assessment year, he had executed work as a sub-contractor under the principal contractor. Admittedly, the petitioner did not maintain accounts relating to the sub-contract works. In that situation, the Assessing Officer invoked section 44AD of…

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