Law:

Section:

Section 194C of the Income-tax Act, 1961, read with article 226 of the Constitution of India - Deduction of tax at source - Contractors/sub-contractors, payments to - Assessment years 2005-06 to 2007-08 - Assessee was a supplier of eggs - He entered into a contract with competent authority of State Government for supply of eggs to 'Noon Meal Centres' in certain districts and made supply of eggs in accordance with specifications contained in contract - According to department, transaction of supply of eggs was liable for payment of income-tax and, therefore, income-tax had to be deducted at source as contemplated under section 194C in respect of contract - Assessing Officer also raised demand of tax along with interest upon assessee - Assessee filed writ petition challenging action of Assessing Officer on plea that contract for supply of goods was not a contract for works but same was a contract of sale to which provisions of section 194C would not apply - Whether question as to whether subject contract was a works contract or sale contract was largely one of fact depending upon terms of contract on proper construction of terms and conditions between parties including obligation cast upon them which had to be discharged under contract and, therefore, writ petition filed by assessee was not maintainable - Held, yes FACTS The assessee was a supplier of eggs. He entered into a contract with the competent authority of the State Government for the supply of eggs to certain 'Noon Meal Centres' in the State and the supply of eggs had been made in accordance with the specifications contained in the contract. The Assessing Officer, by communication dated 31-12-2008, stated that the transaction of supply of eggs was liable for payment of income-tax and based on such communication, the first respondent informed the assessee that income-tax had to be deducted at source as contemplated under section 194C in respect of the contract. Thereafter, the Assessing Officer raised a demand of tax along with interest upon the assessee for the assessment years 2005-06 to 2007-08. The assessee filed writ petition challenging the validity of the action of the Assessing Officer on the…

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