Tax deduction from the amount payable to works contractor

27.     (1) Notwithstanding anything contained in any of the provisions of this Act, every contractee responsible for making payment to any person (hereinafter in this section referred to as the contractor) for discharge of any liability on account of valuable consideration, exceeding rupees five lac in a single contract payable for the transfer of property in goods (whether as goods or in some other form) in pursuance of a works contract, shall, at the time of making such payment to the contractor either in cash or in any other manner, deduct an amount equal to five per cent of such sum towards the tax payable under this Act on account of such contract:

Provided that any individual or Hindu undivided family not registered under this Act, shall not be liable for deduction of such tax.

(2)       Any contractor responsible for making any payment or discharge of any liability to any sub-contractor or in pursuance of a contract with the sub-contractor, for the transfer of property in goods (whether as goods or in some other form) involved in the execution whether wholly or in part, of the work undertaken by the contractor, shall, at the time of such payment or discharge, in cash or by cheque or draft or by any other mode, deduct an amount, equal to five per cent of such payment or discharge, purporting to be a part  of the tax, payable under this Act on such transfer, from the bills or invoices raised by the sub-contractor, as payable by the contractor.

(3)       Every person liable to deduct tax at source under sub-section (1) or sub-section (2), as the case may be, shall make an application in the prescribed manner to the designated officer for allotment of Tax Deduction Number. The designated officer, after satisfying that the application is in order, shall allot Tax Deduction Number.

(4)       The amount deducted under sub-section (1) or sub-section (2), as the case may be, shall be deposited into the Government Treasury by the person making such deduction in the prescribed manner and shall also file a return of tax deduction and payment thereof in such form and in such manner, as may be prescribed.

(5)       Any deduction made in accordance with the provisions of this section and credited into the Government Treasury, shall be treated as payment towards the tax payable on behalf of the person from whose bills and invoices, the deduction has been made and credit shall be given to him for the amount so deducted on the production of the certificate, in the prescribed form in this regard.

(6)       If any contractee or the contractor, as is referred to in sub-section (1) or sub-section (2), as the case may be, fails to make the deduction or after deducting such amount fails to deposit the amount so deducted, the designated officer may, after giving an opportunity of being heard, by order in writing, direct that the contractee or the contractor shall pay, by way of penalty, a sum, equal to the amount deductible under this section, but not so deducted, and if deducted, not so deposited into the Government Treasury.

(7)       Without prejudice to the provision of sub-section (6), if any contractee or the contractor, as the case may be, fails to make the deduction or after deducting, fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of one and half per cent per month on the amount deductible under this section, but not so deducted and, if deducted, but not so deposited, from the date on which such amount was deductible to the date, on which such amount is actually deposited.

(8)       Where the amount has not been deposited after deduction, such amount together with interest referred to in sub-section (6), shall be a charge upon all the assets of the person concerned.

(9)       Payment by way of deduction in accordance with sub-section (1) or sub-section (2), shall be without prejudice to any other mode of recovery of tax, due under this Act from the contractor or the sub-contractor, as the case may be.

(10)        Where on an application being made by any contractor or sub-contractor, the Commissioner or designated officer is satisfied that no deduction of tax or deduction of tax at a lower rate is justified, he shall grant him such certificate permitting no deduction of tax or deduction of tax at a lower rate, as the case may be. On furnishing of such certificate, the person responsible for deduction of tax, shall comply with such certificate.