29. Deduction of tax at source from the bills of works contractors

(1) The deduction referred to in sub-section (1) of section 41 shall be made at the rate notified in this behalf from time to time by the Government.

(2) Such deduction shall be made from payments purporting to be the full or part payment of the sale price, being made in respect of all contracts executed, whether in part or in full, after commencement of this Act:

Provided that no deduction shall be made on account of the payment pertaining to the following –

(a) Labour charges for execution of the works contract,

(b) Amount paid to sub-contractor on account of labour and services,

(c) Charges for planning, designing and architects fees,

(d) Charges for obtaining on hire machineries and tools used in the execution of the works contract,

(e) Cost of consumables such as water, electricity, fuels, etc. used in execution of the works contract the property in which is not transferred in the course of execution of a works contract,

(f) Cost of establishment of the contractor to the extent it is relatable to supply of labour and services,

(g) Other similar expenses relatable to supply of labour and services,

(h) Profit earned by the contractor to the extent it is relatable to the supply of labour and services, and

(i) Goods or transactions exempted under section 6 or section 7 of the Act.

Provided further that the amount deducted during a year shall be refunded, in accordance with the provisions of section 68, to the person from whose bills such deductions are made if he does not become liable to tax during the year during which the said deductions were made:

Provided also that no such refund shall be made unless the person claiming the refund files, before the Circle In-Charge, an application in form A-XIII after the end of the financial year during which the deduction or deductions, as the case may be, were made.

(3) (i) The person making such deduction under sub-section (1) of section 41 and responsible for depositing the same shall forward the crossed cheque or a crossed bank draft, drawn in favour of the concerned circle incharge, accompanied by separate Challans in Form CH-I in respect of each contractor by the 15th day of the following month. The person making the deduction shall also enclose a statement in Form RT-VI giving details about such deductions.

Explanation: The expression “concerned circle incharge” shall—

(a) in a case where the contractor is registered, be the Circle Incharge of the circle within whose jurisdiction the concerned contractor is registered;

(b) in a case where the contractor is not registered, be the circle incharge within whose jurisdiction the concerned works contract is being executed.

Provided that no cheque or draft, as aforesaid, shall be accepted by the concerned Circle Incharge unless the same is accompanied by the statement in form RT-VI.

(ii) Where the cheque or draft is on a bank other than a branch of the Reserve Bank of India or the State Bank of India or the bank specially authorised in this behalf, it shall also include an additional amount equal to the actual collection charges.

(iii) Upon receipt of the cheque or draft specified in sub-clause (i) the concerned Circle Incharge shall deposit the same in the concerned Treasury or the Bank, as the case may be.

(iv) After the deposit is made, the portions of the challan marked “Triplicate” and “Quadruplicate” shall be handed over to the contractor from whose bills the deduction has been made.

(4) (i) Every person deducting tax in accordance with sub- section (1) of section 41 shall, at the time of payment, whether in part or in full, issue to the person from whom such deduction is made, a certificate in Form C-II and furnish fully and correctly all such particulars as are specified therein.

(ii) The certificate mentioned in clause (i) shall be in quadruplicate.

(iii) The portions marked “Original” and “Duplicate” shall be handed over to the contractor from whose bills the deductions have been made who shall furnish the portion marked “Original” to the authority specified in rule 62 as evidence of payment of tax by deduction at source along with the return to be filed under section 24 and the portion marked “Duplicate” shall be retained by the contractor.

(iv) The portion marked “Triplicate” shall be sent to the concerned circle incharge along with the relevant Challan.

(v) The “Quadruplicate” portion shall be retained by the person issuing this certificate.

(5) (i) Every person making the deductions referred to in sub-section (1) of section 41 shall also send to the circle incharge within whose jurisdiction the concerned contractor is registered, a quarterly return in Form RT-VII by the 31st July, 31s t October, 31st January and 30th April in respect of the deductions made by him during the quarter immediately preceding.

(ii) If any contractor is not registered in any circle, a separate quarterly return shall be sent to the circle incharge within whose jurisdiction the concerned contract is being executed.

(6) Any deduction made in accordance with the provisions of sub-section (1) of section 41 and paid in the Government Treasury or the bank, as the case may be, shall be treated, to such extent, as payment of the tax on behalf of the contractor from whom such deduction was made and credit shall be given to him for the amount so deducted and deposited in the Government Treasury or the bank, as the case may be.