1990 (2) TMI 283 - HC - VAT and Sales Tax

Summary

Issues involved:
Challenge to validity of Constitution (Forty-sixth Amendment) Act, 1982 and rule 26A of Bihar Sales Tax Rules, 1983 regarding deduction under section 25A of Bihar Finance Act, 1981.

Validity of Constitution (Forty-sixth Amendment) Act, 1982:
- Petitioner challenged the validity of the Constitution (Forty-sixth Amendment) Act, 1982, specifically clause (29A) inserted in article 366 of the Constitution.
- The amendment allowed for taxation on transfer of property in goods involved in works contracts.
- Supreme Court's interpretation emphasized the amendment's impact on works contracts, making them divisible for taxation purposes.
- Tax to be levied only on transfer of property in goods in works contracts, not on total contract amount.

Validity of rule 26A of Bihar Sales Tax Rules, 1983:
- Section 25A of Bihar Finance Act, 1984 introduced tax deductions for works-contractors.
- Rule 26A prescribed the manner of deduction of tax from works-contractors' bills/invoices under section 25A.
- Petitioner argued that rule 26A(2) went beyond the scope of article 366(29A)(b) and section 25A by directing deductions from all payments, including labor charges.
- Court held that deductions should only be made for transfer of property in goods in works contracts, aligning with section 25A and Supreme Court's interpretation.

Conclusion:
- Court allowed the writ application, directing respondents to make deductions in line with the judgment.
- Emphasized the need for rule amendment to align with section 25A, but clarified that deductions should only apply to payments for transfer of property in goods in works contracts.
- No costs awarded in the case.