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TMI Blog1990 (2) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... made from the amount payable for execution of a works contract by the persons or authorities making such payment in respect of the contract in question. 2.. The relevant part of clause (29A) aforesaid which was introduced by the Forty-sixth Amendment in article 366 of the Constitution is as follows: "tax on the sale or purchase of goods' includes- (a)................................ (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;" After the amendment aforesaid, different States amended the Acts relating to payment of tax on sale and purchase of goods to cover transfer of property in goods, whether as goods or in some other form involved in the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 25A is to be prescribed, rule 26A was introduced in the Rules prescribing the manner of deduction of tax from the bills/ invoices of the works-contractors under section 25A. Rule 26A(1) and (2) are as follows: "26A. (1) The deduction referred to in sub-section (1) of section 25A shall be made at the rate notified in this behalf from time to time by the Government. (2) Such deduction shall be made from all payments being made in respect of all works contracts executed, whether in part or in full, after 1st April, 1984, provided the total value of works contract or contracts exceeds Rs. 25,000." Sub-rule (1) of rule 26A requires a rate to be notified at which deduction referred to in sub-section (1) of section 25A is to be made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract which is divisible into one for sale of goods and the other for supply of labour and services. After the 46th Amendment, it has become possible for the States to levy sales tax on the value of goods involved in a works contract in the same way in which the sales tax was leviable on the price of the goods and materials supplied in a building contract which had been entered into in two distinct and separate parts as stated above. It could not have been the contention of the Revenue prior to the 46th Amendment that when the goods and materials had been supplied under a distinct and separate contract by the contractor for the purpose of construction of a building the assessment of sales tax could be made ignoring the restrictions and condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the execution of a works contract are not the goods involved in the execution of the works contract, but a conglomerate, that is the entire building that is actually constructed. After the 46th Amendment it is not possible to accede to the plea of the States that what is transferred in a works contract is the right in the immovable property." 7.. Now a tax is to be levied on the transfer of property in goods whether as goods or in some other form, involved in the execution of a works contract. Even where a works contract is single or indivisible, i.e., it is not separate in parts, one relating to sale of materials used in the construction of the building by the contractor and the other dealing with the supply of labour and services, in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -founded. If the words "all payments" are to be read to mean all payments including the amount paid on account of labour charges and other services rendered by the contractor, then sub-rule (2) of rule 26A has to be held to be invalid and unconstitutional. 10.. It is well-settled principle of interpretation of statute that if without doing violence to the language of any provision of the Act or the Rules it can be interpreted in a manner which can make it valid and constitutional that interpretation should be given. As such, in my view, the words "all payments being made in respect of all works contracts executed" used in sub-rule (2) of rule 26A has to be read to mean payments made for the transfer of property in goods whether as goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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