C. SIVA REDDY Vs. EXECUTIVE ENGINEER

JUDGEMENT

(1.) HEARD the learned counsel for the petitioner as well as the learned counsel for the respondents. The petitioner took up execution of contract of construction of UT in the Telugu Ganga Project main canal, which involves besides earth work also supply of materials. Bills of the petitioner were finally settled by the Executive Engineer, Telugu Ganga Project showing the expenditure of earth work and the supplies made. It is the grievance of the petitioner that the second respondent - Assistant Pay and Accounts Officer, Telugu Ganga Project, Nandyal - is not passing the bill amount to the petitioner, demanding to deduct tax at source at the rate of 4 percent not only on the supply of materials, but also on the earth work.

(2.) SRI S.R. Ashok, learned Standing Counsel for the Income Tax submits that in such type of contracts, the tax to be levied as regards the supply of materials is 1% in accordance with G.O.Ms. No. 788, dated 21st September, 1996 and that no tax is leviable for earth work at all. Learned Government Pleader for Taxes concedes the submission of Mr. S.R. Ashok of no tax being leviable on earth work and otherwise tax is leviable at 1 percent for the supply of materials, but submit that the second respondent as the drawing authority, as has been explained in Rashtreeya Ispat Nigam Ltd. Vs. State of A.P. : (1996) 22 APSTJ 150 has to deduct tax from the amount to be paid to the contractor. In view of such facts, this case is disposed of with direction that the petitioner is entitled to receive the amount payable to him as per Bill, after deducting tax at 1% on the value of the materials supplied, but no tax is leviable or collected in respect of the earth work. The second respondent - Assistant Pay and Accounts Officer, Telugu Ganga Project, Nandyal shall pay the petitioner accordingly.