Daily Wage Payments Cannot be Considered as Contractual Payments

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Sept. 8 – Compensations made by the employer to workers employed by it on daily wage basis cannot be said to be a contractual disbursement and, as such, the assessee in such cases is not required to subtract tax from such payments u/s. 194 C of the Act.

Such payments are not in the nature of payments under agreement, but have the nature of wages. It is evident that the accountability to deduct tax under Section 194C only arises in case of contractual payments. Since the payments were made to the workers employed by the assessee on daily wages, they cannot be said to be contractual payments.

Where the employer had produced confirmation from the parties to whom payments were made, confirming the fact that they have included the amount received from the assessee as their income and paid taxes thereon, the assessee cannot be treated as assessee in default under the provisions of section 201 (1) of the Act for non-deduction of tax at source.

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