34. Tax deduction at source.

(1)     Without prejudice to any other mode of recovery, payment or collection of tax under this Act, the State Government may, by notification in the Gazette, direct that, in a specified case and in the specified circumstances but subject to such conditions as may be specified, every specified person responsible for making payment to the selling dealer, for discharge of liability on account of valuable consideration payable on sale of goods in such cases as may be specified, shall, at the time of making such payment to the seller, either by credit or in cash or in any other manner, towards satisfaction of tax payable by the dealer on account of sale of any taxable goods, deduct an amount determined in the manner specified:
       Provided that where in case of a works contract, the contractor has awarded a sub-contract and the notification provides for deduction of amount by the contractee from the payments made to contractor, the contractor responsible for making any payment or discharge of any liability to any sub-contractor, in pursuance of a contract with the sub-contractor, shall, while making payment to the sub-contractor, deduct amount of tax referred to above.
       Provided further that where in case of a works contract, the contractor has already made deduction from the payments made to his sub-contractor, the amount of such payments shall be deducted from the amount on which deduction is to be made by the contractee to the contractor.

(2)   Upon issue of a notification under sub-section (1), where-

(a)   a dealer, who makes sale of any taxable goods and in whose case notification referred to in sub-section (1) applies, for any reason claims that he either is not liable to pay tax on such sale or is liable to pay as tax an amount lesser than amount of deduction computed in the manner provided; or

(b)   the person responsible for making payments to the dealer selling the goods is unable to ascertain the turnover of any goods sold, the person responsible for making payment shall require the selling dealer to produce direction issued in this behalf by the assessing authority of the selling dealer and shall act according to such direction of the assessing authority.

(3)     Where purchasing dealer himself is liable to pay tax on turnover of purchase of any goods by virtue of any provision of this Act, he shall not deduct any amount in respect of turnover of such goods.

(4)     In the circumstances under sub-section (2), the dealer selling goods may, for issue of direction to the purchaser to deduct an amount lesser than the proposed amount of tax or not to deduct any amount as tax, apply to the assessing authority having jurisdiction over the principal place of his business or if he has no fixed place of business, to the assessing authority in whose jurisdiction he ordinarily resides.

(5)     The assessing authority referred to in sub-section (4), after examining the liability of payment of tax of the dealer in respect of sale of goods made and after giving reasonable opportunity of being heard to the dealer, shall by an order in writing direct the purchaser of the goods accordingly.

(6)     The amount deducted under sub-section (1) shall be deposited into the Government Treasury by the person making such deduction before the expiry of the 20th day of the month following that in which deduction is made:
       Provided that where the purchaser of goods referred to in sub-section (1) is a registered dealer, he shall deposit the amount of deduction in the manner and within the time in which amount of tax for the tax period in which purchase has been made, is payable and such dealer shall be entitled to claim input tax credit in accordance with provisions of section 13 in respect of such purchase.

(7)     The person making deductions under sub-section (1) shall, at the time of payment or discharge, furnish to the selling dealer a certificate of amount deducted in such form and manner and within such period as may be prescribed and shall submit such statement of all such purchases, payments and deductions made and certificates issued by him, in such manner and within such time, as may be prescribed.

(8)      If any person referred to in sub-section (1) fails to make the deduction or after making deduction fails to deposit the amount so deducted as required by subsection (6), the assessing authority may, after giving to such person an opportunity of being heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section but not so deducted and, if deducted, not so deposited into the Government Treasury.

(9)     Without prejudice to the provisions of sub-section (8), if any such person, after deducting, fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of fifteen percent per annum on the amount not so deposited from the date on which such amount was deducted to the date on which such amount is actually deposited.

(10)    Where the amount has not been deposited after deduction, such amount together with interest referred to in sub-section (9) shall be recovered as arrears of land revenue from the person who has deducted and such amount shall be a charge upon all the assets of the person concerned.

(11)    Nothing contained in this section shall prevent the assessing authority from making an assessment of tax payable by the dealer in accordance with other provisions of this Act and the dealer shall be liable to pay tax in accordance with other provisions of this Act.
      Provided that any deduction made in accordance with the provisions of this section shall be treated as a payment of tax on behalf of the selling dealer, and credit shall be given to him for the amount so deducted on the production of the certificate, referred to in sub-section (9) in the tax return of the relevant period or the assessment made, as the case may be, and any amount found in excess of tax due shall be refunded to the selling dealer.

(12)   No deduction of any amount shall be made under this section if the person selling the goods is not a dealer, but the onus to prove that goods have been purchased from a person other than a dealer shall lie on the person responsible for making payment, failing which it shall be deemed that goods have been purchased from a dealer.

(13)    Where the person responsible for making deduction in respect of a sale under a works contract is unable to ascertain the amount of deduction and the contractor or the sub-contractor, as the case may be, does not produce direction referred to in sub-section (2) from its assessing authority, the person responsible for making deduction shall deduct an amount which shall be four percent of the gross amount of payment.

(14)   No deduction under this section shall be made on the turnover of sale  where such sale  takes place -
       (i)   in the course of inter-State trade or commerce; or
       (ii) outside the State; or
       (iii)  in the course of the export out of, or  import into, the territory of India;

Explanation: - For the purposes of this section, assessing authority in relation to person responsible for making payments to the selling dealer means the officer having jurisdiction over the place where the principal place of business of such person inside the State is located and where such person has no such place, the place where the residence of such person inside the State is located.