Meaning of Construction Materials Supplied by Govt

Q: What does this phrase mean: " payment made by the Govt to a contractor for construction material supplied to the contractor by such Govt." [Used in Section 153(5)(ba)]

Ans. In construction contracts given by a Govt to contractors, the Govt sometimes makes part payment in the form of contruction materials. For example a contract amounting to Rs. 30 (m) is awarded by Govt to a private contractor for construction of a road. Out of this amount Rs. 25 (m) are given in cash, whereas construction material worth Rs. 5 (m) is given to the contractor. In such situations tax is not required to be deducted u/s 153 from the contract amount representing the contruction materials [i.e. Rs. 5 (m) in this example]. Thus, tax is be deducted at 6% of Rs. 25 (m) only.