can any one clarify this please urgent

Sir/ Madam,

i happen to come across a situation that a department/ office at the time of payment to the contractor for the work done by him deducts VAT and remit the same before the payment made to the concern person(contractor).....can it is possible to deduct VAT before making the payment to the said contractor...???if it is possible under what section it can be made???r the payment made is wrong??

and

while calculating the "Income from house property" the house for which is situated in some other part rather than the residential place can avail the claim of interest if it is purchased out of the loan and interest is been paid since july 2010 for the same..???if so under what section it can be done so???

and

whether loss on house property can be shown on the house which is not rented and self occupied  and can we claim the interest on loan on calculating the income from house property for that house...??? 

these doubts might be silly but i m geting confused with the things can any one please help me in this regard...i ll be thankful....

thanks,

padma.