TMI Blog2017 (4) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... -4-2017 - Mr. K.S. Jhaveri And Mr. Vijay Kumar Vyas JJ. For the Appellant(s) : Mr. R. B. Mathur For the Respondent(s) : Mr. Sanjay Jhanwar JUDGMENT 1. In both these appeals, common questions of law and facts are raised, hence they are decided by this common judgment. 2. By way of these appeals, the Department has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeals preferred by the Department. 3. This Court while admitting the appeals framed the following substantial questions of law:- Appeal No. 363/2011 Whether on the facts and circumstances of the case the ITAT was justified in law in holding that the payments made by the assessee were not liable to be dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the whole or any part of the work undertaken by the contractor, or, for supplying any labour, the contractor shall deduct an amount equal to 1 per cent. of such sum as income-tax on the income comprised therein. 3. Section 194C was introduced with effect from 1st April, 1972. Shortly after its introduction, the Board issued Circulars No. 86, dated 29th May, 1972 (F. No. 275/9/72-ITJ), No. 93, dated 26th September, 1972 (F. No. 275/100/72-ITJ), and No. 108, dated 20th March, 1973 (F. No. 131(9)/ 73-TPL), in this regard. 4. Some of the issues raised in the above-mentioned circulars need to be reviewed in the light of the judgment dated March 23, 1993, delivered by the Supreme Court of India in Civil Appeal No. 2860(NT) of 1979- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court and the Patna High Court is that the provisions of section 194C would apply to all types of contracts including transport contracts, labour contracts, service contracts, etc. In the light of these judgments, the Board have decided to withdraw their above mentioned Circulars Nos. 86 and 93 and para 11 of Circular No. 108 and issue the following guidelines in regard to the applicability of the provisions of section 194C: (i) The provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, materials contracts and works contracts. (ii) No deduction at sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Government or any other specified person and the fabrication work is done by a contractor. (b) Where, however, the contractor undertakes to supply any article or thing fabricated according to the specifications given by the Government or any other specified person and the property in such article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview of this section. (c) In State of Himachal Pradesh v. Associated Hotels of India Ltd. [1972] 29 STC 474, the Supreme Court observed that where the principal objective of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be deducted at source. In a case where, at the time when the contract was entered into, it was expected that the total payment thereunder would not exceed ₹ 10,000 but later on it is found that the payment exceeds that amount, deduction should be made in respect of earlier payments as well. (x) The percentage deduction prescribed in law is with reference to the amount of payment and not income comprised in the payment . The person responsible for making payment, therefore, is not required to estimate the income comprised in the payment. (xi) In a case where advance payments are made during the execution of a contract and such payments are to be adjusted at the time of final settlement of accounts, tax will have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc., along with staff (e.g., driver, conductor, cleaner, etc.). Reference in this regard is also invited to Board s Circular No. 558, dated 28th March, 1990. (iii) The term materials contracts in the context of section 194C would mean contracts for supply of materials where the principal contract is for work and labour and not a contract for sale of materials. 9. Board s Circular No. 86, dated 29th May, 1972, and No. 93, dated 26th September, 1972, and para 11 of Circular No. 108, dated 20th March, 1973, are hereby withdrawn. Board s Circular No. 558, dated 28th March, 1990, is reiterated. 10. It is clarified that this circular explaining the provisions of section 194C will apply with effect from 1st April, 1994. Tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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