TMI Blog1998 (10) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... ated May 29, 1972, and September 26, 1972, which had come to be issued immediately after the insertion of section 194C of the Act. Section 194C, in so far as relevant, reads : "194C. Payments of contractors and sub-contractors.---(1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as 'the contractor'), for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and--- (a) the Central Government or any State Government ; or (b) any local authority ; or (c) any corporation established by or under a Central, State or provincial Act ; or (d) any company; or (e) any co-operative society; shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode whichever is earlier, deduct an amount equal to two per cent. of such sum as income-tax on income comprised therein." From sub-section (1) of section 194C, it is manifest that, any person responsible for paying any sum to any contractor for carrying out any work, including supply of labour for carryin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No. 681, came to be issued by the Central Board of Direct Taxes. The genesis of the circular dated March 8, 1994, is the decision of the Supreme Court in Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435. In Associated Cement Co. Ltd.'s case [1993] 201 ITR 435 (SC), the contention of the appellant before the Supreme Court was that, the amount deductible under section 194C(1) out of the sum credited to the account of or paid to a contractor would arise only when such sums are paid, on account of a contractor executing a works contract, that is, a contract which produces a tangible property. Learned counsel for Associated Cement Co. Ltd. contended before the Supreme Court that, the "work" for the carrying out of which the sum is required to be credited to the account of or paid to a contractor under section 194C(1) of the Act is only a "works contract". So the debate before the Supreme Court was whether the words "any work", occurring in sub-section (1) of section 194C, refer to only works contract. Reproducing section 194C(1), the Supreme Court observed that "no ambiguity is found in the language employed in the sub-section" and stated the following formulations : (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has a special connotation in the fiscal law, the Central Board of Direct Taxes realised that, it had issued the two circulars dated May 29, 1972 and September 26, 1972, erroneously, that a transport contract cannot ordinarily be regarded as contract for carrying out any work and as such, no deduction in respect of income-tax is required to be made from payments made under such a contract and to correct that mistake, the Central Board of Direct Taxes, issued the circular dated March 8, 1994, reviewing the earlier two circulars. The Central Board of Direct Taxes, reviewing the earlier circulars relying on the decision of the Supreme Court in Associated Cement Co. Ltd.'s case [1993] 201 ITR 435, stated in the circular dated March 8 1994 as under : "7. The conclusion flowing from the aforesaid judgments of the Supreme 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 abovementioned circulars Nos. 86 and 93 and para. 11 of Circular No. 108 and issue the following guidelines in reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circulars issued by the Central Board of Direct Taxes earlier ; (ii) that, there is nothing in the decision of the Supreme Court to justify the reversal of the view taken by the Central Board of Direct Taxes in the earlier circulars ; (iii) that, the Supreme Court has not interpreted the provisions of section 194C in the manner which is sought to be interpreted by the Central Board of Direct Taxes and to apply to all types of contracts including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, materials contracts, works contracts etc ; (iv) that, it is well settled that the judgment of the Supreme Court has to be read subject to the facts directly presented for consideration before it and not affecting those matters which may lurk in the record. We have already pointed out that learned counsel for Associated Cement Co., pointedly argued before the Supreme Court that, the "work" for carrying out of which the sum is required to be credited to the account of or paid to a contractor under section 194C(1) of the Act is only a "works contract". Rejecting this contention, the Supreme Court Held that, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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