TMI Blog1996 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 194C of the Income-tax Act, 1961 (for short " the Act "), and for a direction not to make any deduction from the amount due to the petitioners under section 194C of the Act. Since the facts and points of law involved in all the cases are similar, they were heard together with the consent of learned counsel for the parties and are being disposed of by this common judgment. Circular No. 681, dated March 8, 1994, relates to deduction of income-tax at source under section 194C of the Act from payments made to contractors/sub-contractors. The Board issued the circular purportedly on the basis of the judgment rendered by the Supreme Court on March 23, 1993, in the case of Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435. In the said circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to extend the statutory provision to them, it is clearly ultra vires the provisions of the Act, particularly section 194C. The petitioners contend that since the statutory provision of section 194C does not apply to them, it is not permissible for the Board to extend the provision by issuing mere executive instructions and that if it is intended that the petitioners should be brought within the purview of section 194C, then necessary amendment in the statute ought to be made. In the absence of any such move, no liability for making such deduction at source can be attached by the executive instruction. The contentions raised by the petitioners are refuted by the Department. The case of the Department, shortly stated, is that all that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as ' the sub-contractor ') in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-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 one per cent. of such sum as income-tax on income comprised therein. Explanation. --- For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) or sub-section (2) shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificate or deduct no tax, as the case may be. " In Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435, the Supreme Court ruled that no ambiguity is found in the language employed in the sub-section. What is contained in the sub-section, as appears from its plain reading and analysis, admits of the following formulations : (1) A contract may be entered into between the contractor and any of the organisations specified in the sub-section. (2) Contract in Formulation-1 could not only be for carrying out any work but also for supply of labour for carrying out any work. (3) Any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining by any of such organisations supply of labour under a contract with a contractor for carrying out its work which would have fallen outside the ' work ', but for its specific inclusion in the sub-section. In the said decision, the Supreme Court also decided the controversy relating to the exact amount to be deducted from the dues of the contractor. That question, however, is not relevant for the purpose of the present case. The Bombay High Court in the case of Bombay Goods Transport Association v. CBDT [1994] 210 ITR 136, specifically considered the question of validity of the circular of the Board bearing No. 681, dated March 8, 1994, requiring deduction of tax at source under section 194C in the case of contracts for carriage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of section 194C to labour contracts because the contention of the assessee was that the said section was applicable only to works contracts. It was this contention that was repelled by the Supreme Court. The court held that Circular No. 681 is illegal and without jurisdiction in so far as it requires deduction of tax at source from payments to advertising agencies for professional services rendered by them. The Madhya Pradesh High Court in the case of M. P. State Bar Council v. Union of India (Writ Petition No. 2259 of 1994, disposed of on August 24, 1995), referring to the decisions of the Supreme Court in the case of Associated Cement Co. [1993] 201 ITR 435 the Bombay High Court in Chamber of Income-tax Consultants v. CBDT [1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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