TMI Blog1996 (9) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... tants at Faridabad (Haryana). The petitioner, Shri Sanjay Bansal, is an advocate in C. W. P. No. 6731 of 1994. The circular in question has been challenged on the ground that the persons rendering services as lawyers, chartered accountants, physicians, surgeons, engineers, architects, consultants, etc., have been wrongly made liable to pay tax at the rate of two per cent. of the remuneration payable to them by the party engaging them for professional services. It is alleged that the said circular has been issued by the Board in excessive exercise of its powers conferred by section 190 of the Income-tax Act, 1961 (for short, " the Act "). The persons and parties paying remuneration to the professionals, like lawyers, chartered accountants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Act shall observe and follow such orders, instructions and directions of the Board : Provided that no such orders, instructions, or directions shall be issued -- (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner ; or (b) so as to interfere with the discretion of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the exercise of his appellate functions." The aforesaid provision empowering the Board to issue instructions and directions was enacted so as to facilitate proper administration of the Act. Therefore, the power to issue direction or any instruction is to be exercised only for carrying out the proper administration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular is based on the argument that the ratio of the decision of the Supreme Court has been wholly misread and misinterpreted. The Supreme Court in Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435, was examining the case of a contractor who had been engaged in the work of loading cement bags for, and on behalf of, a company under a contract. It was held that the contract falling under section 194C need not be a works contract only but may be a contract to carry out any work or to supply labour. Thus, the matter before the Supreme Court did not relate to the persons rendering professional services under an agreement. The petitioners have pleaded that the impugned circular has given a distorted and misconceived meaning and construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 11 along with their respective answers appear to be relevant inasmuch as they threw light on the view taken by the Board earlier on the applicability of section 194C to payments to various persons or parties. These questions and answers, being relevant are reproduced below (at page 31) : Question 5 : Does the requirement apply to transport contract ? Answer : 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. In the case of a composite contract involving transport as well as loading and unloading, the entire contract will be regarded as ' works contract ' and income-tax will h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said Bill sought the insertion of the new section so as to provide for the deduction of tax at source from the payments made to a resident by way of fees for professional services, royalty, fees for technical services, rent, commission or brokerage. It was explained in the " Notes on Clauses " appended to the said Bill that the new section provided for deduction of tax at source on payments beyond specified amounts of fees for professional services, royalty, etc. The amendment was proposed to take effect from June 1, 1987. However, the proposed new provision was dropped and did not come on the statute book. It is, therefore, evident that section 194C did not cover payments made to the professionals for their professional and technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 435. Similar view has been taken by the Delhi High Court in S. R. F. Finance Ltd. v. CBDT [1995] 211 ITR 861, the Gujarat High Court in All Gujarat Federation of Tax Consultants v. CBDT [1995] 214 ITR 276 and the Madras High Court in Madras Bar Association v. CBDT [1995] 216 ITR 240. The view taken by the Bombay High Court in Chamber of Income-tax Consultants' case [1994] 209 ITR 660 was challenged in a special leave petition before the Supreme Court but their Lordships of the Supreme Court have dismissed the special leave petition filed by the Department against the decision of the Bombay High Court. The impugned circular issued by the Board is held to be beyond the scope of section 119 and the result of misreading of section 194C of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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