All Gujarat Federation of Tax Consultant vs Central Board of Direct Taxes

Balia. J.

In all these four petitions, a short common question has been raised. Hence, they are being disposed of by this common judgment. Relevant facts may be noticed as under. Regarding ambit and scope of deduction of income tax at source from the amount paid to a contractor in terms of section 194C of the Income- tax Act, 1961 which was introduced with effect from 1 -4-1972. The Board had issued two circulars being Nos. 86, dated 29-5-1972 and 93, dated 26-9-1972 and 108,dated 20-3-1973 ( see Taxman''s Direct Taxes Circulars, 1991 edn., pp. 2073, 2076 and 2808), confining the operation of section 194C to the payments made in respect of the works contracts. The Supreme Court delivered a judgment in The Associated Cement Company Ltd. Vs. The Commissioner of Income Tax, Bihar, Patna and another, . The Board has issued the Circular No. 681, dated 8-3-1994 - [1994] 73 Taxman 277 (St.) which is annexed as Annexure "A" in Special Civil Application No. 5419 of 1994 issuing fresh guidelines in view of the judgment of the Supreme Court and reiterating its Circular No. 558, dated 28-3-1990 (p. 2084).

It is issuance of this circular which has been made effective from 1-4-1994, which is the subject-matter of challenge in these petitions. It is the contention of the petitioners in all these cases that the Board had no jurisdiction to issue circular of the nature, which is in question, for interpreting the provisions of the Act in this manner.

It may be noticed that the circular clearly states that it is being issued only as guidelines in regard to the applicability of the provisions of section 194C in terms of the Board''s view of the Supreme Court judgment mentioned above. It is well-settled in this regard that interpretation of law is not the domain of the Board and any interpretation to be made by the Board is not binding either on the assessing authority or Courts insofar as the question of interpretation of law is concerned, though it may be read as an independent opinion of the Board which may or may not be accepted by the adjudicating authority after hearing the person concerned. Viewed from the aforesaid point of view, we think it appropriate to dispose of these petitions with observations that the concerned assessing authority will decide the question of deductibility of 2 per cent of the sum paid to any contractor independent of the view expressed in the impugned circular after giving the assessee concerned an opportunity and taking into consideration the relevant law including the aforesaid Supreme Court judgment without feeling bound by the impugned circular. Petitions stand disposed of, accordingly, with no order as to costs.