Indian Association of Tour Operators vs Central Board of Direct Taxes

Bhat, J.—The petitioners challenge the validity of the circular issued by the CBDT whereby the Board provided to extend the applicability of section 194C of the income tax Act, 1961 (''the Act''). According to the petitioners, their cases cannot be covered at all and, therefore, the circular is ultra vires the provisions of the Act to that extent. The petitioners carry on the business of conducting and organising tours, international and a few domestic tours. They provide hotel accommodations, transport facilities, guides for local and other sightseeing and related services. When it is stated that they provide hotel accommodations, it should be understood that they did not render the hotel service as such but arrange for the accommodations in hotels for the tourists.

The question is whether the petitioners ''carry out any work'' as contemplated u/s 194C. It is clear that no tangible property is produced by the activity of the petitioners. They are actually rendering services of conducting tours or act as agents in providing accommodations. Their cases cannot in any way be different from the cases of commission agents and brokers and following the decision of this Court in S.R.F. Finance Ltd. Vs. Central Board of Direct Taxes and others, we declare that the impugned circular to the extent it purports to extend the provisions of section 194C to the activities of the petitioners as stated above is ultra vires and unenforceable. The writ petition is, accordingly, allowed. The rule made absolute. No costs.