CENTRAL BOARD OF DIRECT TAXES Vs. SARADHA TRANSPORT

JUDGEMENT

(1.) THE above batch of writ appeals have been filed questioning the orders of the learned single judge, in striking down Circular No. 681, dated March 8, 1994 (see [1994] 206 ITR (St.) 299), issued by the Central Board of Direct Taxes on the ground of it being ultra vires Section 194C of the Income-tax Act, 1961 (hereinafter referred to as "the Act").

(2.) SECTION 194C of the Act obligates any person paying any amount due to a contractor in pursuance of a contract, to deduct a particular percentage of amount as income-tax. This can be called as tax deduction at source. The assessees, who are transport contractors and entitled for payment for carriage of goods, were aggrieved by the action of the income-tax authorities in seeking to deduct the amount at source by invoking SECTION 194C of the Act. Their contention was that the circular, which has been issued authorising tax deduction at source was illegal and ultra vires, as the substantive law, i.e., SECTION 194C of the Act did not authorise any tax deduction at source for mere carriage of goods by transportation in motor vehicles. This contention found favour with the learned single judge. Accordingly, the said circular was set at naught.