A S CONSTRUCTION COMPANY Vs. UNION OF INDIA

JUDGEMENT

(1.) IN this petition, the prayer is made to quash the impugned Circular No. 737 (see [1996] 218 ITR (St.) 97), dated February 23, 1996, issued by the Central Board of Direct Taxes ("the CBDT"), and the actions taken in pursuance thereof. The Central Board of Direct Taxes issued Circular No. 684, dated June 10, 1994, to explain the substance of the newly inserted provisions of Section 44AD of the INcome-tax Act, 1961 (for short "the Act" hereinafter). The circular has been published in [1994] 208 ITR (St.) 8. IN paras. Nos. 31 to 31.7 at page 30, the meaning and scope of Section 44AD has been explained as under :

(2.) A subsequent impugned Circular No. 737 (see [1996] 218 ITR (St.) 97), dated February 23, 1996, was issued by the Central Board of Direct Taxes. . It has been mentioned in the circular that a doubt has been raised as to whether deduction on account of salary/interest to the partners of a firm shall be admissible from the income estimated in accordance with Section 44AD and Section 44AE of the Act. The doubt has primarily arisen because of the erroneous clarification given in paras. 31.3 and 32.2 of Circular No. 684 (see [1994] 208 ITR (St.) 8), dated June 10, 1994. The following lines appearing in paras. 31.3 and 32.2 of Circular No. 684 (see [1994] 208 ITR (St.) 8), dated June 10, 1994, were deleted by the subsequent Circular No. 737 (see [1996] 218 ITR (St.) 97), dated February 23, 1996 (page 98) :