RAJASTHAN TAX CONSULTANTS ASSOCIATION Vs. CENTRAL BOARD OF DIRECT TAXES

JUDGEMENT

(1.) IN this writ petition, Circular No. 681*, dated March 8, 1994, requiring to deduct the tax at source has been prayed to be quashed. IN the said circular, the term "service contract" was defined as service rendered as lawyers, physicians, surgeons, engineers, accountants, architects, consultants, etc. This circular was issued on the basis of the judgment of the Supreme Court in the case of Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435 where the observations were made that "there is nothing in the sub-section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to works contract". On the basis of this observation the provision of Section 194C of the INcome-tax Act, 1961, was sought to be applied to professionals.

(2.) THE grievance of the petitioner is that it is contrary to the provisions of the Act.

(3.) THIS provision by itself contemplates that there should be a payment to the contractor. With effect from June 1, 1987, the provisions of Section 194E were sought to be inserted providing for deduction of tax in respect of fee for professional services. On opposition, this proposal was dropped. Besides these specific provisions of law which were sought to be inserted by Parliament, Circular No. 86 (see [1972] 84 ITR (St.) 99), dated May 29, 1972, was issued in which it was provided as under (page 100):