Case Note & Summary
The petitioner, M/s Musale Constructions, a partnership firm engaged in construction business, filed three writ petitions challenging Circular No. 9 dated 17.02.2020 issued by the Vidarbha Irrigation Development Corporation (VIDC), respondent no. 1. The circular directed that 5% Tax Deducted at Source (TDS) be deducted from all contractor bills. The petitioner contended that the circular was without any statutory authority, as TDS is governed exclusively by the Income Tax Act, 1961, and the VIDC had no power under its governing Act or Rules to impose such a deduction. The respondents argued that the circular was issued to ensure compliance with tax laws and to prevent tax evasion. The court, after hearing both sides, examined the VIDC Act and found no provision empowering the Corporation to issue such a circular. The court held that the circular was ultra vires as it lacked statutory backing and could not override the provisions of the Income Tax Act. The court quashed the circular and allowed the petitions. The judgment was delivered by a division bench of the Bombay High Court at Nagpur, comprising Justices A. S. Chandurkar and N. B. Suryawanshi, with the latter authoring the judgment.
Headnote
A) Administrative Law - Ultra Vires - Circular Without Statutory Authority - Circular No. 9 dated 17.02.2020 issued by Vidarbha Irrigation Development Corporation directing deduction of 5% TDS from contractor bills - The court held that the Corporation has no statutory power to issue such a circular imposing TDS, as TDS is governed by the Income Tax Act, 1961, and the circular is not backed by any provision of the VIDC Act or Rules. The circular was quashed as being ultra vires. (Paras 1-10) B) Taxation - Tax Deduction at Source - Income Tax Act, 1961 - Section 194C - TDS on payments to contractors - The court held that TDS can only be deducted as per the provisions of the Income Tax Act, 1961, and a circular issued by a corporation cannot override or supplement the statutory scheme. The impugned circular was held to be without authority of law. (Paras 5-8)
Issue of Consideration
Whether Circular No. 9 dated 17.02.2020 issued by Vidarbha Irrigation Development Corporation directing deduction of 5% TDS from contractor bills is legally valid and enforceable.
Final Decision
The court quashed Circular No. 9 dated 17.02.2020 and allowed the writ petitions.
Law Points
- Circular without statutory authority is ultra vires
- TDS deduction must be under statutory provisions
- Circular cannot override statutory provisions
- No power to impose TDS under VIDC Act
