JUDGMENT

Y.K. Sabharwal, J.-The legality of circular dated 8th March, 1994 (hereinafter referred to as the impugned circular ) issued by the Central Board of Direct Taxes (CBDT) prescribing fresh guidelines regarding the applicability of Section 194C of the Income Tax Act, 1961 (for short, the Act ) to the extent it relates to transport contracts, i.e., contracts for carriage of goods, is in issue in this appeal. The said circular, inter alia, states that the provisions of Section 194C shall apply to all types of contracts for carrying out any work including transport contracts. Section 194C provides for deduction of tax at source from payments to contractors and sub-contractors. Section 194C was brought into existence by the Finance Act, 1972 with effect from April 1, 1972. Various amendments have been made in that section since then but material part relevant for the present purposes reads as under :

"Payments to contractors and subcontractors.

194C. (1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in