CBDT circular 30 August 1995
Circular No. 720
1120. Payment of any sum shall be liable for deduction of tax only under one section
What this is
Circular No. 720 was issued by the Central Board of Direct Taxes on 30 August 1995. Its subject is 1120. Payment of any sum shall be liable for deduction of tax only under one section.
What it does
Stops deductors applying two TDS provisions to the same payment. Each section in Chapter XVII on deduction at source deals with a particular kind of payment to the exclusion of all other sections in that Chapter, so a payment is liable to deduction under one section only. The instance the Board had before it was payment for advertising work being subjected to deduction both under section 194C as a works contract and under section 194J as fees for professional services.
Why it was issued
It was brought to the Board's notice that in some cases deductors were applying more than one provision to the same payment, advertising payments being the example given.
Who it reaches
- Payers of advertising charges
- Advertising agencies and production houses receiving such payments
- Deductors uncertain between sections 194C and 194J
- Assessing Officers raising short-deduction demands
The provisions it speaks to
Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.
The instrument, as the Board published it
The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.
1120. Payment of any sum shall be liable for deduction of tax only under one section
It has been brought to the notice of the Board that in some cases persons responsible for deducting tax at source are deducting such tax by applying more than one provision for the same payment. In particular, it has been pointed out that the sums paid for carrying out work of advertising are being subjected to deduction of tax at source under section 194C as payment for work contract as also under section 194J as payments of fees for professional services.
2. It is hereby clarified that each section, regarding TDS under Chapter XVII, deals with a particular kind of payment to the exclusion of all other sections is this Chapter. Thus, payment of any sum shall be liable for deduction of tax only under one section. Therefore, a payment is liable for tax deduction only under one section.
Circular : No. 720, dated 30-8-1995.
What to watch
- The circular says a payment falls under one section only, but it does not decide which section a given advertising payment falls under - that still turns on the nature of the payment.
- It is a general proposition about Chapter XVII, so it applies beyond the advertising example that prompted it.
- Deducting under the wrong single section is not cured by this circular; only double deduction on the same payment is addressed.
Where you meet it
In a TDS survey or section 201 order where the Department seeks deduction under a second section on a payment already subjected to deduction under another.
On the same provision
Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.
- Circular No. 09/2012 — Section 194C of the Income-tax Act, 1961 - Deduction of TAX at Source - Payments to Contractors & Sub-contractors - Dedu 17 October 2012
- Circular No. 13/2006 — Dated 13/12/2006 13 December 2006
- Circular No. 6/2006 — TAX Deduction at Source - Issue of TDS Certificate under section 203 of the Income-tax Act - Cases of Truck/goods-carria 23 June 2006
- Notification No. 163 — Rules/amendment Rules 17 June 2005
- Circular No. 5/2002 — 1126. Clarifications on various provisions relating to tax deduction at source regarding changes introduced through Fina 30 July 2002
- Circular No. 787 — 227. Guidelines regarding taxation of income of artists, entertainers, sportsmen, etc., from international/national/ loc 10 February 2000
A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.
Source: the Income Tax Department’s own published text — its page for this instrument.