Section 194C cannot be expanded by circular beyond "work"; prospective amendment could not retrospectively validate transport TDS directions.

A circular cannot widen the scope of section 194C beyond the statutory meaning of "work"; on that construction, payments for mere carriage of goods by motor transport were outside the pre-amendment provision, so tax deduction at source could not be insisted upon under the earlier text. The later Finance Act, 1995 amendment was held to operate prospectively and could not retrospectively validate an earlier ultra vires circular. The note records that the circular was invalid and ultra vires section 194C, with the writ appeals dismissed.

---

---

Issues: Whether Circular No. 681 dated 8 March 1994, directing deduction of tax at source from payments to transport contractors for carriage of goods, was ultra vires section 194C of the Income-tax Act, 1961, and whether the subsequent amendment by the Finance Act, 1995 could validate the circular retrospectively.

Analysis: Section 194C, as inserted by the Finance Act, 1972, applied to payments to contractors for "work" done, and the expression "work" as then explained did not include mere carriage of goods by motor transport. On that construction, the circular could not enlarge the scope of the substantive provision so as to require deduction at source from transport charges. The later amendment brought in by the Finance Act, 1995 was held to operate only prospectively and could not retrospectively ratify the earlier circular.

Conclusion: The circular was invalid and ultra vires section 194C, and deduction of tax at source could not be insisted upon for mere transportation of goods under the pre-amendment provision.

Final Conclusion: The challenge to the circular failed, and the writ appeals were dismissed, leaving the assessees' position undisturbed.

Ratio Decidendi: A circular cannot expand the scope of section 194C beyond the meaning of "work" contained in the statute, and a later amendment that is prospective cannot retrospectively validate an earlier ultra vires circular.

---