TaxTMI 
TaxTMI 
TaxTMI 
1999 (1) TMI 24
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.... contracts such as transport contracts, service contracts, labour contracts, material contracts as well as works contract, etc. 3. The provisions of section 194C are as under "(1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and - (a) the Central Government or any State Government ; or (b) any local authority ; or (c) any corporation established by or under a Central, State or Provincial Act ; or (d) any company; or (e) any co-operative society, shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to two per cent. of such sum as. income-tax on income comprised therein. (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-con....
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....ort contractors as it is by way of an including clause, while the argument of learned counsel for the respondent is that it is only clarificatory in nature and, therefore, the words "any work" used in section 194C will cover these services as well. 5. Circular of the Board dated October 8, 1993, which is in dispute is as under: "5.3 It is clarified that the term 'any work' in section 194C has to be understood in its natural meaning, i.e., any work means 'any and not only a works contract' which has a special connotation in the tax law. This has been clearly enunciated by the Supreme Court of India in its judgment dated March 23, 1993, in Civil Appeal No. 2860(NT) of 1979-Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435. Thus, the provisions of section 194C are applicable to all types of contracts for carrying out any work, such as transport contracts, service contracts, labour contracts, material contracts as well as works contracts, etc." Earlier, Circular No. 93, dated September 26, 1972, in respect of transport contracts as under : "A transport contract cannot ordinarily be regarded as a 'contract for carrying out any work' and, as such, no dedu....
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....on 194C are not applicable to contracts for mere carriage of goods which do not include any other services like loading or unloading. The circular was accordingly quashed. 8. The Orissa High Court in the case of Sethi Transport v. CBDT [1997] 226 ITR 274, had also the occasion to consider the circular dated March 8, 1994, and agreeing with the decision given by the Bombay High Court observed that section 194C does not extend to the contract for mere carriage of goods, to that extent, the circular issued was held illegal. 9. The Calcutta High Court in the case of Calcutta Goods Transport Association v. Union of India [1996] 219 ITR 486 has taken into consideration the definition of the word "work" as defined in New Shorter Oxford English Dictionary, and Stroud's Judicial Dictionary and came to the conclusion that the word "work" is to be understood in the limited sense as product or result. The carrying out of work indicates doing something to conduct the work to completion or an operation which produces the result. That being so the mere transportation of goods by a common carrier does not affect or result in the goods being carried nor are the goods affected thereby and as ....
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....ion, therefore, has a wide import and covers 'any work' which one or the other of the organisations specified in the sub-section can get carried out through a contractor under a contract and further it includes obtaining by any of such organisations supply of labour under a contract with a contractor for carrying out its work which would have fallen outside the 'work' but for its specific inclusion in the sub-section." 12. According to the interpretation of the Department which was prevalent till April 1, 1994, the transport contractors were not considered to be falling within the ambit of section 194C. Mere transportation of goods by a common carrier does not affect or result in the goods carried nor are the goods affected. The legislative intent could also be seen from the subsequent amendments. Explanation III was inserted by the Finance Act, 1995, by which advertising and travelling agencies, etc., were included thereunder. Whether the Explanation could be considered to be explanatory so as to apply for the transaction between April 1, 1994, to June 30, 1995 ? An interpretation which had continued and acted upon for more than a decade is not to be easily devia....