TaxTMI 
TaxTMI 
2024 (11) TMI 653
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....d Mr. Sanjay Kumar and Mr. Santosh Kumar, leamed counsels appearing for respective sides, we are of the considered opinion that the appeals would merit further consideration. 2. We note that undisputedly the viability gap funding was part of a prescription of the concession agreement itself. It is in the aforesaid context that, prima facie, we find ourselves unable to sustain the view taken by the Income Tax Appellate Tribunal ['ITAT'] which has observed in paragraph 7 that the said payment was not in discharge of a contractual obligation. We, consequently, admit these appeals on the following question of law: - A. Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that the assessee was not liable to deduct tax at source from non-refundable sums paid under any name by NHAI to the Concessionaries particularly when such sums have been paid as per Concession Agreement for securing rights of NHAI? 3. List again on 15.07.2024." 3. Shorn of unnecessary details, it would be the following facts which would merit being noticed for the purposes of disposal of the present appeals. For the sake of brevity, we pr....
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.... collect user fee as per rates prescribed by the Union Government. The capital grant subsidy is explained by NHAI as essentially being financial support which is rendered by it to the Concessionaire in relation to projects where, on account of various factors, the revenue that the Concessionaire generates is less than the expected projection or where it may be found that the Concessionaire would be unable to recover the total project cost. In order to attend to this viability gap, NHAI provides funding to the Concessionaire as a capital grant on the basis of a competitive bidding process. According to the disclosures made before the Tribunal, the bidders are selected for the award of the "Build, Operate Transfer" [BOT] contracts based on the lowest viability gap funding requirement bid for. 9. NHAI had before the Tribunal explained the nature of BOT contracts as envisaging the Concessionaire to be recognized as the owner of the assets which come to be created, conferred with the right to collect toll over the concession period and at the end of which the highway would revert to the NHAI. It had contended before the Tribunal that the capital grant subsidy is essentially in the na....
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....wners of the project for 15 years and they receive the capital grants from the assessee on which no TDS should be deducted. It was submitted that there are hundred and sixteen PIUs all over India, who disburse the money at project level being branch office of head office of NHAI and the branch offices (PIUs) are having their own TAN number and, therefore, there should not be double deduction of TDS at head office level, PIU level. It was submitted that the relation between head office of the assessee and PIUs is like that 'of head office and branch office. Since PIUs have done their duty of tax deduction at source at different places all over India, there should not be double deduction of TDS at assessee's head office level. The assessee thus claimed that it should get full relief on the issue. It was pointed out that the assessee had disbursed capital grants to different concessionaires during the financial year which was about 2% to 40% of total project cost. It was argued that since the capital grant is given by the Government through the assessee as a capital work in progress there should not be any TDS under section 194C on this capital grant. 5.1. Some undisputed....
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.... first appellate order. It is also an undisputed fact that the Government of India have approved in Model Concession Agreement (MCA) that to make such project viable in / private partnership models, the assessee provides viability gap funding as capital grant on competitive bidding process. Therefore, the assessee has not deducted the TDS on the payment of VGF (Grant) as it is not contractual payment liable for deduction of tax at source under section 194C of the Act as VGF is not a revenue receipt in the hands of the concessionaire. The ratio laid down in the above cited decisions also support this stand of the assessee. We thus hold that the authorities below were not justified in coming to the conclusion that grant given by the assessee to concessionaire as a contract payment and not in the nature of grant/subsidy given by the assessee for building, operating and maintaining the toll road with this observation that relationship between assessee and concessionaires is contractor-builder or a contractor-maintainer, concessionaires assets for the purpose of Income Tax, the word grant has been used as it is not expected to be returned hack and that relationship between the assessee ....
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....d is no longer res integra and was duly examined by the Jaipur Bench of the Tribunal in Deputy Commissioner of Income Tax (TDS) v. National Highway Authority of India Ltd. ITA Nos. 236, 237 & 238/JP/2012 and where the following pertinent observations came to be rendered:- "4.1 The ld. CIT D/R vehemently argued that the ld. CTT (A) was not justified in deleting the addition. He submitted that the assessee has given colour of contractual payment as 'grant'. He submitted that the payment made to the concessionaires is nothing but a contractual payment. Therefore, the assessee was required to deduct tax thereon as per section 194C of the Act. The assessee has grossly failed to do so, therefore, the AO was justified in treating the assessee in default. 4.2. On the contrary, the ld. Counsel for the assessee reiterated the submissions as made in the written submission. The ld. Counsel for the assessee submitted that as per clause XXIII of the agreement with M/s. GVK, the total contributions made by the NHAI of Rs. 211 crores in A.Y. 2004-05, 2005-06 & 2006-07 towards its shares in respect of the cost of the project. Such contributions have been nomenclature as 'g....
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.... the revenue/income received as toll collection, through the method of escrow accounting system. These peculiar features also differentiate the present agreements from the normal works contract agreement. Accordingly, the AO's findings given in this regard are irrelevant and incorrect. He further submitted that in the works contract agreement, the ownership of the project/assets lies with the principal only and the contractor is not having any sort of rights, be of real ownership or beneficial in nature, in this regard. However, it can be noticed that as per clause XXXVIII of the concession agreement, till the specified time period therein, the BOT concessionaires would have the ownership rights of the project and its assets for all practical and legal purposes. Thus the concessionaires are not only executors of the project, but they also assumed status of the co-owners of the same. The ld. Counsel submitted that in the case of M/s. GVK, the Coordinate Bench of the Tribunal allowed depreciation to the concessionaires on such assets while treating them beneficial ownership in the project as such. He submitted that the AO has erred in not appreciating Escrow Accounting System, as spe....
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....rlier, deduct an amount equal to two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family of such sum as income-tax for A.Y. 2011-12 of such sum as income comprised therein. Therefore, specified person the deductor herein i.e. NHAI is required to deduct tax in the event the payment is made to the contractor in pursuance of a contract. In the case in hand, we need to examine whether the payments made by the NHAI under the head 'Grant' to M/s. GVK Kishangarh Expressway Pvt. Ltd. was liable to deduction of tax or not. Undisputed facts remain that the NHAI has made payment to M/s. GVK Kishangarh Expressway Pvt. Ltd. under the head 'Grant'. The AO treated such payments as payment made under the contract. The AO examined various terms of the agreement between NHAI and M/s. GVK Kishangarh Expressway Pvt. Ltd. and has also reproduced certain terms of agreement. The AO, therefore, treated the assessee in default. However, the ld. CIT (A) after examining the terms of agreement came to the conclusion that such payments are not in the nature of payment made to the contractor. By doing so, he observed in para ....
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....is not made to the contractor. The agreement cannot be stated to be purely a contract agreement but it is a contract agreement of joint venture. Hence, we not see any infirmity in the order of ld. CIT(A), therefore, the same is hereby upheld." 5. In view of the concurrent finding of all the authorities below regarding payments in the nature of contribution in the joint venture, no interference is required in this appeal." 18. At the outset, it becomes pertinent to note that undisputedly, Section 194C is not confined to works contracts. This aspect has been authoritatively settled by the Supreme Court in Associated Cement Company Ltd. v. Commissioner of Income Tax (1993) 2 SCC 556 and where it had held as follows:- "4. Section 194C (1) of the Income Tax Act on the proper construction of which the decision on the aforesaid question should necessarily rest, runs thus: xxxx xxxx xxxx No ambiguity is found in the language employed in the sub-section. What is contained in the sub-section, as appears from its plain reading and analysis, admit of the following formulations: (1) A contract may be entered into between the contractor and any of ....
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....em it apposite to extract Section 194C hereunder: "Payments to contractors. 194C. (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 specified person 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- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such inco....
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.... (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under Section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or (k) any firm; or (l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,- (A) does not fall under any of the preceding sub-clauses; and (B) [has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in c....
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....cession is spoken of in Article 3 and reads as follows:- "ARTICLE 3 GRANT OF CONCESSION 3.1 The Concession 3.1.1 Subject to and in accordance with the provisions of this Agreement, the Applicable Laws and the Applicable Permits, the Authority hereby grants to the Concessionaire the concession set forth herein including the exclusive right, licence and authority during the subsistence of this Agreement to construct, operate and maintain the Project (the "Concession") for a period of 20 (twenty) years commencing from the Appointed Date, and the Concessionaire hereby accepts the Concession and agrees to implement the Project subject to and in accordance with the terms and conditions set forth herein: 3.1.2 Subject to and in accordance with the provisions of this Agreement, the Concession hereby granted shall oblige or entitle (as the case may be) the Concessionaire to: (a) Right of Way access and licence to the Site for the purpose of and to the extent conferred by the provisions of this Agreement; (b) finance and construct the Project Highway; (c) manage, operate and maintain the Project Highway and regulate the use thereof by thi....
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....ith all and singular rights, liberties, privileges, easements and appurtenances whatsoever to the said Licensed Premises. hereditaments or premises or any part thereof belonging to or in anyway appurtenant thereto or enjoyed therewith, for thc duration of the Concession Period and, for the purposes permitted under this Agreement, and for no other purpose whatsoever." 23. The subject of construction of the project highway is dealt with and regulated by Articles 12, 12.1, 12.2 and 12.4.2 and which read as follows:- "ARTICLE 12 CONSTRUCTION OF THE PROJECT HIGHWAY 12.1 Obligations prior to commencement of construction Prior to commencement of Construction Works, the Concessionaire shall: (a) submit to the Authority and the Independent Engineer its detailed design, construction methodology, quality assurance procedures, and the procurement, engineering and construction time schedule for completion of the Project in accordance with the Project Completion Schedule as set forth in Schedule-G; (b) appoint its representative duly authorised to deal with the Authority in respect of all matters under or arising out of or relating to this Agreement; ....
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....further that in the event Project Completion Date is achieved on or before the Scheduled Six-Laning Date, the Damages paid under this Clause 12.4.2 shall be refunded by the Authority to the Concessionaire, but without any interest thereon. For the avoidance of doubt, it is agreed that recovery of Damages under this Clause 12.4.2 shall be without prejudice to the rights of the Authority under this Agreement, including the right of Termination thereof." 24. Article 17 sets out the obligations of the Concessionaire with respect to operation and maintenance. Clause 17.1.1 of Article 17 makes the following provisions in this respect:- "ARTICLE 17 OPERATION AND MAINTENANCE 17.1 O&M obligations of the Concessionaire 17.1.1 During the Operation Period, the Concessionaire shall operate and maintain the Project Highway in accordance with this Agreement either by itself, or through the O&M Contractor and if required, modify, repair or otherwise make improvements to the Project Highway to comply with the provisions of this Agreement, Applicable Laws and Applicable Permits, and conform to Good Industry Practice. The obligations of the Concessionaire hereunder shall in....
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....use 25.2, the Grant shall be credited to the Escrow Account and shall be applied by the Concessionaire for meeting the Total Project Cost (the "Equity Support"). 25.2.2 "The Equity Support" shall not exceed the sum specified in the Bid and as accepted by the Authority, but shall in no case be greater than 1/2 (one half) of the Equity, and shall be further restricted to a sum not exceeding 10% (ten per cent) of the Total Project Cost. For the avoidance of doubt, the Total Project Cost to be reckoned for the purposes of this Clause 25.2.2 shall include Equity Support." 25.2.3 Equity Support shall be due and payable to the Concessionaire after it has expended the Equity, and shall be disbursed proportionately along with the loan funds thereafter remaining to be disbursed by the Senior Lenders under the Financing Agreements. The Authority shall disburse each tranche of the Equity Support as and when due, but not later than 15 (fifteen) days of receiving a request from the Concessionaire along with necessary particulars. Provided further, within 30 (thirty) days of Lenders Representative certifying the final drawdown of the last instalment of the debt, all the balance ....
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....Loan, as the case may be, within 60 (sixty) days of receiving a valid request from the Concessionaire along with the particulars thereof including a detailed account of the Indirect Political Event, Political Event or the Authority Default, as the case may be, and its impact on the collection of Fee. 28.2 Repayment of Revenue Shortfall Loan A sum equal to 50% (fifty per cent) of the 'profit before tax' of the Concessionaire, as and when made, shall be earmarked for repayment of the Revenue Shortfall Loan and interest thereon, and paid by the Concessionaire to the Authority within 90 (ninety) days of the close of the Accounting Year in which such profits have been made; provided that the Concessionaire shall repay the entire Revenue Shortfall Loan and interest thereon not later than one year prior to the expiry of the Concession Period and in the event that any sum remains due or outstanding at any time during such period of one year, the Authority shall be entitled to terminate this Agreement forthwith. For the avoidance of doubt, it is agreed that the repayment of Revenue Shortfall Loan shall be in accordance with and subject to the provisions of Article 31." ....
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....cordance with the conditions, if any, set forth in the Financing Agreements; (c) O&M Expenses, subject to the ceiling, if any, set forth in the Financing Agreements; (d) O&M Expenses and other costs and expenses incurred by the Authority in accordance with the provisions of this Agreement, and certified by the Authority as due and payable to it; (e) Concession Fee due and payable to the Authority; (f) monthly proportionate provision of Debt Service due in an Accounting Year; {(g) Premium due and payable to the Authority;) (h) all payments and Damages certified by the Authority as due and payable to it by the Concessionaire, including repayment of Revenue Shortfall Loan; Concessionaire hereby agrees to give irrevocable instructions to the Escrow Bank to make payment from the Escrow Account in accordance with the instructions of the Authority under Clause 17.9.2 and debit the same to O&M Expenses (i) monthly proportionate provision of debt service payments due in an Accounting Year in respect of Subordinated Debt; (j) any reserve requirements set forth in the Financing Agreements; and (k) balance, if any....
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....ith and authorises the Escrow Bank to exercise such rights, powers, authorities and discretion as are specifically delegated to the Escrow Bank by the terms hereof together with all such rights, powers, authorities and discretion as are reasonably incidental hereto, and the Escrow Bank accepts such appointment pursuant to the terms hereof. 2.1.2 The Concessionaire hereby declares that all rights, title and interest in and to the Escrow Account shall be vested in the Escrow Bank and held in trust for the Authority, the Lenders' Representative and the Concessionaire, and applied in accordance with the terms of this Agreement. No person other than the Authority, the Lenders' Representative and the Concessionaire shall have any rights hereunder a: the beneficiaries of, or as third party beneficiaries under this Agreement. 2.2 Acceptance of Escrow Bank The Escrow Bank hereby agrees to act as such and to accept all payments and other amounts to be delivered to and held by the Escrow Bank pursuant to the provisions of this Agreement. The Escrow Bank shall hold and safeguard the Escrow Account during the term of this Agreement and shall treat the amount in the Es....
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....ment, it shall be deemed for the purposes of this Agreement that the Nominated Company is a Party hereto and the Nominated Company shall accordingly be deemed to have succeeded to tile rights and obligations of the Concessionaire under this Agreement on and with effect from the date of substitution of the Concessionaire with the Nominated Company. 3 DEPOSITS INTO ESCROW ACCOUNT 3.1 Deposits by the Concessionaire 3.1.1 The Concessionaire agrees and undertakes that it shall deposit into and/or credit the Escrow Account with: (a) all monies received in relation to the Project from any source, including the Senior Lenders, lenders of Subordinated Debt and the Authority; (b) all funds received by the Concessionaire from its share-holders in any manner or form; (c) all Fee levied and collected by the Concessionaire; (d) any other revenues, deposits or capital receipts, as the case may be, from or in respect of the Project Highway; and (e) all proceeds received pursuant to any insurance claims. 3.1.2 The Concessionaire may at any time make deposits of its other funds into the Escrow Account, provided that the....
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....all payments relating to construction of the Project Highway, subject to and in accordance with the conditions, if any, set forth in the Financing Agreements; (c) O&M Expenses, subject to the ceiling, if any, set forth in the Financing Agreements; (d) O&M Expenses incurred by the Authority, provided it certifies to the Escrow Bank that it had incurred such expenses in accordance with the provisions of the Concession Agreement and that the amounts claimed are due to it from the Concessionaire; (e) Concession Fee due and payable to the Authority; (f) monthly proportionate provision of Debt Service due in an Accounting Year; {(g) Premium due and payable to the Authority;} (h) all payments and Damages certified by the Authority as due and payable to it by the Concessionaire pursuant to the Concession Agreement, including repayment of Revenue Shortfall Loan; (i) monthly proportionate provision of debt service payments due in an Accounting Year in respect of Subordinated Debt: (j) any reserve requirements set forth in the Financing Agreements; and (k) balance, if any, in accordance with the instructions of t....
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....be earlier. While, principally it is the obligation of the Concessionaire to endeavour to meet the economic targets, arrange for appropriate credit facilities from lenders, the NHAI bearing in mind the huge investment required to be made also extends financial aid and support in the shape of viability gap funding. 30. Having noticed the salient provisions of the Concession Agreement, it becomes apparent that the work relating to the creation of infrastructure, and which in this case was concerned with the six-laning of an expressway, constituted the physical component of the contract. It becomes relevant to note that Section 194C requires a deduction of tax at source on any sum which may be paid to a contractor for carrying out any work. The expression 'work' is further expanded in the principal provision with the statute ordaining that it would include supply of labour for carrying out any work. The word 'work' also stands defined in the Explanation to Section 194C and which includes activities such as advertising, broadcasting and telecasting of programmes, carriage of goods or passengers, catering, manufacturing or supplying a product as some of the activities which could fal....
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....icular sport, game or exercise. xxxx xxxx xxxx 5. A particular act or piece of labour; a task, job. Also gen. something difficult to do, a 'hard task' (cf. 4 b); or in special connexions, e.g. a particular operation in some manufacture. Obs. exc. Hist. xxxx xxxx xxxx † b. In early use applied spec. (in sing. or pl.) to the building or repair of a church. Obs. xxxx xxxx xxxx c. slang. A criminal act or activity. Cf. JOB sb2. I b. xxxx xxxx xxxx 6. a. Trouble, affliction; in later use in lighter sense: Disturbance, fuss, 'ferment'. (See also 31.) b. Pain, ache: see WARK sb1. dial. xxxx xxxx xxxx II. 9. With possessive: The product of the operation or labour of a person or other agent; the thing made, or thigns made collectively; creation, handiwork. Also vaguely, the result of one's labour, something accomplished. xxxx xxxx xxxx b. The result of the action or operation of some person or thing; 'effect, consequence of agency' (J.); (one's) 'doing'; the device or invention of some one. xxxx xxxx xxxx 10. Without possessive: A thing made; a manufactured ar....
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....tate of Uttar Pradesh, AIR 1954 All 700, 702. [Land Acquisition Act (1 of 1984), S. 40(1)(aa)] Word 'work' appears to mean other constructions or works which are neither buildings nor industrial works. Word cannot be read in ejusdem generis sense. Pramatha Nath Talukdar v. State of W.B., MLJ: QD (1961-1965) Vol IV C162: 67 Cal WN 387: AIR 1963 Cal 554 [Land Acquisition Act (1 of 1984), S. 40(1)(aa)] xxxx xxxx xxxx The expression 'work' occurring in Section 194C of the Act is to be understood in the limited sense as product or result. The mere transportation of goods by a common carrier does not affect the goods carried nor are the goods affected thereby and as such cannot be brought within the scope of Section 194C of the Act [Calcutta Goods Transport Association v. Union of India, (1996) 219 ITR 486 (Cal)] [Income-tax Act (43 of 1961), S. 194C] The word 'work' may have different and wider meanings but one has to find out the real meaning of the word in the context of its setting in Section 194C of the Act. A lawyer is not engaged to carry out the work of arguing a case; he is engaged to argue a case or to conduct a case; he is paid a fee for the....
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....the Railway Stock Protection Act, 1872, "means any establishment or place used for the purpose of trade or manufacture, which is connected with a line of Railway by siding along which the rolling stock may be propelled." 12. The word "work" was defined in the Act and Wills J. observed that it was not easy to say exactly what was meant by "a work". He then says: "The difficulty arises from the fact of its not being a word known to the law it is a mere word of art not being work in popular use in the sense in which it is used in the Act"." 35. The meaning so ascribed was also noticed by the Supreme Court in Larsen and Toubro Limited and Another v. State of Karnataka and Another (2014) 1 SCC 708, as would be evident from paragraphs 69 and 70 of the report:- "69. The ordinary dictionary meaning of the word "work" means a structure or apparatus of some kind; architecture or engineering structure, a building edifice. When it is used in the plural i.e. as works, it means architectural or engineering operations, a fortified building, a defensive structure, fortification or any of the several parts of such structures. In Webster's Comprehensive Dictionary, Inte....
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....ource. If such 'works' were already covered by section 194C, it was wholly unnecessary for Parliament to introduce separate statutory provisions in this regard and, thus, it follows that the word 'work' is to be understood in the limited sense as a product or result. The carrying out of work indicates doing something to conduct the work to completion or an operation which produces such result. In V. M. Salgaocar and Bros. Ltd. v. ITO, the Karnataka High Court has concurred with the view expressed by the Bombay and Calcutta High Courts. The High Courts of Gujarat, Madras, Orissa and Delhi have also expressed similar views. On the other hand, as already noticed, the Rajasthan High Court in the judgment under appeal has expressed the contrary view relying upon the decision in ACC case. 12. Two interpretations are reasonably possible on the question whether the contractor for carrying of goods would come or not within the ambit of the expression 'carrying out any work'. One of the two possible interpretations of a taxing statute, which favours the assessee and which has been acted upon and accepted by the Revenue for a long period should not be disturbe....
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....alth club, business centre services, etc. do not involve carrying out any work which results into production of the desired object and, therefore, would be outside the purview of section 194C of the Act. 19. From the fact that the contracts for supply of labour to carry out any work have been specifically brought within the purview of section 194C and the fact that four categories of service contracts have been specifically brought within the purview of section 194C by inserting Explanation III to section 194C, it cannot be inferred that the services rendered by a hotel to its customers are also covered under section 194C of the Act. In other words, as the services rendered by a hotel to its customers by providing certain facilities/amenities do not constitute "work" within the meaning of section 194C, the impugned Circular No. 681 issued by the Central Board of Direct Taxes to the extent it applies to a customer availing of the services rendered by the hotel must be held to be contrary to section 194C of the Act. 20. It is true that the word "work" in section 194C is not restricted to "works contract" only as held by the apex court in the case of Associated Cemen....
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....Court in S.R.F. Finance Ltd. v. Central Board of Direct Taxes and Others 1994 SCC OnLine Del 597 had, while adjudging the validity of Circular Nos. 661 and 681 issued by the Central Board of Direct Taxes [CBDT], rendered the following pertinent observations with regards to 'work' as that expression finds place in Section 194C:- "4.16. Mr. Syali is right in pointing out the qualitative differences between the subject, referred as 'work' and the subject referred as 'service'. The two words convey different ideas. In the former (i.e. 'work') the activity is predominantly physical, it is tangible. In the activity referred as 'services', the dominant feature of the activity is intellectual, or atleast, mental. Certainly, 'work' also involves intellectual exercise, to some extent. Even a gardener has to bestow sufficient care in doing his job; so is the case with a mason, carpenter or a builder. But the physical, (tangible) aspect is more dominant than the intellectual aspect. In contrast, in the case of rendering any kind of 'service', intellectual aspect plays the dominant role. The vocation of a lawyer, doctor, architect or a Ch....
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....word, a meaning which the sentence in which it is found, does not convey. The wider meaning is indicated, according to the Supreme Court, because the section expressly includes supply of labour to carry out a work. 4.24 The entire paragraph in which the above observation of the Supreme Court is found, shall have to be read together; lifting one or the other sentence and read the lifted portion separately would destroy the integrity of the paragraph. In the opening sentence of the paragraph, the scope of the discussion is indicated, when the Supreme Court said in the last part of the first sentence, "...............there is nothing in the sub-section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to 'works contract' as was argued." 4.25 The position becomes clear when the special connotation of the term 'works contract' in the tax law is properly understood. 'Works contract' involves two elements- (i) the transfer of materials; and (ii) rendering of services in bringing out a tangible property out of the materials; for example, in the case of a building c....
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....uding part of the Supreme Court observation quoted above brings out the true purport of the term 'any work' in Section 194-C 4.29 Any work, certainly is a term of wide import; but, it is not so wide, as to comprise within its stoppage the obtaining of the supply of labour to carry out the work, because, the latter concept is essentially, a concept falling within the sphere of 'services'. However, the term 'any work' is wide enough to cover any kind of work which one can got carried out through another. The essentiality is that, it should be a 'work' which is to be 'carried out'. xxxx xxxx xxxx 4.32 It is most inappropriate to equate rendering of a service to carrying, out a work. That is why Parliament thought it expedient to expand the meaning of the word 'work' by including in it the supply of labour. It is obvious that because the word 'work' would not include within its amplitude the supply of labour, Parliament added the same by 'including' the latter in the former, thereby giving the word 'work' an extended meaning. The extended meaning cannot travel beyond the actual extended a....
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....ion so as to recoup the investment made in its creation. Upon completion of the concession term, the highway was to revert to the NHAI. The Concessionaire was thus, and in that sense, in possession of the contract assets and conferred the right to exploit the same as per the contractual stipulations. Quite apart from the BOOT model itself being a hybrid arrangement, the capital grant subsidy was not a payment made for work per se but representative of the obligation of NHAI to extend financial support in connection with the creation of an asset of public utility and importance. 41. Viewed in that light it becomes apparent that the capital grant subsidy was essentially aid and support that the NHAI extended to the Concessionaire as opposed to payment that it would have ordinarily made to a contractor and would be directly connected with or constitute recompense for physical work that was performed. As the precedents noticed hereinabove bid us to acknowledge, the word 'work' in the context of Section 194C is liable to be understood as relating to labour that is expended, the undertaking of a task or operation which produces a result. The infusion of equity capital as a measure of ....