1994 (12) TMI 334 - HC - Income Tax

Summary

Issues Involved:

1. Maintainability of the writ petition.
2. Applicability of Section 194C of the Income-tax Act, 1961 to the carriage of goods.
3. Doctrine of contemporanea expositio and its application.
4. Interpretation of the term "carrying out any work" under Section 194C.
5. Conflict between Section 194C and Section 44AE of the Income-tax Act.

Detailed Analysis:

1. Maintainability of the Writ Petition:

The revenue raised a preliminary objection regarding the maintainability of the writ petition, arguing that the first petitioner (an association) is not actually carrying on the business and that the affidavit in support of the writ petition was not filed by the second or third petitioners. The court rejected this objection, noting that the second petitioner is admittedly affected by the impugned circular, and the non-filing of an affidavit on behalf of the second petitioner can be ignored as an irregularity since the question involved is purely one of law and the basic facts are undisputed.

2. Applicability of Section 194C to the Carriage of Goods:

The petitioners contended that the carriage of goods for transportation cannot come within the scope of the words "carrying out any work" in Section 194C, arguing that the word "work" connotes the bringing out of a tangible object, such as in construction work. They also relied on earlier circulars issued by the CBDT, which clarified that transport operations would not be covered by Section 194C. The court agreed with this contention, holding that the interpretation given to Section 194C by the CBDT at the earliest occasion could be taken as the proper interpretation by applying the doctrine of contemporanea expositio.

3. Doctrine of Contemporanea Expositio:

The petitioners relied on the doctrine of contemporanea expositio, which is a rule for interpreting a statute by reference to the exposition it has received from contemporary authority. The court applied this doctrine, citing the Supreme Court's explanation in K.P. Varghese v. ITO and the earlier circulars issued by the CBDT, which clarified that a transport contract cannot ordinarily be considered a contract for carrying out any work. The court noted that various attempts to enlarge the scope of Section 194C indicated that it is not as wide as the impugned circular sought to make it.

4. Interpretation of "Carrying out Any Work" under Section 194C:

The court referred to the decision in S.R.F. Finance Ltd. v. CBDT, where it was held that Section 194C does not govern payments of fees towards professional or technical services. The term "any work" in Section 194C is aimed at work resulting in tangible material. The court also referred to the decision in Bombay Goods Transport Association v. CBDT, which held that contracts for mere carriage of goods, without any other services like loading or unloading, are not covered by Section 194C. The court agreed with this interpretation and held that the impugned circular is ultra vires the provisions of Section 194C insofar as it purports to cover the cases of actual carriage of goods for hire.

5. Conflict between Section 194C and Section 44AE:

The petitioners argued that Section 44AE, which deals specifically with the transport of goods, cannot be reconciled with Section 194C. The court dismissed this argument, stating that Section 44AE provides an alternative mode of computing income and paying tax, while Section 194C provides for the deduction of a percentage of the consideration by the payer. There is no conflict between these two provisions, as Section 44AE was enacted in 1994, while Section 194C was enacted in 1972 and has undergone several changes.

Conclusion:

The writ petition was allowed, and it was declared that the impugned circular is ultra vires the provisions of Section 194C insofar as it purports to cover the cases of actual carriage of goods for hire. The court confined its declaration to the factual situation where the dominant activity is the carriage of goods, with incidental loading or unloading. The rule was made absolute, and no costs were awarded.