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TMI Blog1997 (4) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... liged to deduct the amount of TDS under s. 194C of the Act from the payments made to the transport companies as the provisions are not applicable to such transactions. The respondents, therefore, initiated penalty proceedings against the petitioner. The petitioner, by this writ petition, challenges the legality and validity of the Circular No. 681, dt. 8th March, 1994 issued by the CBDT, New Delhi and the notices issued by the ITO (TDS), Chittorgarh. 3. It is contended by the learned counsel for the petitioner, that (i) s. 194C of the Act covers only works contracts and does not cover the payment of transport charges for carriage of goods; (ii) the service rendered for carrying on transportation of the goods can by no imagination, be treated as covered by the words any work used in s. 194C of the Act and the coverage and scope of s. 194C given in Circular No. 681; (iii) Expln. (iii) added to s. 194C of the Act, covering carriage of goods within the expression of word works is only prospective and does not cover the case of the petitioner between the period from 1st April, 1994 to 30th June, 1995; (iv) while issuing the Circular No. 681 (Annexure A) [published at (1994) 117 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section reads as under : Sec. 194C. Payment to contractors and sub-contractors: (1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including labour for carrying out any work) in pursuance of a contract between the contractor and : (a) xxx xxx xxx xxx (b) xxx xxx xxx xxx (c) any company; (d) to (j) xxx xxx xxx 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 (a) one per cent in case of advertising; (b) in any other case two per cent of such sum as income-tax on income comprised therein (2) xxx xxx xxx Explanation I. xxx xxx xxx Explanation II. xxxx xxx xxx Explanation III. For the purpose of this section, the expression work shall also include (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting and telecasting; (c) carriage of goods and passengers by any mode of transport other than by railways; (d) catering. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired under s. 194C (1) of the Act, came up for consideration before the Supreme Court in : Associated Cement Company Ltd. vs. CIT Anr. (supra) and the apex Court, while interpreting the words any work answered the question as under : Work envisaged in the sub-section, 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. 10. On the basis of the decision of the Supreme Court, a circular was issued by the Ministry of Finance giving instructions regarding TDS under s. 194C. In pursuance to this circular issued by the Ministry of Finance and in view of the judgment of the Supreme Court in Associated Cement Company s case, the CBDT considered that the earlier circular issued under s. 194C needs to be reviewed in the light of the judgment. The Board was of the view that the conclusion flowing from the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried through the contractor; (iv) consideration for the contract should exceed ₹ 10,000, i.e., the amount fixed by s. 194C; and (v) the payment is made to the contractor for the work carried out by him. If these conditions are satisfied then it is obligatory upon the person responsible for making such payment to deduct TDS from the payment to be made. The expression carrying out any work is the soul of the section and the applicability of the section depends upon the interpretation of this expression. The word any is a word which excludes the limitation and qualification and can mean all , each and every . The meaning of this word given in the statute depends upon the context and the subject-matter of the statute and its generality can be restricted by the context in which it has been used. It has been used as a prefix to the word work which means engagement in the performance of a task, duty or the likes. The term work covers all forms of physical and mental exertions or both combined for the attainment of some object other than recreation or amusement. 15. The dictionary meaning of the words carrying on implies a repetition of acts. Whether carriage of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court, considering the judgment of the Supreme Court in Associated Cement Company s case and the earlier Circulars issued by the CBDT treating the transport contracts not falling within the purview of s. 194C, held: We do not find anything in the decision of the Supreme Court to justify the reversal of the above view by the CBDT by making the Circular. The Supreme Court has not interpreted the provisions of s. 194-C in the manner it is sought to be interpreted by the CBDT to apply to all types of contracts including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, material contract, works contracts etc. In our view the CBDT has committed a manifest error of law in interpreting the judgment of the Supreme Court. It is well settled that the judgment of the Supreme Court has to be read subject to the facts directed/presented for consideration before it and not effecting those matters which may lurk in the record.......... In Associated Cement Company s case (1993) 111 CTR (SC) 165 : (1993) 201 ITR 435 (SC) : TC 5PS.39 the controversy before the Supreme Court was limited to the applicabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame up for consideration and the Division Bench of the Gujarat High Court, after considering the judgment of the Supreme Court, the judgments of the Bombay, Calcutta and Madras High Courts and the circulars issued by the Board, observed that : The only question which fell for determination before the Supreme Court was : whether the applicability of s. 194C was confined to the works contracts only and the Supreme Court decided only this limited question and held that there was no reasons to curtail or cut down the meaning of the plain word work used in s. 194C to confine or restrict it to the work contracts was interpreted. The Division Bench of the Gujarat High Court therefore, quashed and set aside the Circular No. 681. 19A. The same controversy, also, came up for consideration before the Madras High Court in : Madras Bar Association Ors. vs. CBDT Ors. (supra) and the Madras High Court, held that the circular is illegal and without jurisdiction so far as it has cast an obligation for deduction of the tax at source under s. 194C in respect of a contract for mere carriage of goods which do not include any other service like loading and unloading and are not, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying of the goods is an act or a business of transport operators involving an effort of exertion directed to a definite and expressly as a means of gaining one s livelihood. The contract of transportation of the cement bags from the factory to various destinations, thus, falls within the expression carrying out any work . The consideration for the contract exceeded the amount fixed by s. 194C(iii) and, therefore, the company, being responsible for making payment, was obliged to make deduction of TDS. All the necessary requirements for the applicability of s. 194C were, thus, satisfied and, therefore, it was obligatory upon the petitioner company to deduct the TDS. 24. The dispute in the present case regarding non-deduction of TDS relates only for the period w.e.f. 1st April, 1994 to 30th June, 1995, i.e., prior to the addition of the Expln. (iii) appended to s. 194C. After the addition of Expln. (iii) the compliance of s. 194C is being made by the petitioner. The Expln. (iii) added by the Finance Act of 1995 is merely clarificatory in nature. Even otherwise, without this Expln. (iii) the carrying of business of transportation of cement from the factory of the petitioner to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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