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TMI Blog2009 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... services rendered by the petitioners apart from boarding and lodging are, providing highly trained / experienced multi-lingual staff, 24-hour service for reception, information and telephones, house-keeping of the highest standard, select restaurants, bank counter, beauty saloon, barber shop, car rental, shopping centre, laundry / valet, health club, business centre services etc. The question is whether these services would constitute 'carrying out any work' under section 194C of the Act? 3. Section 194C which deals with the liability of a person to deduct income tax while making payments to contractors and sub contractors for the work done, was inserted into the Act with effect from 1/4/1972. Relevant portion of section 194C as originally inserted reads thus:- "194C. Payments to contractors and sub- contractors - (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 establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g contracts, telecasting contracts, labour contracts, material contracts and work contracts. 8. Challenging the aforesaid circular No.681 dated 8/3/1994 various writ petitions were filed. This Court in the case of Chamber of Income-Tax Consultants & Ors. V/s. Central Board of Director Taxes & Ors. reported in 209 I.T.R. 660 (Bom.) held that the circular No.681 is illegal to the extent it holds that the tax is to be deducted from the amounts payable to lawyers, chartered accountants, etc. towards their professional fees. 9. Similarly, in the case of Bombay Goods Transport Association & Anr. V/s. Central Board of Direct Taxes & Ors. reported in 210 I.T.R. 136 (Bom), this Court held that the circular No.681 is illegal in so far as it applies to the transport contracts. 10. Further, in the case of Advertising Agency Association of India & Anr. V/s. Central Board of Director Taxes & Ors. reported in 210 I.T.R. 152 (Bom.), this Court held that the circular No.681 is illegal in so far as it applies to advertising agencies. 11. In the light of the aforesaid decisions, the Parliament deemed it fit to insert section 194J into the Act by Finance Act, 1995 with effect from 1/7/1995 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f goods by a carrier does not affect the goods carried thereby. The submission is that by carrying the goods, no work to the goods is undertaken and the context in which the expression "carrying out any work" has been used, makes it evident that it does not include in it the transportation of goods by a carrier. In Bombay Goods Transport Association v. CBDT (1994) 210 ITR 136, the Bombay High Court quashing the impugned circular has held that the expression "carrying out any work" would not include the carrying of goods. In Calcutta Goods Transport Association v. Union of India [1996] 219 ITR 486 (Cal), a similar view has been expressed by the Calcutta High Court. It has also been pointed out in this decision that Parliament had sought to bring professional services and other works within the net of tax deduction at source. If such "works" were already covered by section 194 C, 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 opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contract by a contractor / subcontractor results into production of the desired object or accomplishing the task under the contract. 18. The services rendered by a hotel to its customers by making available certain facilities / amenities like providing multilingual staff, 24 hour service for reception, telephones, select restaurants, bank counter, beauty saloon, barber shop, car rental, shopping centre, laundry / valet, health 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. The fact that the contracts for supply of labour to carry out any work has 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 constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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