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TMI Blog2024 (11) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fall within the meaning of that expression. That the definition is not intended to be exhaustive is evident from clause (iv) of the Explanation using the phrase shall include . As we read Section 194C, it becomes evident that the same is principally concerned with the undertaking of a physical or tangible activity as opposed to the mere grant of subsidy or financial assistance. The provision creates a direct linkage between the sum paid and the carrying out of work. While eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ums were credited directly to the Escrow Account. This would, therefore, also not be a case where sub-section (2) of Section 194C would be attracted. Tribunal has correctly come to conclude that the subsidy or financial support which was extended by NHAI to the Concessionaire and was only envisaged to work as viability gap funding could not possibly have been construed as payment made for a work undertaken by the contractor. While it is true that Section 194C does not stand confined to a works contracts alone, unless the appellant had established that the sum in question and represented by the viability gap funding were recompense for a physical activity undertaken or labour expended, those disbursements could not have formed subject matter of a withholding tax under Section 194C. Decided against revenue. - HON'BLE MR. JUSTICE YASHWANT VARMA AND HON'BLE MR. JUSTICE RAVINDER DUDEJA For the Appellant Through: Mr. Sanjay Kumar Ms. Easha, Advs. For the Respondent Through: Mr. Santosh Kumar, St. Counsel with Mr. Adithya Ramani Mr. Devansh Malhotra, Advs. JUDGMENT YASHWANT VARMA, J. 1. The Commissioner of Income Tax (TDS) impugns the judgment rendered by the Income Tax Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice of the NHAI to those units. We are in the present case concerned with the capital grant subsidy which has been disbursed by the NHAI to a Concessionaire who was awarded the project work on Build-Own-Operate-Transfer [BOOT] basis. 5. In terms of an order framed by the Assessing Officer [AO] on 28 March 2012, it was held that NHAI had failed to comply with the obligation to deduct taxes in terms of Section 194C on the capital grant subsidy released by it to its Concessionaires. Aggrieved by the aforesaid order, NHAI is stated to have preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] and which in terms of its order of 20 May 2013 affirmed the view as expressed by the AO. 6. The NHAI, being aggrieved by the aforesaid decision, had approached the Tribunal and which appeal has come to be allowed in terms of its order dated 10 April 2017 for Assessment Year [AY] 2010-11, leading to the institution of the present challenge by the appellant. 7. The Tribunal has held that in terms of the Concession agreements, the Concessionaires develop roads and highways based on the Public Private Partnership [PPP] model and in terms of which the construction of expressway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessionaire rendered the following observations:- 5. Having gone through the orders of the authorities below, we find that assessee is the head office having its project implementation unit (PIUs) at several state head-quarters and different places all over India. The head office is run by Ministry of Surface Transport, Transport Bhawan, New Delhi. The PIUs get the funds from Ministry through head office and HAI disburse the funds to different concessionaries, who are the private limited companies firms etc. Who get the project work on built-own-operate-transfer (BOOT) basis, then transfer the project to Government of India after a period of 12/15 years. Thus it is the model of public-private partnership between private business concerns and Government of India so that the role of private companies in nation building/infrastructure is enhanced and utilized by the Government of India to the maximum possible extent. The private business concerns also get their benefits of employing their man power along with resources and nation s wealth is created in this manner with modern infra-structure facilities like high quality roads, as found in developed countries . The Assessing Officer ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and is reproduced below:- 7. When we examine the facts of the present case in view of the above cited decisions, we find certain undisputed facts that the concessionaire is constructing the toll plaza at its own risk for owning and maintaining the same for a period specified in concession agreement and not under a work contract between the assessee and the concessionaire. The concessionaire will ultimately transfer to NHAI the plaza by executing a conveyance or any deed or documents and other writings as the NHAI may deem fit. It proves beyond doubt that the concessionaire is the owner of the toll plaza during the concession periods. The right of concessionaire to claim depreciation on the toll plaza (as per Income Tax Act) has been upheld by Court of Law [(CIT Vs. Noida Toll Bridge Co. Ltd., Gujarat Road Infrastructure Co. Ltd. vs. CIT (supra)] which also proves that it is owner of the toll plaza during the concession period as defined in the Income Tax Act. Thus, it is evident that the agreement is actually public private partnership for development of the infrastructure. The agreement between the assessee and the concessionaire is not that of principal and contractor, but that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y allowed. 13. It is the correctness of the aforesaid view which is questioned before us by Mr. Sanjay Kumar, learned counsel who appeared for the appellant. Mr. Kumar would contend that the Tribunal has clearly erred in construing Section 194C and has failed to bear in consideration that as long as a sum is paid to a contractor for work, any such disbursement would fall within the ambit of that provision. According to learned counsel, the Tribunal has erred in relying upon various decisions which had principally considered the issue of whether a works contract alone would fall within the scope of Section 194C. 14. According to Mr. Kumar, the word work as it appears in Section 194C is clearly intended to be conferred an expansive meaning and thus not restricted to a works contract alone. It was his submission that all payments, therefore, as made to a Concessionaire by NHAI would be subject to a withholding tax in terms of Section 194C. 15. Mr. Santosh Kumar, learned counsel appearing for the NHAI, on the other hand, submitted that the Tribunal has rightly appreciated the nature of a BOT contract and the capital grant subsidy which is paid in terms of the covenants contained in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common escrow account. Thus, in view of such financial arrangement, their relationship is found more of like partners/joint owners of a project than a contractor and contractoree. Moreover, another unique arrangement i.e. ownership of the assets/project is rested with the concessionaires for initial phase only and subsequently requires to be passed on to the NHAI also suggests that such unusual phase-wise ownership arrangement is not at all possible. In a normal contractual agreement, having such unique characteristics and dimensions cannot be subject matter of Section 194C of the Act, which deal with simple contractual matters. In other words, the phase-wise ownership arrangements entered between BOT concessionaires and NHAI is found absolutely different from the relationship, normally the NHAI is having with the other contractors who are engaged for road construction in routine manner. Since the NHAI and the BOT concessionaires are found investing in the project are like carrying out its own business and the same are not found similar to a relationship of the principal and contractor as such accordingly, any contribution made by NHAI is out of purview of section 194C. He further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement and vehemently argued that the AO was not justified in holding the assessee in default for non-deduction of tax under section 201 (1) and also charged interest under section 201 (1A) of the Act. On the facts and circumstances of the case, the Id. Counsel further submitted that all the BOT concessionaires have already discharged the duty and duly filed their returns of income for all assessment years after paying due taxes, hence there is no liability on the deductor for deduction of tax under section 194C. The ld. Counsel placed reliance on the judgment of Hon'ble Supreme Court rendered in the case of Hindustan Coca Cola Beverage Pvt. Ltd. vs. CIT (2007) 293 ITR 226 (SC). Therefore, he submitted that even otherwise also the demands so raised deserve to be deleted. 4.3. We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. The only issue to be adjudicated under the facts of the case whether provisions of section 194C of the Act is applicable or not. For the sake of clarity, section 194C is reproduced as under:- xxxx xxxx xxxx A bare reading of above section, makes it explicit that any per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion was also drawn to the order passed by the High Court of Rajasthan on an appeal which was taken against the aforenoted decision of the Tribunal and which came to be dismissed on 21 April 2017. While affirming the view expressed by the Tribunal, the High Court had held as follows:- 3. The facts of the case are that The assessee has entered into concession agreements with these companies and the agreement is on Build Operate and Transfer (BOT) Model. As per these agreements, NHAI has conveyed the concession to construct the Highways, operate and maintain them and collect Toll on these Highways to the abovenamed Concessionaries. As per these agreements, the concessionaries were to be given certain amount for construction of roads by the NHAI. The AO observed that the assessee (NHAI) had not made TDS as per section 194C of the IT Act, 1961 which appeared to be applicable in the instant case in respect of the above concessionaries. The AO passed order u/s 201 (1)/ 201 (1A,) on 18.03.2011 creating demand of Rs. 6,56,58,200/- for AY 2006-07 for non deduction of TDS on the payment of Contract Money to the concessionaries. 4. While considering the case, the Tribunal has observed as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on behalf of the appellant. We see no reason to curtail or to cut down the meaning of plain words used in the section. Any work means any work and not a works-contract , which has a special connotation in the tax law. Indeed, in the sub-section, the work referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of legislature that the work in sub-section is not intended to be confined to or restricted to works contract . 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. 19. That still leaves us to consider whether the capital grant subsidy which was extended by NHAI could be construed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakh rupees], the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, [where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with] his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. Explanation . For the purposes of this section, (i) specified person shall mean, (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; or (f) any authority, constituted in India by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s placed on our record. Article 2 of the MCA defines the scope of the project in the following terms:- ARTICLE 2 SCOPE OF THE PROJECT 2.1. Scope of the Project The scope of the Project (the Scope of the Project ) shall mean and include, during the Concession Period: (a) construction of the Project Highway on the Site set forth in Schedule A and as specified in Schedule-B together with provision of Project Facilities as specified m Schedule-C, and in conformity with the Specifications and Standards set forth in Schedule-D, (b) operation and maintenance of the Project Highway in accordance with the provisions of this Agreement; and (c) performance and fulfilment of all other obligations of the Concessionaire in accordance with the provisions of this Agreement and matters incidental thereto or necessary for the performance of any or all of the obligations of the Concessionaire under this Agreement. 21. The grant of concession 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 Concessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried out or work undertaken by the Concessionaire on or about the Site pursuant hereto in the event of Termination or otherwise. 10.2.2 In consideration of the Concession Fee, this Agreement and the covenants and warranties on the part of the Concessionaire herein contained, the Authority, in accordance with the terms and conditions set forth herein, hereby grants to the Concessionaire, commencing from the Appointed Date, leave and licence rights in respect of all the land (along with any buildings, constructions or immovable assets, if any, thereon) comprising the Site which is described, delineated and shown in Schedule-A hereto (the Licensed Premises ), on an as is where is basis, free of any Encumbrances, to develop, operate and maintain the said Licensed Premises, together with 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys from the date set forth for such Milestone in Schedule-G, unless such failure has occurred due to Force Majeure or for reasons solely attributable to the Authority, it shall pay Damages to the Authority in a sum calculated at the rate of 0.1% (zero point one per cent) of the amount of Performance Security for delay of each day until such Milestone is achieved; provided that if any or all Project Milestones or the Scheduled Six-Laning Date are extended in accordance with the provisions of this Agreement, the dates set forth in Schedule-G shall be deemed to be modified accordingly and the provisions of this Agreement shall apply as if Schedule-G has been amended as above; provided 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 Concess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RANT 25.1 Grant 25.1.1 The Authority agrees to provide to the Concessionaire cash support by way of an outright grant equal to the sum set forth in the Bid, namely, Rs....... (Rupees in words ............................), in accordance with the provisions of this Article 25 (the Grant ). 25.1.2 The Grant shall be disbursed to the Concessionaire by way of Equity Support in accordance with the provisions of Clause 25.2. 25.2 Equity Support 25.2.1 Subject to the conditions specified in this Clause 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 proport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shall, upon request of the Concessionaire, provide Revenue Shortfall Loan at an interest rate equal to 2% (two percent) above the Bank Rate. The entire surplus cash, atter meeting the subsistence expenditure shall be used for repayment of such Revenue Shortfall Loan. 28.1.3 The Authority shall disburse the Revenue Shortfall Loan or the provisional Revenue Shortfall 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 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id out therefrom in the month when due: (a) all taxes due and payable by the Concessionaire for and in respect of the Project Highway; (b) 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow 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 Escrow Account as monies deposited by the Concessionaire, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisions of this Agreement shall apply to such deposits. 3.2 Deposits by the Authority The Authority agrees and undertakes that, as and when due and payable, it shall deposit into and/or credit the Escrow Account with: (a) Gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance 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 the Concessionaire. 4.1.2 Not later than 60 (sixty) days prior to the commencement of each Accounting Year, the Concessionaire shall provide to the Escrow Bank, with prior written approval of the Lenders Representative, details of the amounts likely to be required for each of the payment obligations set forth in this Clause 4.1; provided that such amounts may be subsequently modified, with prior written approval of the Lenders' Representative, if f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract. 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 fall within the meaning of that expression. That the definition is not intended to be exhaustive is evident from clause (iv) of the Explanation using the phrase shall include . 31. As we read Section 194C, it becomes evident that the same is principally concerned with the undertaking of a physical or tangible activity as opposed to the mere grant of subsidy or financial assistance. The provision creates a direct linkage between the sum paid and the carrying out of work. The Black s Law Dictionary [8TH Edition] defines work as follows: work, n. 1. Physical and mental exertion to attain an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our, 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 article or object; a structure or apparatus of some kind, esp. one forming part of a larger thing. Now chiefly in generalised sense with qualification, esp. in established compounds such as BRICKWORK, FIREWORK, FRAMEWORK, LATTICEWORK, WAX-WORK. xxxx xxxx xxxx 11. An architectural or engineering structure, as a house, bridge, pier, etc.; a building, edifice. xxxx xxxx xxxx b. pl. Architectural or engineering operations. Clerk of the Works, Master of the Works: see CLERK sb. 6c, MASTER sb.1 19a xxxx xxxx xxxx 12. spec. (Mil.) A fortified building, fortress, fort; a defensive structure, fortification; any one of the several parts of such a structure (often in pl.). Also as second element of a compound, as earth-work, field-work, hornwork, outwork, etc. The continental equivalent is found in BULWARK. xxxx xxxx xxxx 13. A literary or musical composition (viewed in relation to its author or composer); often pl. and collect. s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase; he is paid a fee for the services rendered by him and not any price for the work done by him [S.R.F. Finance Ltd. v. CBDT, (1995) 211 ITR 861 (Del)] [Income-tax Act (43 of 1961), S. 194C] 34. A learned judge of the Allahabad High Court in Radha Raman v. State of Uttar Pradesh and others 1954 SCC OnLine All 124 , while considering the meaning to be ascribed to the word work as it occurs in Section 40 of the Land Acquisition Act, 1894 had held as follows : 9. It is argued that the word work has been used in Section 40 of the Act with reference to the construction of large industrial or scientific establishments, and the construction of ordinary houses for purposes of residence do not come within the meaning of the word. In support of this argument the learned counsel has referred me to the meaning of the word work as given in the Chambers Dictionary (20th Century) and the Webster's Dictionary, Vol. 4. 10. No useful purpose will be served by quoting the meaning as given in these dictionaries, because the word work has a very wide meaning. It is really used in two senses of bestowing labour and that upon which labour has been bestowed. When used in plural, the word certainly m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat upon which labor is expended; an undertaking task; (3) that which is produced by or as by labor, specifically, an engineering structure;... In the same dictionary, the term works is stated as a manufacturing establishment including buildings and equipment. 70. In Radha Raman, the Allahabad High Court stated (although in the context of Section 40 of the Land Acquisition Act, 1894) that: (AIR p. 702, para 5) 5. .... the word work has a very wide meaning. It is really used in two senses of bestowing labour and that upon which labour has been bestowed. When used in plural, the word certainly means some outstanding or important result of the labour that has been bestowed, and large industrial and scientific establishments are called works 36. Notably, the Supreme Court in Birla Cement Works v. Central Board of Direct Taxes and Others (2001) 9 SCC 35 as relied upon by learned counsel for the appellants, clarified the true import of the decision in Associated Cement as well as the scope of Section 194C and had ultimately come to hold as follows: 11. The key words in Section 194-C are carrying, out any work . Learned counsel for the appellant contended that a word or collection of word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected in the impugned circular, then the issue of earlier circulars and acceptance and acting thereupon by the Revenue reflecting the contrary view would have been of no consequence. That, however, is not the position. Further, there are no compelling reasons to hold that Explanation III inserted in section 194C with effect from July 1, 1995, is clarificatory or retrospective in operation. We hold that section 194C before insertion of Explanation III is not applicable to transport contracts, i.e., contracts for carriage of goods. For the aforesaid reasons the appeal is allowed, the impugned circular to the extent it relates to transport contracts is quashed. The parties are left to bear their own costs. 37. The Bombay High Court in East India Hotels Ltd. and Another v. Central Board of Direct Taxes and Another 2009 SCC OnLine Bom 362 was primarily concerned with whether services rendered by a hotel to its guests would fall within the ambit of the expression carrying out any work as provided under Section 194C. In that context, while placing reliance on the decision of the Supreme Court in Birla Cement, the Bombay High Court had observed: 16. Thus, from the above decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood in a limited sense and would extend only to the service contracts specifically included in the said section by way of Explanation III. Therefore, the argument of the Revenue that the service contracts between petitioner No. 1 hotel and its customers is covered under section 194C of the Act cannot be accepted because, neither does such a contract constitute work within the meaning of section 194C of the Act nor are those contracts covered under service contracts specifically included by way of Explanation III to section 194C of the Act. 21. If the contention of the Revenue that the words any work in section 194C are very wide enough to include all types of work is accepted, then it would mean that even the hair cutting work done by a barber would be a work covered under section 194C and the person making payment to the barber would be covered under section 194C. Such a wider interpretation is uncalled for, especially when the Revenue itself had considered since inception that section 194C is restricted to the works done by contractors/ sub-contractors . Apart from the above, the Central Board of Direct Taxes by its Circular No. 715 dated August 8, 1995 ([1995] 215 ITR (St.) 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement but all the movements are projections of the talent which is natural, or acquired by training. A surgery certainly involves physically visible and tangible work; but, inherently, it is the mental skill developed by the intellectual exercise that permeates the operation. 4.17. Language is a vehicle of conveying ideas. English language has developed particular terms and usages to convey particular ideas. Same word may convey a different meaning when placed in a different context. Therefore, the meaning conveyed by a word has to be gathered in the context in which the word is used. The long established and recognised meaning of a word, cannot be understood as conveying a meaning different from its natural meaning unless there are strong reasons for it. 4.18. Word 'work' may have different and wider meanings. But, here, we have to find out the real meaning of the word in the context of its setting in Section 194-C. The meaning attributable should fit into the clause for carrying out any work . An architect is not engaged to carry out the work of drawing a sketch. A lawyer is not engaged to carry out the work of arguing a case; he is engaged; to 'argue' a case or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in constructing the building. Similarly, when a carpenter is asked to supply a table, the consideration payable to him comprises of the cost of the timber and other materials used and the remuneration for the job of converting these materials into a table. However, if the timber and other materials are supplied and the carpenter is asked to make a table, he is paid towards his services in making the table. In the case of a building, if the contractor is engaged to perform the construction work, but the entire materials are supplied by the person engaging the contractor, the contractor is paid for supplying the labour and supervising the construction work. While the former type of cases fall within the category of works contract, the latter type are considered as contract for 'services'. xxxx xxxx xxxx 4.27 The narrow meaning attributed to the word 'work' in Section 194-C as confined to works contract was rejected by the Supreme Court and in that context the Court held that the term 'any work' is a term of wide import, to include not only the work involved in the works contract but also the work resulting in other type of contracts where the contract require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of labour and the output or result of labour that has been bestowed. The capital grant subsidy was really not concerned with the physical elements of the contract. As has been correctly noted by the Tribunal, it was more in the nature of a grant in aid, the provision of financial assistance and equity contribution provided to the Concessionaire by the NHAI bearing in mind the imperatives of economic viability. The Concession Agreement in Clause 25.1.1 had in clear and unambiguous terms provided that the grant would be in the nature of cash support to be made outrightly and equivalent to the sum set forth in the bid. The said grant was to be extended and disbursed by way of equity support. The said equity support was to be read in conjunction with the loans and credit facilities which were to be disbursed by the lenders of the Concessionaire under the financing agreements. These grants and payments were to be placed directly in the Escrow Account and were in that sense neither payments made for work undertaken nor where they funds placed at the discretion and disposal of the Concessionaire. This becomes apparent when one views the priorities which were to be borne in mind for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts would be deemed to a credit of such income to the account of the payee. However, and as was noticed hereinbefore, the capital grant subsidy was not an amount which was to be deposited in its account or be accounted for in its books of account as that expression is understood in common parlance. Those sums were credited directly to the Escrow Account. This would, therefore, also not be a case where sub-section (2) of Section 194C would be attracted. 43. In our considered opinion, the Tribunal has correctly come to conclude that the subsidy or financial support which was extended by NHAI to the Concessionaire and was only envisaged to work as viability gap funding could not possibly have been construed as payment made for a work undertaken by the contractor. While it is true that Section 194C does not stand confined to a works contracts alone, unless the appellant had established that the sum in question and represented by the viability gap funding were recompense for a physical activity undertaken or labour expended, those disbursements could not have formed subject matter of a withholding tax under Section 194C. 44. Accordingly and for all the aforenoted reasons, we answer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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