TMI Blog2009 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... No.1 hotel, while making payment to the hotel for occupying its room and availing other facilities / amenities provided by the hotel is required to deduct income tax at the rate specified in section 194C of the Act. 2. The petitioner No.1 company operates a number of Five Star Deluxe Hotels all over India. The company as a chain of hoteliers offers various facilities / amenities to its guests all of which are essential for carrying on the hotel business. The 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 sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making payment to the hotel for availing the facilities / amenities provided by the hotel. 7. However, by relying upon a decision of the Apex Court in the case of Associated Cement Co. Ltd. V/s. Commissioner of Income Tax Anr. reported in 201 I.T.R. 435 (S.C.), the CBDT issued the impugned circular No.681 on 8/3/1994 stating therein that section 194C would apply to all types of contracts including transport contracts, service contracts, advertisement contracts, broadcasting 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Apex Court in the case of Associated Cements Co. Ltd. (supra) and held thus:- " The key words in section 194C are "carrying out any work". Learned counsel for the appellant contended that a word of collection of words should fit into the structure of the sentence in which the word is used or collection of words formed. The contention is that in the context of section 194C, carrying out any work indicates doing something to conduct the work to completion or something which produces such result. The mere transportation of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich on being carried out culminates into a product or result. In other words, the word 'work' in section 194C is limited to doing something with a view to achieving the task undertaken or carry out an operation which produces some result. 17. As illustrated in the circular No.86, section 194C would apply to payments for carrying out the work such as constructing buildings or dams or laying of roads and air fields or railway lines or erection or installation of plant and machinery, etc. In all these contracts, the execution 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 194I of the Act. Thus, there is inconsistency in the stand of the CBDT as to whether the services rendered by a hotel to its customers is covered under section 194C or under section 194I of the Act. 22. In the present case, we are concerned with the question as to whether the services rendered by the petitioner hotel to its customers is covered under section 194C of the Act? 23. As noticed above, the facilities / amenities made available by the petitioner No.1 hotel to its customers do not constitute 'work' within the meaning of section 194C of the Act. Consequently, the circular No.681 dated 8/3/1994 to the extent it holds that the services made available by a hotel to its customers are covered under section 194C of the Act must be held to be bad in law. 24. For all the aforesaid reasons, the petition is allowed by quashing the circular No.681 dated 8/3/1994 to the extent it holds that section 194C of the Income Tax Act applies to payments by the customers to the petitioner No.1 hotel for availing the facilities / amenities made available by the petitioners. 25. The rule is made absolute in the above terms with no order as to costs. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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