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TMI Blog2001 (2) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... m April 1, 1972. Various amendments have been made in that section since then but the material part relevant for the present purposes reads as under: "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--... (d) any company; or... 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 to two per cent. of such sum as income-tax on income comprised therein." Soon after insertion of section 194C, a circular dated May 29, 1972, was issued, inter alia, stating that the provisions of section 194C would apply only in relation to "work contracts" and "labour contracts" and will not cover contracts for sale of goods. Another Circular No. 93, dated September 26, 1972, was issued clarifying that the provisions of section 194C will not be applicable to transport contracts. This ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod in question is from April 1, 1994, to June 30, 1995. The contention urged before the High Court was that section 194C does not apply to payments made for transport charges for carrying of gods is transportation of goods is not covered by the words "any work" used in the section and by the impugned circular the Central Board of Direct Taxes has illegally withdrawn earlier circulars stating that section 194C is not applicable to such transactions. It was also contended that III was only prospective and does not cover the period in question, i.e., April 1, 1994, to June 30, 1995. Rejecting these contentions, the High Court by the impugned judgment has held that the payment to the transporters for carriage of goods to different destinations is a payment for work which comes within the expression "carrying out any work" and is covered by section 194C and, therefore, on such transactions, tax was deductible at source. It was held that the expression "carrying out any work" would include carrying the goods. Explanation III was held to be merely clarificatory and inserted in order to remove the doubts and clarify that section 194C is applicable to such transactions also. The impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of supply of labour under a contract with a contractor for carrying out any work. The section was not confined or restricted in its application to "works contracts". There was nothing in the language of the section which permitted exclusion of the amount reimbursed by the company to the contractor under clause 13 from the sum envisaged therein. The facts of the case and observations made in Associated Cement Co. Ltd.'s case [1993] 201 ITR 435 (SC), make it clear that in the said decision, this court was concerned with a work carried through a contractor under a contract which further included obtaining supply of labour under a contract with a contractor for carrying out its work which would have fallen outside "work" but for its specific inclusion in the sub-section. Under these circumstances, it was said: "...there is nothing in the sub-section which could make 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 the plain words used in the section. 'Any work' means any work and not a 'works contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n High Court in the judgment under challenge has followed the interpretation placed on section 194C by the Kerala High Court in CBDT v. Cochin Goods Transport Association [1999] 236 ITR 993 and the Punjab and Haryana High Court in Ekonkar Dashmesh Transport Co. v. CBDT [1996] 219 ITR 511. The contrary views expressed by the High Courts of Bombay, Calcutta, Karnataka, Gujarat, Madras, Orissa and Delhi quashing the impugned circular have been dissented from in the judgment under challenge. The key words in section 194C are "carrying out any work". Learned counsel for the appellant contended that a word or 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 incl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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