TMI Blog1999 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of section 194C are as under "(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 established by or under a Central, State or Provincial Act ; or (d) any company; or (e) any co-operative society, 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. (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory in nature and, therefore, the words "any work" used in section 194C will cover these services as well. Circular of the Board dated October 8, 1993, which is in dispute is as under: "5.3 It is clarified that the term 'any work' in section 194C has to be understood in its natural meaning, i.e., any work means 'any and not only a works contract' which has a special connotation in the tax law. This has been clearly enunciated by the Supreme Court of India in its judgment dated March 23, 1993, in Civil Appeal No. 2860(NT) of 1979-Associated Cement Co. Ltd. v. CIT [1993] 201 ITR 435. Thus, the provisions of section 194C are applicable to all types of contracts for carrying out any work, such as transport contracts, service contracts, labour contracts, material contracts as well as works contracts, etc." Earlier, Circular No. 93, dated September 26, 1972, in respect of transport contracts as under : "A transport contract cannot ordinarily be regarded as a 'contract for carrying out any work' and, as such, no deduction in respect of income-tax is required to be made from payments made under such a contract. In the case of a composite contract involving transport as well as lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Orissa High Court in the case of Sethi Transport v. CBDT [1997] 226 ITR 274, had also the occasion to consider the circular dated March 8, 1994, and agreeing with the decision given by the Bombay High Court observed that section 194C does not extend to the contract for mere carriage of goods, to that extent, the circular issued was held illegal. The Calcutta High Court in the case of Calcutta Goods Transport Association v. Union of India [1996] 219 ITR 486 has taken into consideration the definition of the word "work" as defined in New Shorter Oxford English Dictionary, and Stroud's Judicial Dictionary and came to the conclusion that the word "work" is to be understood in the limited sense as product or result. The carrying out of work indicates doing something to conduct the work to completion or an operation which produces the result. That being so the mere transportation of goods by a common carrier does not affect or result in the goods being carried nor are the goods affected thereby and as such cannot be brought within the scope of section 194C of the Act. It was declared that common carriers of goods by road are not liable to deduction of tax at source under section 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply 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." According to the interpretation of the Department which was prevalent till April 1, 1994, the transport contractors were not considered to be falling within the ambit of section 194C. Mere transportation of goods by a common carrier does not affect or result in the goods carried nor are the goods affected. The legislative intent could also be seen from the subsequent amendments. Explanation III was inserted by the Finance Act, 1995, by which advertising and travelling agencies, etc., were included thereunder. Whether the Explanation could be considered to be explanatory so as to apply for the transaction between April 1, 1994, to June 30, 1995 ? An interpretation which had continued and acted upon for more than a decade is not to be easily deviated. Circular No. 108 dated March 20, 1973, has dealt with the service contracts not involving carrying out of any work and has specifically said that the transport contract would not be included in the purview of section 194C as transport contract cannot be regarded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do ; what a person (or thing) has or had to do ; occupation, employment, business, task function." From a perusal of the above definition it is evident that the word "work" has relation with the word "labour" which has to be put by a person for occupation, employment, business, task or function. The word "work" refers and comprehends the activities of the workmen and not the operation in the factory or on machines. It is the physical force which has been comprehended in the word "work". Section 194C(1) refers to carrying out of any work. If the sub-section (1) is read as a whole then it could be interpreted that it is the work of labour which is done by the contractor or he may supply the labour to do the work as a sub-contractor. Sub-section (2) of section 194C also refers to the contract for carrying out the work undertaken by the contractor or for supplying wholly or partly any labour which the contractor has undertaken to supply. It is only by virtue of Explanation III added by the Finance Act, 1995, that advertising, broadcasting, telecasting, carriage of goods and passengers by any mode of transport and catering have been included. This Explanation cannot be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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