TMI Blog1994 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... en the contractor" and specified concerns or authorities. On May 29, 1972, a circular was issued by the Government of India explaining the scope and ambit of, inter alia, section 194C. In so far as it is material the circular (Circular No. 86 dated May 29, 1972) provided : "(ii) The deduction of income-tax will be made from sums paid for carrying out any work or for supplying labour for carrying out any work. In other words, the new provision will apply only in relation to works contracts' and 'labour contracts' and will not cover contracts for sale of goods.... The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale. . . . (iii) Contracts for rendering professional services by lawyers, physicians, surgeons, engineers, accountants, architects, consultants, etc., can also not be regarded as contracts 'for carrying out any work' and, accordingly, no deduction of income-tax will be made from payments relating to such contracts." On September 26, 1972, a second circular was issued by the Ministry dated September 26, 1972) in response to several inquiries, received from various trade associations. One of the enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section and went on to say (page 440) : " 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 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 the Legislature that the 'work' in the 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." On the basis of this decision of the Supreme Court, on October 8, 1993 a circular was issued by the Ministry of Finance giving instructions regarding deduction of tax at source under section 194C in which it was only stated, inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any work as explained above. (vi) The provisions of this section will not cover contracts for sale of goods. 8. It may be noted that,-- (i) The term 'service contracts' would include services rendered by such persons as lawyers, physicians, surgeons, engineers, accountants, architects, consultants, etc. . . . (ii) The term 'transport contracts' would, in addition to contracts for transportation and loading/unloading of goods, also cover contracts for plying of buses, ferries, etc., along with staff (e.g., driver, conductor, cleaner, etc.). Reference in this regard is also invited to Board's Circular No. 558 dated 28th March, 1990." However, contracts for sale were kept outside the purview of the section and the Board reiterated the stand taken by them in 1972 that whether a particular contract was a contract for work and labour or for sale should be decided the light of the principles laid down by the Supreme Court in the case of State of H. P. v. Associated Hotels of India Ltd. [1972] 29 STC 474. The challenge of this writ application is directed at the circular dated October 8, 1993, and the circular dated March 8, 1994. According to the petitioners, the only basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be entertained by this court. Secondly, it is submitted that the decision of the Supreme Court could not be limited to the facts of the case before it as it had in fact, construed section 194C as a matter of law. The Supreme Court had in no uncertain terms said that there was no ambiguity in the section. Therefore, there was no scope for applying any principles of construction such as the principle of contemporanea expositio. Thirdly, it is submitted that the Supreme Court had clearly held that the phrase "any work" could not be given a narrow or restricted meaning. Besides, it is argued, the plain meaning of the section would show that the words "any work" were unqualified by any limiting factor. Finally, it is submitted that no prejudice would be suffered by the transporters if payment was made subject to tax deducted at source as it was a liability which would have to be met by the transporters in any event. It may be mentioned that although the directions were given for filing of affidavits, no affidavit in opposition has been filed by the respondents to the petition. The initial point taken by the respondents which is by way of a preliminary objection is without merit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... describe such professionals as 'contractors' or 'sub-contractors'. If the contention of the Revenue in this regard is accepted, a solicitor or an advocate on record will have to be described as a 'contractor' and counsel briefed by him in the matter a 'sub-contractor'. An interpretation which leads to such a ridiculous result cannot be a proper interpretation of the section." The Bombay High Court also held that the judgment of the Supreme Court would have to be read in the context in which it was delivered and that the context before the Supreme Court was whether the words "any work" used in section 194C were restricted to "works contract". The Bombay High Court also was of the view that the circulars issued by the Central Board of Direct Taxes during the last two decades explaining the scope and ambit of section 194C were clearly in the nature of contemporanea expositio and that an interpretation of a taxing statute which had been acted upon and accepted should not be easily departed from except for compelling reasons. A similar view was taken by the Division Bench of the Delhi High Court in S. R. F. Finance Ltd. v. CBDT [1995] 211 ITR 861. The issue before the High Court was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the enactment of section 194C. In this decision, the Bombay High Court noted thit,thc petitioner association had written a letter seeking a specific clarification from the Commissioner, Bombay, in regard to the applicability of section 194C to transport contractors. In reply, the Commissioner had informed the petitioners stating in unequivocal and categorical terms that he had been directed to state that the provisions of section 194C are not applicable in respect of the transport contractors. The Bombay High Court also noted that in 1982, the Under-secretary to the Government of India, Ministry of Finance, in reply to a query from a transporter had said that if the contracts are purely transport contracts involving only transportation of goods entrusted for carriage to the transport operators, the provisions of section 194C would not be applicable to such payments. The Bombay High Court said that the circulars issued by the Central Board of Direct Taxes provided a useful aid to construction of the statute to ascertain the true intention of the Legislature as well as the intention of those incharge of its administration. It was said (see page 150 of 210 ITR): " Mr. Jetley, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r result produced by the operation, action, or labour of or of a person or other agent ; things made collectively, creation, handiwork ; (iii) A place or premises where industrial activity, esp. manufacture, is carried on." The third meaning clearly has no application. We are concerned with the first two meanings of the word. Similarly, in Stroud's Judicial Dictionary, 5th edition, the definition of "work" culled out from diverse decisions has been stated as follows : The word 'work' may be used in two senses ; it may mean either the labour which a man bestows upon a thing, or the thing upon which the labour is bestowed." The first sense of the word as defined in the dictionary is the wider one. The question is whether all acts, actions and processes are sought to be covered under section 194C. If not the word "work" will have to bear the meaning assigned in the second sense. The definition of the words "carry out" would also assist in fixing the meaning of the word "work" in section 194C. "Carry out" has been defined in New Shorter Oxford English Dictionary (1993) as "perform, conduct to completion and put into practice". There are thus two distinct senses in which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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