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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 ..... ounsels appearing for respective sides, we are of the considered opinion that the appeals would merit further consideration. 2. We note that undisputedly the viability gap funding was part of a prescription of the concession agreement itself. It is in the aforesaid context that, prima facie, we find ourselves unable to sustain the view taken by the Income Tax Appellate Tribunal ['ITAT'] which has observed in paragraph 7 that the said payment was not in discharge of a contractual obligation. We, consequently, admit these appeals on the following question of law: - A. Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that the assessee was not liable to deduct tax at source from non-refundable sums paid under any name by NHAI to the Concessionaries particularly when such sums have been paid as per Concession Agreement for securing rights of NHAI? 3. List again on 15.07.2024." 3. Shorn of unnecessary details, it would be the following facts which would merit being noticed for the purposes of disposal of the present appeals. For the sake of brevity, we propose to take note of the facts as they emanate from ITA 1145/2017. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t subsidy is explained by NHAI as essentially being financial support which is rendered by it to the Concessionaire in relation to projects where, on account of various factors, the revenue that the Concessionaire generates is less than the expected projection or where it may be found that the Concessionaire would be unable to recover the total project cost. In order to attend to this viability gap, NHAI provides funding to the Concessionaire as a capital grant on the basis of a competitive bidding process. According to the disclosures made before the Tribunal, the bidders are selected for the award of the "Build, Operate Transfer" [BOT] contracts based on the lowest viability gap funding requirement bid for. 9. NHAI had before the Tribunal explained the nature of BOT contracts as envisaging the Concessionaire to be recognized as the owner of the assets which come to be created, conferred with the right to collect toll over the concession period and at the end of which the highway would revert to the NHAI. It had contended before the Tribunal that the capital grant subsidy is essentially in the nature of financial support which is extended by NHAI and is not liable to be viewed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no TDS should be deducted. It was submitted that there are hundred and sixteen PIUs all over India, who disburse the money at project level being branch office of head office of NHAI and the branch offices (PIUs) are having their own TAN number and, therefore, there should not be double deduction of TDS at head office level, PIU level. It was submitted that the relation between head office of the assessee and PIUs is like that 'of head office and branch office. Since PIUs have done their duty of tax deduction at source at different places all over India, there should not be double deduction of TDS at assessee's head office level. The assessee thus claimed that it should get full relief on the issue. It was pointed out that the assessee had disbursed capital grants to different concessionaires during the financial year which was about 2% to 40% of total project cost. It was argued that since the capital grant is given by the Government through the assessee as a capital work in progress there should not be any TDS under section 194C on this capital grant. 5.1. Some undisputed facts in the present case are that the concessionaire is constructing the toll plaza at its own risk f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Agreement (MCA) that to make such project viable in / private partnership models, the assessee provides viability gap funding as capital grant on competitive bidding process. Therefore, the assessee has not deducted the TDS on the payment of VGF (Grant) as it is not contractual payment liable for deduction of tax at source under section 194C of the Act as VGF is not a revenue receipt in the hands of the concessionaire. The ratio laid down in the above cited decisions also support this stand of the assessee. We thus hold that the authorities below were not justified in coming to the conclusion that grant given by the assessee to concessionaire as a contract payment and not in the nature of grant/subsidy given by the assessee for building, operating and maintaining the toll road with this observation that relationship between assessee and concessionaires is contractor-builder or a contractor-maintainer, concessionaires assets for the purpose of Income Tax, the word grant has been used as it is not expected to be returned hack and that relationship between the assessee and the concessionaire is that of contractor builder or a contractor-maintainer. The nature of the work between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (TDS) v. National Highway Authority of India Ltd. ITA Nos. 236, 237 & 238/JP/2012 and where the following pertinent observations came to be rendered:- "4.1 The ld. CIT D/R vehemently argued that the ld. CTT (A) was not justified in deleting the addition. He submitted that the assessee has given colour of contractual payment as 'grant'. He submitted that the payment made to the concessionaires is nothing but a contractual payment. Therefore, the assessee was required to deduct tax thereon as per section 194C of the Act. The assessee has grossly failed to do so, therefore, the AO was justified in treating the assessee in default. 4.2. On the contrary, the ld. Counsel for the assessee reiterated the submissions as made in the written submission. The ld. Counsel for the assessee submitted that as per clause XXIII of the agreement with M/s. GVK, the total contributions made by the NHAI of Rs. 211 crores in A.Y. 2004-05, 2005-06 & 2006-07 towards its shares in respect of the cost of the project. Such contributions have been nomenclature as 'grant' to meet out the capital cost of the project and treated the same as part of the share holders funds or equity support from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiate the present agreements from the normal works contract agreement. Accordingly, the AO's findings given in this regard are irrelevant and incorrect. He further submitted that in the works contract agreement, the ownership of the project/assets lies with the principal only and the contractor is not having any sort of rights, be of real ownership or beneficial in nature, in this regard. However, it can be noticed that as per clause XXXVIII of the concession agreement, till the specified time period therein, the BOT concessionaires would have the ownership rights of the project and its assets for all practical and legal purposes. Thus the concessionaires are not only executors of the project, but they also assumed status of the co-owners of the same. The ld. Counsel submitted that in the case of M/s. GVK, the Coordinate Bench of the Tribunal allowed depreciation to the concessionaires on such assets while treating them beneficial ownership in the project as such. He submitted that the AO has erred in not appreciating Escrow Accounting System, as specified in such agreements. By doing so, the AO has given a different meaning or connotation to such phrases than the obvious and liter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided family of such sum as income-tax for A.Y. 2011-12 of such sum as income comprised therein. Therefore, specified person the deductor herein i.e. NHAI is required to deduct tax in the event the payment is made to the contractor in pursuance of a contract. In the case in hand, we need to examine whether the payments made by the NHAI under the head 'Grant' to M/s. GVK Kishangarh Expressway Pvt. Ltd. was liable to deduction of tax or not. Undisputed facts remain that the NHAI has made payment to M/s. GVK Kishangarh Expressway Pvt. Ltd. under the head 'Grant'. The AO treated such payments as payment made under the contract. The AO examined various terms of the agreement between NHAI and M/s. GVK Kishangarh Expressway Pvt. Ltd. and has also reproduced certain terms of agreement. The AO, therefore, treated the assessee in default. However, the ld. CIT (A) after examining the terms of agreement came to the conclusion that such payments are not in the nature of payment made to the contractor. By doing so, he observed in para 3.3.1 of his order as under:- xxxx xxxx xxxx The contention of the assessee in substance is that from the terms of the agreement it can be inferred tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ld. CIT(A), therefore, the same is hereby upheld." 5. In view of the concurrent finding of all the authorities below regarding payments in the nature of contribution in the joint venture, no interference is required in this appeal." 18. At the outset, it becomes pertinent to note that undisputedly, Section 194C is not confined to works contracts. This aspect has been authoritatively settled by the Supreme Court in Associated Cement Company Ltd. v. Commissioner of Income Tax (1993) 2 SCC 556 and where it had held as follows:- "4. Section 194C (1) of the Income Tax Act on the proper construction of which the decision on the aforesaid question should necessarily rest, runs thus: xxxx xxxx xxxx No ambiguity is found in the language employed in the sub-section. What is contained in the sub-section, as appears from its plain reading and analysis, admit of the following formulations: (1) A contract may be entered into between the contractor and any of the organisations specified in the sub-section. (2) Contract in Formulation 1 could not only be for carrying out any work but also for supply of labour for carrying out any work. (3) Any person responsible for paying any sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for carrying out any work) in pursuance of a contract between the contractor and a specified person 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- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under Section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or (k) any firm; or (l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,- (A) does not fall under any of the preceding sub-clauses; and (B) [has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of Section 44-AE; (iii) "contract" shall include sub-contract; (iv) "work" shall include- (a) advertising; (b) broadcasting and telecasting including production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by accepts the Concession and agrees to implement the Project subject to and in accordance with the terms and conditions set forth herein: 3.1.2 Subject to and in accordance with the provisions of this Agreement, the Concession hereby granted shall oblige or entitle (as the case may be) the Concessionaire to: (a) Right of Way access and licence to the Site for the purpose of and to the extent conferred by the provisions of this Agreement; (b) finance and construct the Project Highway; (c) manage, operate and maintain the Project Highway and regulate the use thereof by third parties; (d) demand, collect and appropriate Fee from vehicles and persons liable for payment of Fee for using the Project Highway or any part thereof and refuse entry of any vehicle if the Fee due is not paid; (e) perform and fulfil all of the Concessionaire's obligations under and in accordance with this Agreement; " 22. In order to facilitate the carrying out of work over the site in question, the NHAI provides a 'right of way' as stipulated in Article 10 of the MCA. We, for our purposes deem it appropriate to notice Clauses 10.1, 10.2.1 and 10.2.2 of Article 10 and which are reproduced hereinbelo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks, the Concessionaire shall: (a) submit to the Authority and the Independent Engineer its detailed design, construction methodology, quality assurance procedures, and the procurement, engineering and construction time schedule for completion of the Project in accordance with the Project Completion Schedule as set forth in Schedule-G; (b) appoint its representative duly authorised to deal with the Authority in respect of all matters under or arising out of or relating to this Agreement; (c) undertake, do and perform all such acts, deeds and things as may be necessary or required before commencement of construction under and in accordance with this Agreement, the Applicable Laws and Applicable Permits; and (d) make its own arrangements for quarrying of materials needed for the Project Highway under and in accordance with the Applicable Laws and Applicable Permits. 12.2 Maintenance during Construction Period During the Construction Period, the Concessionaire shall maintain, at its cost, the existing lane(s) of the Project Highway so that the traffic worthiness and safety thereof are at no time materially inferior as compared to their condition 7 (seven) days prior to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration Period, the Concessionaire shall operate and maintain the Project Highway in accordance with this Agreement either by itself, or through the O&M Contractor and if required, modify, repair or otherwise make improvements to the Project Highway to comply with the provisions of this Agreement, Applicable Laws and Applicable Permits, and conform to Good Industry Practice. The obligations of the Concessionaire hereunder shall include: (a) permitting safe, smooth and uninterrupted flow of traffic on the Project Highway during normal operating conditions; (b) collecting and appropriating the Fee; (c) minimising disruption to traffic in the event of accidents or other incidents affecting the safety and use of the Project Highway by providing a rapid and effective response and maintaining liaison with emergency services of the State; (d) carrying out periodic preventive maintenance of the Project Highway; (e) undertaking routine maintenance including prompt repairs of potholes, cracks, joints, drains, embankments, structures, pavement markings, lighting, road signs and other traffic control devices; (f) undertaking major maintenance such as resurfacing of pavements, repai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Support as and when due, but not later than 15 (fifteen) days of receiving a request from the Concessionaire along with necessary particulars. Provided further, within 30 (thirty) days of Lenders Representative certifying the final drawdown of the last instalment of the debt, all the balance Equity Support shall be disbursed by the Authority. 25.2.4 In the event of occurrence of a Concessionaire Default, disbursement of Equity Support shall be suspended till such Concessionaire Default has been cured by the Concessionaire. 25.3 O&M Support (PREMIUM) (25.4 Premium The Concessionaire acknowledges and agrees that as set forth in the Bid, it shall pay to the Authority for each year of the Concession Period, a premium (the "Premium") in the form of an additional Concession Fee, as set forth in Clause 26.2.1, and in the manner set forth in Clause 26.4.)" 26. Of equal significance is Article 28 which introduces the concept of a revenue shortfall loan. The said chapter is extracted hereunder:- "ARTICLE 28 REVENUE SHORTFALL LOAN 28.1 Revenue Shortfall Loan 28.1.1 If the Realisable Fee in any Accounting Year shall fall short of the Subsistence Revenue as a result of an Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to terminate this Agreement forthwith. For the avoidance of doubt, it is agreed that the repayment of Revenue Shortfall Loan shall be in accordance with and subject to the provisions of Article 31." 27. In terms of Article 31, the funds constituting the financial package, fees and other revenue generated by and from the project as well as all payments made by the NHAI are to be placed in an Escrow account. The withdrawals from that account are also duly regulated by appropriate provisions being incorporated in the concession agreement. Article 31 is extracted in its entirety hereinbelow:- "ARTICLE 31 ESCROW ACCOUNT 31.1 Escrow Account 31.1.1 The Concessionaire shall, prior to the Appointed Date, open and establish an Escrow Account with a Bank (the "Escrow Bank") in accordance with this Agreement read with the Escrow Agreement. 31.1.2 The nature and scope of the Escrow Account are fully described in the agreement (the "Escrow Agreement") to be entered into amongst the Concessionaire, the Authority, the Escrow Bank and the Senior Lenders through the Lenders' Representative, which shall be substantially in the form set forth in Schedule-S. 31.2 Deposits into Escrow Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancing Agreements; and (k) balance, if any, in accordance with the instructions of the Concessionaire. 31.3.2 The Concessionaire shall not in any manner modify the order of payment specified in Clause 31.3.1, except with the prior written approval of the Authority. 31.4 Withdrawals upon Termination 31.4.1 Notwithstanding anything to the contrary contained in this Agreement, all amounts standing to the credit of the Escrow Account shall upon Termination, be appropriated in the following order: (a) all taxes due and payable by the Concessionaire for and in respect of the Project Highway: (b) 90% (ninety per cent) of Debt Due excluding Subordinated Debt; (c) outstanding Concession Fee; (d) 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. (e) retention and payments relating to the liability for defects and deficiencies set forth in Article 39; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank. In performing its functions and duties under this Agreement, the Escrow Bank shall act in trust for the benefit of, and as agent for, the Authority, the Lenders' Representative and the Concessionaire or their nominees, successors or assigns, in accordance with the provisions of this Agreement. 2.3 Establishment and operation of Escrow Account 2.3.1 Within 30 (thirty) days from the date of this Agreement, and in any case prior to the Appointed Date, the Concessionaire shall open and establish the Escrow Account with the............................(name of Branch) Branch of the Escrow Bank. The Escrow Account shall be denominated in Rupees. 2.3.2 The Escrow Bank shall maintain the Escrow Account in accordance with the terms of this Agreement and its usual practices and applicable regulations, and pay the maximum rate of interest payable to similar customers on the balance in the said account from time to time. 2.3.3 The Escrow Bank and the Concessionaire shall, after consultation with the Lenders' Representative, agree on the detailed mandates, terms and conditions, and operating procedures for the Escrow Account, hut in the event of any conflict or inconsistency be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and any other monies disbursed by the Authority to the Concessionaire; (b) Revenue Shortfall Loan; (c) all Fee collected by the Authority in exercise of its rights under the Concession Agreement; and (d) Termination Payments: Provided that the Authority shall be entitled to appropriate from the aforesaid amounts, any Concession Fee due and payable to it by the Concessionaire, and the balance remaining shall be deposited into the Escrow Account. 3.3 Deposits by Senior Lenders The Lenders' Representative agrees, confirms and undertakes that the Senior Lenders shall deposit into and/or credit the Escrow Account with all disbursements made by them in relation to or in respect of the Project; provided that notwithstanding anything to the contrary contained in this Agreement, the Senior Lenders shall be entitled to make direct payments to the EPC Contractor under and in accordance with the express provisions contained in this behalf in the Financing Agreements. 3.4 Interest on deposits The Escrow Bank agrees and undertakes that all interest accruing on the balances of the Escrow Account shall be credited to the Escrow Account, provided that the Escrow Bank shall be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval of the Lenders' Representative, if fresh information received during the course of the year makes such modification necessary. 4.2 Withdrawals upon Termination Upon Termination of the Concession Agreement, all amounts standing to the credit of the Escrow Account shall, notwithstanding anything in this Agreement, be appropriated and dealt with in the following order: (a) all taxes due and payable by the Concessionaire for and in respect of the Project Highway; (b) 90% (ninety per cent) of Debt Due excluding Subordinated Debt; (c) outstanding Concession Fee; (d) all payments and Damages certified by the Authority as due and payable to it by the Concessionaire pursuant to the Concession Agreement, including {Premium,} repayment of Revenue Shortfall Loan and any claims in connection with or arising out or Termination; (e) retention and payments arising out of, or in relation to, liability for defects and deficiencies set forth in Article 39 of the Concession Agreement; (f) outstanding Debt Service including the balance of Debt Due; (g) outstanding Subordinated Debt; (h) incurred or accrued O&M Expenses; (i) any other payments required to be made under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defines 'work' as follows: "work, n. 1. Physical and mental exertion to attain an end, esp. as controlled by and for the benefit of an employer; labor. xxxx xxxx xxxx work, vb. 1. To exert effort; to perform, either physically or mentally 2. To function properly; to produce a desired effect . 3. Patents. To develop and use (a patented invention, esp. to make it commercially available) . * Failure to work a patent in a specified amount of time is grounds for a compulsory license in some countries. [Cases: Patents 191. C.J.S. Patents §§ 217, 214, 339.]" 32. The meaning of the word 'work' was further elaborated in the Oxford English Dictionary [2ND Edition, Vol. XVI] as follows:- "2. Something to be done, or something to do; what a person (or thing) has or had to do; occupation, employment, business, task, function. xxxx xxxx xxxx 3. † a. Action (of a person) in general; doings, deeds; conduct. (Often conjoined with word.) Obs. xxxx xxxx xxxx b. Action (of a person or thing) of a particular kind; † doing, performance; working, operation. In various connexions; of a thing, often in reference to result; to do its work, to produce its effect (cf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rth-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. sing., (a person's) writings or compositions as a whole. xxxx xxxx xxxx 17. An excavation in the earth, made for the purpose of obtaining metals or minerals; a mine. Obs. exc. = WORKING vbl. sb. 16. xxxx xxxx xxxx b. A kind of trench in draining. Local. xxxx xxxx xxxx 18. pl. An establishment where some industrial labour, esp. manufacture, is carried on, including the whole of the buildings and machinery used; a factory, manufactory, etc. In later use commonly construed as sing., in earlier use (to c 1860) also in sing. form. Often as the second element of a compound; see references below. xxxx xxxx xxxx b. Phr. in the works = in the pipeline s.v. PIPE-LINE sb. B. N. Amer. xxxx xxxx xxxx 19. Something that is to be or is being operated upon: in various connexions (see quots.; cf. also 15). xxxx xxxx xxxx 33. The meaning of the word 'work' has additionally been clarified by P. Ramanatha Aiyar's "The Major Law Lexicon" [4TH Edition] as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 means some outstanding or important result of the labour that has been bestowed, and large industrial and scientific establishments are called works; but in the singular the meaning is not confined in the field of construction to only large or important establishments. If a mason has constructed a wall, it is the work of that mason, and if an engineer has constructed a house it is the work of that engineer. The word really gets its colour and complexion from the nature of the work, and when used in singular with reference to constructions it is not confined to only big industrial or scientific constructions. The learned counsel relied upon two cases in support of his contention, but none of them, in my opinion, is of any real help to him. 11. In the case of- 'The Easton Estates Mining Co. v. Western Wagon Co.', (1883) 54 LT 735 (A), the facts were that an engine was seized while it was standing in a shed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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 194-C, 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned 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 apex court, it is clear that the word "carrying out any work" in section 194C is limited to any work which 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 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/sub-contractor results in 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 facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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), has clarified that the payments made by persons other than individuals and HUFs for hotel accommodation taken on regular basis will be in the nature of "rent" subject to TDS under section 194-I of the Act. Thus, there is inconsistency in the stand of the Central Board of Direct Taxes as to whether the services rendered by a hotel to its customers is covered under section 194C or under section 194-I 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 petitioner No. 1 hotel to its customers do not constitute "work" within the meaning of section 194C of the Act. Consequently, Circular No. 681 dated March 8, 1994, to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 to 'conduct' a case; he is paid 'fee' for the services rendered by him and not any 'price' for the work done by him. xxxx xxxx xxxx 4.23. No doubt, the Supreme Court has said the word 'work' referred in Section 194-C has a wide import. But this observation is found in the context of an argument (of the petitioner therein), that the said word work has to be confined to the concept of works contract. The word 'work' has a wider meaning because, it is not to be restricted to the term 'works contract'. The concept conveyed by the word 'work' found in Section 194-C is not confined, limited or restricted to the concept of works contract'. The word 'therefore', in the particular sentence clearly brings out the reason for the statement that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 requires 'carrying out of any work'. 4.28 One more factor makes the meaning of the section beyond the pale of any doubt. If the term 'any work' in Section 194-C by itself covers any kind of service, the words found in the bracket, in sub-section (1) of Section 194-C will have to be treated as otiose or superfluous. Supply of labour to carry out any work, is a concept that falls within the concept of 'service' if so, why should the Parliament include these words in the bracket, to give an expanded meaning to the term 'any work'. The Supreme Court, in the Associated Cement Company case clearly pointed out that but for the specific inclusion of those words (i.e. 'including supply of labour for carrying out any work'), in Section 194-C, obtaining of supply of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 the purposes of withdrawal from the Escrow Account during the currency of the Concession. Those provisions, in explicit terms, provided for the manner in which all sums standing to the credit of the Escrow Account were liable to be utilised. 40. While equity support was undoubtedly a concomitant of the Concession Agreement, it would be wholly incorrect to view it as payment made for a 'work' entrusted to the Concessionaire. In fact, the BOOT contract itself envisaged investment being primarily made by the Concessionaire for the purposes of creation of the targeted infrastructure. In terms of the contract model, the Concessionaire was upon completion of the physical elements of the project, enabled to own and operate the expressway, collect fee from users of the highway and exploit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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