Rajesh Balia, J.
1. In these petitions, a common question arises about the validity of Circular No. 666 (see [1993] 204 ITR 40) dated October 8, 1993, and Circular No. 681 (see [1994] 206 ITR 299 dated March 8, 1994, respectively, issued by the Central Board of Direct Taxes ('the Board', for short). The relief claimed is to quash the two circulars and grant reliefs consequential to the main relief. The main thrust of the contentions before this court is whether the provisions of section 194C of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), providing for deduction of tax at source applies to payments made by the class of persons on whose behalf these petitions have been filed.
2. Special Civil Application No. 4802 of 1994 has been filed on behalf of the All Gujarat Federation of Tax Consultants whose members are either advocates, chartered accountants or tax consultants by profession and in the course of carrying on their profession, they are engaged by various persons to represent their cases before the tax authorities and courts.
3. Special Civil Application No. 5288 of 1994 is on behalf of the Income-tax Bar Association which consists of advocates, chartered accountants and other practitioners, that is to say, this petition is also by professionals engaged in the profession of tax consultancy and advocacy which includes advocates, chartered accountants ('C.A.' for short) and other practitioners.
4. Special Civil Application No. 5289 of 1994 is on behalf of the Gujarat Institute of Civil Engineers and Architects. The petition represents the cause of persons engaged in the profession of civil engineering and architecture.
5. Special Civil Application No. 1600 of 1995 is on behalf of the Gujarat Chamber of Commerce and Industry. This petition has been filed for the purpose of quashing the aforesaid two circulars issued by the Board to the extent it issues instructions to deduct tax at source for payments made to its members by the persons referred to in section 194C of the Act falling within the category of contracts for carrying out any work termed as transport contracts, service contracts, advertisement contracts, broadcasting contracts and telecasting contracts and those who are carrying on profession as advocates, chartered accountants, engineers, architects, doctors, etc.
6. Special Civil Application No. 874 of 1995 is on behalf of the Tanker Owners and Operators Association while Special Civil Application No. 14043 of 1994 is on behalf of the Akhil Gujarat Truck Transport Association praying for identical reliefs.
7. Chapter XVII of the Act, generally containing various provisions providing for collection of tax through the mode of deduction of tax at source on payments made to certain classes of persons mentioned therein. Generally speaking, it provides for deduction of tax at source from salaries paid by employers, 'interest on securities', dividends, interest other than 'interest on securities', etc., etc. Section 194C of the Act provides for deduction of tax from payments to contractors and sub-contractors. Section 194C was brought into existence by the Finance Act, 1972, with effect from April 1, 1972. Various amendments have been made in that section since then up to the Finance Act, 1994, which are not very relevant for the present purpose. Section 194C of the Act reads as under :
'Section 194C. (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; or
(f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need. for housing accommodation or for the purpose of planning, development or improvement of cities; towns and villages, or for both; or
(g) any society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any 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),
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 or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at any 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 one per cent. of such sum as income-tax on income comprised therein.
Explanation. - For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) 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....' Contemporaneously with the insertion of section 194C, to be more precise, before the provision came into force, Circular No. 86 (see [1972] 84 ITR 99) dated May 29, 1972, came to be issued by the Ministry of Finance expanding the provisions. The relevant part of the circular reads as under (at pages 99, 100) :
'(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 or sale of goods.
(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.'
8. Soon thereafter, the Board also issued a Circular No. 93 (see [1972] 86 ITR 30) dated September 26, 1972, clarifying the ambit and scope of the new provision in a question and answer form. The relevant portion of the circular reads as under (at page 31) :
'Question 5 : Does the requirement apply to transport contract
Answer : A transport contract cannot ordinarily be regarded as '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 loading and unloading, the entire contract will be regarded as 'works contract' and income-tax will have to be deducted from payments made thereunder. Where, however, the element of labour provided for loading and unloading is negligible, no income-tax will be deductible. . .
Question. 7 : Does the requirement apply in relation to payments made to commission agents for arranging sales or to advertising agents rendering professional services
Answer : No. Service contracts not involving the carrying out of any work are outside the scope of the provision.'
9. However, the aforesaid circulars were withdrawn in the year 1993 and a Circular No. 666 (see [1993] 204 ITR 40) dated October 8, 1993, was issued, relevant portion of which reads as under (at page 40) :
'2. According to the provisions of section 194C of the Income-tax Act, 1961, any person. . . .
It is clarified that carrying out any work includes service contracts and transport contracts. . . .
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]201ITR435(SC) . 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.'
10. Again Circular No. 681 (see [1994] 206 ITR 299) dated March 8, 1994, was issued by the Board in the following terms (at page 300) :
'6. It may be pointed out that this appeal before the Supreme Court was by virtue of a special leave petition against the judgment in Writ Petition No. 2909 of 1978 of the Patna High Court in the case of Associated Cement Co. Ltd. v. CIT : [1979]120ITR444(Patna) . The Patna High Court, while dismissing the writ petition of the aforesaid company, observed that 'in a very broad sense, a work done by one person is service rendered to another and indeed one of the dictionary meanings of the word 'service' is work'.
7. The conclusion flowing from the aforesaid judgments of the Supreme Court and the Patna High Court is that the provisions of section 194C would apply to all types of contracts including transport contracts, labour contracts, service contracts, etc. In the light of these judgments, the Board have decided to withdraw their above mentioned Circulars Nos. 86 and 93 and paragraph 11 of Circular No. 108 and issue the following guidelines in regard to the applicability of the provisions of section 194C :
(i) The provisions of section 194C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, materials contracts and works contracts.. .
(v) Service contracts would be covered by the provisions of this section since service means doing any work as explained above. ..
(vii) The provisions of this section would apply in relation to payments made to persons who arrange advertisement, broadcasting, telecasting, etc. . . .
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. However, services rendered for which payment is in the nature of salaries which is chargeable under the head of income 'A. Salaries' in Chapter IV of the Income-tax Act, 1961, shall not be covered by section 194C.
(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 the Board's Circular No. 558 (see [1990] 183 ITR 158) dated March 28, 1990..'
11. It was urged by learned counsel for the petitioner that though the words used in section 194C make 'any work' of a wider amplitude than 'works contract', none the less, they do not include within their meaning service which cannot be construed as 'work', nor 'contractor' embraces within it persons who are independently engaged in professions as advocates, solicitors, chartered accountants, tax practitioners, doctors, surgeons, engineers, etc. If during the course of their business activities, persons enumerated under section 194C, clauses (a) to (e), engage such professionals or service agencies for securing their special services on the subject or area concerned rendering services on payment of fees or charges, they cannot be equated with carrying on work as contractors for the principals. The context in which the words 'any work' and 'contract' have been used means carrying out a job on a contract basis for principal, which he would have done himself otherwise. Any payment made to any person under an agreement for rendering services in the course of his business, therefore, cannot be construed as payment to such person as a 'contractor' for doing 'work'.
12. Learned counsel for the Revenue vehemently urged that in view of the law laid down by their Lordships of the Supreme Court in Associated Cement Co. Ltd.'s case : [1993]201ITR435(SC) , the operation of section 194C cannot be confined to payments made for executing works contracts, but it extends to payments for any work done under the terms any agreement and with that outline, he urges that any amounts received by a lawyer for conducting a case or by a doctor for prescribing medicines to patients or by an architect for drawing a plan of a bungalow or by a railway for carrying goods from one place to another by charging freight, are all receiving payments made under a contract and they do some work. Therefore, on a plain reading of the language of section 194C as interpreted by their Lordships, all the aforesaid categories of persons are included in the term contract for carrying out any work and while making any payments to them, any persons enumerated in clauses (a) to (e) of that section, are under an obligation to deduct the amount at a prescribed rate from the payments made to such contractor.
13. Before we advance further, we may notice a few more facts. In the Finance Bill, 1987, it was proposed to insert section 194E in the following terms (see [1987] 165 ITR 56) :
'194E. Other incomes. - (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of -
(a) fees for professional services, or
(b) royalty, or
(c) fees for technical services, or
(d) rent, or
(e) commission (not being insurance commission referred to in section 194D) or brokerage, or
(f) payments for goods supplied to Government or any local authority or any corporation or body established by or under a Central, State or Provincial Act or any company,
shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate in force :
Provided that : . . . .
(2) In this section, -
(a) 'professional services' means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purpose of section 44AA;...'
14. However, ultimately this proposal did not carry further and had to be dropped due to strong opposition. In the Finance Bill, 1995, section 194C is sought to be amended. To the extent it is relevant for present purposes, it is reproduced below (see [1995] 212 ITR 122) :
'34. (ii) below sub-section (2), after Explanation II, the following Explanation shall be inserted, namely :
'Explanation III. - For the purposes of this section, the expression 'work' shall also include -
(a) advertising;
(b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
(c) carriage of goods and passengers by any mode of transport other than by the railways;
(d) catering;'
15. By the very same Bill, there is also a proposal to insert section 194J in the following terms (see [1995] 212 ITR 123) :
'194J. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of -
(a) fees for professional services, or
(b) fees for technical services,
shall, at the time of credit of such sum to the account of the payee 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 ten per cent. of such sum as income-tax on income comprised therein :
Provided that no deduction shall be made under this section - . . . .
Explanation. For the purpose of this section, -
(a) 'professional services' means services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy, or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section;
(b) 'fees for technical services' shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;'
16. It may be noticed that section 194J now proposed to be inserted is almost in the same terms for the same purpose for which section 194E was proposed to be inserted by the Finance Bill, 1987.
17. It is true that the statute has used words 'any work' and, therefore, a narrow interpretation confining the applicability of the Act to carrying out works contracts only, would be restricting the natural meaning of the provision. In this connection, it may be appropriate to refer in brief to the concept of 'work contract' which has acquired its well-established meaning under the taxing statutes to mean that a contract which involves two elements, namely, (i) transfer of material, and (ii) rendering of service in bringing out tangible property out of material. A controversy had arisen whether the bringing out of tangible property out of such material which work contract complete resulting in transfer of property and material used in bringing out tangible property. However, for the present, it is suffice to state that the narrow meaning of works contract bringing out tangible property out of various raw material is not necessarily the only type of work which is required to be carried out by contractors. The Legislature, by not using the words 'work contract' but by only using the words 'any contract' gave out clearly that the provisions are not confined to activities of carrying out 'works contract' only, but of carrying out other work also. The crucial issue in the context of section 194C is that payments made under such contract which makes the person receiving payment 'a contractor'.
18. The question still remains what is meant by work. Any word in a taxing statute is not to be understood by reference to its several dictionary meanings. The word used in a fiscal law is to be understood in the absence of any definition, in its popular sense, in the sense in which the relevant word is usually and normally understood. Further, the word or the collection of words Should fit into the structure of the sentence in which the words is used or the collection is formed. If viewed from that angle, in our opinion, rendering of service in the course of one's own business on being required by others cannot be equated with carrying on any work for others under a contract as contractor merely because he had been paid fees/charges or consideration for any agreement. If that be so, every agreement for consideration, except for sale, shall be an agreement for work on contract wherever consideration is paid. When the railways who are engaged in the business of carrying of goods, book a consignment for being carried from place 'X' to place 'Y', it cannot be said that they are acting as contractors for the consignor for carrying of goods. Likewise, when a doctor examines a Patient for diagnosing a malady and prescribes mordacious and charges a sum of fees, it cannot be said that the doctor is carrying out work of examining the patient or ailing person on contract as a contractor, or where an architect who in the course of his profession, is engaged to give out a design of a bungalow to a prospective builder, no one would understand the architect to be carrying on work 'as contractor' of designing plans for the builder. Therefore, in our 'pinion, before a person can be called a contractor within the meaning of section 194C, his status must have nexus in its characteristic as carrying out work for another person as a contractor in the ordinary sense and not merely carrying on activities of his own business or profession in the ordinary course by charging fees, remuneration, freight by whatever name it is called.
19. That apart, it may be noticed that in section 194C, the Legislature has resorted to an inclusive phraseology by bringing in supply of labour or labour contract simpliciter within the ambit of the provisions. Obviously, mere supply of labour for carrying out any work and not a contract for carrying out work itself would not have come within the ambit of section 194C but for creating a fiction because in the former case, it would have been merely a case of rendering services and not carrying out work. That is to say, payments would have been made as wages as part of remuneration to the workman paid to the contractor for the supply of labour, but payment would not have been made for work done by the labour so supplied. This also gives the clue that but for the inclusive provisions, services rendered by supply of labour by charging remuneration therefor would not have been covered by section 194C even though the labourer would have been supplied only for the purpose of carrying out work.
20. It may also be noticed that though the Board is not vested with authority to interpret the provisions of the statute and it has no jurisdiction to issue any binding interpretation of law and any exercise made in this regard by the Board cannot go beyond expressing the view of the Department by the Board for the purpose of general guidelines to be taken into consideration for interpretation.
21. Therefore, circulars issued by the Board either earlier or later, do not bind the courts. However, one has to remember that under the scheme of the Income-tax Act, under section 116, the Act provides various income-tax authorities for the purpose of implementing the provisions of the Act. The Central Board of Direct Taxes is the apex body entrusted with the duty of implementing fiscal statutes which fall in the category of direct taxes. It has also authority to issue instructions and guidelines for proper administration of the Act which are binding on all its subordinate authorities and is a limb of the Finance Ministry which is the framer of any fiscal provisions to be enacted.'Contemporanea expositio' is a well-known doctrine for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. The 'administrative construction' (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned, such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive. A contemporaneous exposition by the administrative authorities is a very useful and relevant guide to the interpretation of the expressions used in a statutory instrument. The doctrine of contemporanea expositio is relied an to remove any possible ambiguity in the understanding of the language of the relevant statutory instrument. The aforesaid principle was approved by their Lordships of the Supreme Court in K.P. Varghese v. ITO : [1981]131ITR597(SC) , wherein their Lordships observed as under [at page 612) :
'It was clear from these two circulars that the Central Board of Direct Taxes, which is the highest authority entrusted with the execution of the provisions of the Act, understood sub-section (2) as limited to cases where the consideration for the transfer has been understated by the assessee and this must be regarded as a strong circumstance supporting the construction which we are placing on that sub-section.'
22. The principle was reiterated and applied by their Lordships of the Supreme Court in Indian Metals and Ferro Alloys Ltd. v. Collector of Central Excise : 1991ECR11(SC) , in which it was said, while interpreting tariff item No. 26AA (at page 1034) :
'The practice of the Department in assessing the poles to duty (except in cases where they were exempt as the conditions in the exemption notifications were fulfilled) and the issue of notifications from time to time (the first of which was almost contemporaneous with the insertion of item No. 26AA) are being relied upon on the doctrine of contemporanea expositio to remove any possible ambiguity in the understanding of the language of the relevant statutory instrument : . . . Applying the principle of these decisions, that a contemporaneous exposition by the administrative authorities is a very useful and relevant guide to the interpretation of the expressions used in a statutory instrument, we think the assessee's contention that the products fall within the purview of item No. 26AA should be upheld.'
23. Here, we must remind ourselves that the conclusion to which we have arrived at above about the interpretation of the words 'any contract' and 'contractor' in the context of section 194C is supported by a strong circumstance bout the interpretation which the Finance Ministry and the Board entrusted with the execution of the provisions of the Act was placed before the subordinate authority and public for clarifying their doubts explaining newly inserted provision in the year 1972. The provision came into force with effect from April 1, 1972, through the Finance Act, 1972. As early as in May, 1972, vide Circular No. 86 (see [1972] 84 ITR 99) dated May 29, 1972, the Finance Ministry stated that 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. It was also clearly stated that 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. Soon after the issuance of circular dated May 29, 1972, the Board issued Circular No. 93 (see [1972] 86 ITR 30) dated September 26, 1972, with reference to specific queries stating in no uncertain terms that 'transport contract' cannot ordinarily be regarded as '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. It made it clear that in the case of a composite contract involving transport as well as loading and unloading, the entire contract will be regarded as 'works contract' and income-tax will have to be deducted from payments made thereunder. it also clarified in answer to query No. 7, relating to commission agents for arranging sales or advertising agents rendering professional services that 'service contracts' not involving the carrying out of any work are outside the scope of the provisions. This view as expressed by the highest authority under the Income-tax Act was put in practice and was followed uniformly until the decision in Associated Cement Company Ltd.'s case : [1993]201ITR435(SC) came, relying on which the Board decided to turn back on the clarification issued by it since the commencement of the provisions by holding out that the Supreme Court has altered the interpretation given by the Department. This brings for consideration the question whether Associated Cement Co.'s case : [1993]201ITR435(SC) lays down any law contrary to what was the law as understood by the Department as well as the assessee in any manner in so far as the question as to deduction in respect of service contracts or in respect of rendering professional services are concerned.
24. On a careful reading of the said decision, we are of the opinion that no upturning of the usage or practice followed by the Department as per its own instructions contained in the two circulars referred to above can be spelt out from the decision in Associated Cement Co.'s case [1993] 201 ITR 43S. One cannot fail to notice that it was a case in which the question directly related to a contract for loading packed cement bags from its packing plants into wagons and trucks. That is to say, it was not a case of works contract, but a case of a labour contract. The limited argument which was raised before their Lordships of the Supreme Court was that only labour contracts come within the ambit of the scope of section 194C to carry out a works contract or contracts to supply labour to carry out works contracts and not any other labour contracts. This contention was rejected by their Lordship while observing as under (headnote) :
. . . . section 194C(1) had a wide import and covered 'any work' which could be got carried out through a contractor under a contract including the obtaining 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'.'
25. Their Lordships of the Supreme Court further observed that :
'That but for the specific inclusion of those words (i.e., 'including supply of labour for carrying out any work') in section 194C, obtaining of supply of labour for carrying out the work would have fallen outside the word 'work'.'
26. The above observation of the Supreme Court brings out the true purport of the term 'any work' in section 194C.
27. On pain of repetition, it may be noticed that in the first circular issued by the Finance Ministry, the position regarding loading and unloading contracts was qualified by stating that in the case of a composite contract involving transport as well as loading and unloading, the entire contract will be regarded as a 'works contract' and income-tax will have to be deducted from payments made thereunder. Where, however, the element of labour provided for loading and unloading is negligible, no income-tax will be deductible, is clearly indicative of the fact that while loading and unloading of goods meant for transport work was the activity falling in the category of carrying out any work, supply of labour simpliciter was only within the scope of rendering services and where loading and unloading activity was the primary activity to be carried out by the contractor, supply of labour for that purpose was stated to be coming within the purview of supply of labour or carrying out any work. That is the meaning which has been assigned by their Lordships of the Supreme Court to the activity of loading cement bags for transportation in Associated Cement Cu. Ltd.'s case : [1993]201ITR435(SC) . It, therefore, cannot be said that such an eventuality of compelling nature had happened which justified deviation from 'administrative construction' by administrators or executive officers charged with execution of statutes and had been in usage or practice for a period of over 22 years without there being any doubt expressed about it by any party.
28. In our conclusion, we are further strengthened by the fact that the Legislature intended to make a separate provision for bringing the service contract and professional service within the purview of the provision relating to tax deduction at source, by the Finance Bill, 1987, which has been quoted above. Once again in the Finance Bill 1995, a similar insertion has been proposed. Had the services rendered, by professionals like advocates, chartered accountants, engineers, physicians, architects, etc., already been within the scope and ambit of section 194C, the Legislature would not have resorted to this exercise. It cannot be assumed that the Legislature uses or indulges in an exercise for bringing something by way of surplus. Likewise, it may be noticed that the the profession/business of advertising, broadcasting and telecasting including production of programmes for such broadcasting or telecasting, carriage of goods by railway, etc., which are being now being now been designed to be inserted in the expression 'work' under section 194C has only been intended to be given effect from July 1,1995. In view of this clear intention of inclusion being effective from prospective date, it is clear by indicative of the fact that the proposed amendment is not brought by way of clarification of any existing provision but is intended to bring substantial change in the existing provision. We may not be taken to have construed the existing provision with aid of proposed amendment, but we have referred to them only by way of the strengthening the conclusion to which we have arrived independently of it.
29. In our conclusion, we are fortified by a catena of decisions of various High Courts.
30. In Chamber of Income-tax Consultants v. CBDT : [1994]209ITR660(Bom) , the Bombay High Court was concerned with examining the validity and constitutionality of the very same circulars in the context of section 194C with which we are concerned. It related to and arose out of a petition filed by the Chamber of Income-tax Consultants, Forum of Indian Professional Organisations and Chartered Accountants. The Bombay High Court distinguished Associated Cement Co. Ltd.'s case : [1993]201ITR435(SC) in the following terms (at page 672) :
'A reading of the above observations of the Supreme Court in the context of the controversy before it makes it absolutely clear that the Supreme Court did not intend to give an extended meaning to the expression 'any work' so as to include professional services within its ambit. The Supreme Court interpreted the expression 'any work' to decide whether it was confined to works contracts as argued by the appellant before it or it was applicable to labour contracts also. It is in this context that the Supreme Court observed that 'any work' means any work and not only a 'works contract'. . . .
If we read the decision of the Supreme Court in Associated Cement Co. Ltd.'s case : [1993]201ITR435(SC) in the light of the principles set out above, it will be abundantly clear that the only question that fell for determination was whether the applicability of section 194C was confined to 'works contracts' only as contended by the assessee. The Supreme Court decided only this limited question and held that there was no reason to curtail or cut down the meaning of the plain words used in section 194C to confine or restrict it to 'works contracts'. It was in this context that the Supreme Court held that the 'work' envisaged in sub-section (1) of section 194C has a wide import and covers any work which one or other of the organisations specified in the sub-section can carry out through a contractor under a contract. This was also the consistent stand of the Revenue ever since the incorporation of section 194C. The assessee sought to challenge the same and contended that section 194C was applicable only to 'works contracts' which produces a tangible property and not to labour contracts. It is this contention of the assessee which was repelled by the Supreme Court and the interpretation put by the Revenue on section 194C was upheld. No other question fell for determination in that judgment. It is, therefore, evident that the Central Board of Direct Taxes committed a manifest error in reading the above decision in the way it has done in its impugned circular and reversing the interpretation consistently put by it on section 194C of the Act for the last two decades purportedly in the light of the said decision of the Supreme Court.'
31. It has been further observed by the High Court as under by adopting the well-known canon of contemporanea expositio for the interpretation of section 194C (at page 673) :
'The impugned action of the Central Board of Direct Taxes is also against the well-settled principle of construction of fiscal statutes that the interpretation of a provision in a taxing statute rendered years back and accepted and acted upon should not be easily departed from except for compelling reasons. The circulars issued by the Central Board of Direct Taxes during the last two decades explaining the scope and ambit of section 194C are clearly in the nature of contemporanea expositio which can legitimately be used as aids in the construction of the said provision. . . . The language of section 194C is plain and unambiguous and leaves and scope for any controversy in regard to its interpretation. In such a situation, the earlier circulars of the Central Board of Direct Taxes explaining the scope and ambit of section 194C must be regarded as a strong circumstance in support of the construction that section 194C is not applicable to payments by way of professional fees.'
32. The aforesaid principle was followed and applied by the Bombay Court again in the case of Bombay Goods Transport Assn. v. CBDT : [1994]210ITR136(Bom) which related to transport carriers wherein after considering the decision in Associated Cement Co. Ltd.'s case : [1993]201ITR435(SC) and keeping in view the judgment of the Supreme Court has to be read subject to the facts directly presented for consideration before it not affecting those matters which may lurk in the record, observed that (at page 150) :
'The controversy before the Supreme Court was limited to the of section 194C to labour contracts.'
33. The Supreme Court did not approve the narrow construction of the expression 'any work' to include only 'works contracts' and affirmed the interpretation of section 194C of the Act to include not only works contracts but also 'labour contracts' which would have fallen outside the work envisaged by section 194C but for its specific inclusion in sub-section (1). The expression 'any work' used in section 194C means 'works contracts' and 'contracts for work', i.e., 'labour contracts' but not service contracts or 'transport contracts'. On this reasoning, it held that the provisions of section 194C are not applicable to contracts for mere carriage of goods which do not include any other service like loading and unloading.
34. In the case of S.R.F. Finance Ltd. v. CBDT : [1995]211ITR861(Delhi) , a Division Bench of the Delhi High Court came to the same conclusion about the ratio of the Supreme Court decision in Associated Cement Co. Ltd.'s case : [1993]201ITR435(SC) and the meaning of 'any work', vis-a-vis, 'contract' for the purpose of section 194C and held (headnote)
'The word 'work' may have different and wider meanings but one has to find out the real meaning of the word in the context of its setting in section 194C. 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 sketch. A lawyer is not engaged to carry out the work of arguing case; he is engaged to 'argue' a case or to 'conduct' a case; he is paid a fee for the services rendered by him and not any price for the work done by him.'
35. It is further held that (headnote) :
'It is most inappropriate to equate the rendering of a service with carrying out a work. That is why Parliament thought it expedient to expand the meaning of the word 'work' by including in it the supply of labour. It is obvious that because the word 'work' would not include within its amplitude the supply of labour, Parliament added the same by including the latter in the former, thereby giving the word 'work' an extended meaning. The extended meaning cannot travel beyond the actual extended area; Parliament had stretched the scope of the word to some extent only.'
36. It also relied on the doctrine of contemporanea expositio. While considering the decision in Associated Cement Co. Ltd.'s case : [1993]201ITR435(SC) . the High Court followed the view expressed by the Bombay High Court in the case of Chamber of Income-tax Consultants : [1994]209ITR660(Bom) . We have been informed that the special leave petition filed against the aforesaid decision of Chamber of Income-tax Consultants : [1994]209ITR660(Bom) has been rejected. The said fact has also been noticed in [1995] 212 ITR 61.
37. As a result of the aforesaid discussion, we hold that engagement for professional service or services simpliciter which do not involve a contract for carrying out any work itself, or a contract for labour for carrying out such services, are not within the purview of section 194C of the Act as it exists. Therefore, contracts for advertising, contract of goods transport simpliciter, persons engaged in the business of broker as commission agent without carrying any work for his principal or professionals rendering professional services by charging fees in the course of their profession, are not amenable to the provisions of section 194C of the Act. The earlier Circular No. 86 (see [1972) 84 ITR 99) dated May 29, 1972, and Circular No. 93 (see [1972] 86 ITR 30) dated September 26, 1972, contemporaneously clarifying the ambit and scope of the provisions concerning service contracts held out the correct view and there was no justification for issuing instructions to alter the said construction on the basis of the decision in the case of Associated Cement Co Ltd. : [1993]201ITR435(SC) as observed above.
38. Accordingly, Circular No. 666 (see [1993] 204 ITR 40 dated October 8, 1993. and Circular No. 681 (see [1994] 206 ITR 299) dated March 8, 1994, are hereby quashed and set aside. Rule made absolute in each petition. Under the facts and circumstances of the case, there is no order as to costs in each petition.