B.R. ARORA, J. :
The petitioner, a manufacturer of cement, is a public limited company, whose registered office is at Calcutta and the factory/works is at Chittorgarh. The cement manufactured by the petitioner factory is being transported to the different destinations with the assistance of approved transport operators/companies. The petitioner did not deduct the tax at source (TDS) on the payments made to the transporters under S. 194C of the IT Act, therefore, a letter dt. 18th March, 1995 was issued to the petitioner company by the ITO (TDS), Chittorgarh requesting and reminding it to deduct the TDS from the payments made to the transport contractors in accordance with Circular No. 681, dt. 8th March, 1994.
2. No deduction of the TDS was made by the petitioner company under S. 194C of the IT Act as according to the petitioner it was not obliged to deduct the amount of TDS under S. 194C of the Act from the payments made to the transport companies as the provisions are not applicable to such transactions. The respondents, therefore, initiated penalty proceedings against the petitioner. The petitioner, by this writ petition, challenges the legality and validity of the Circular No. 681, dt. 8th March, 1994 issued by the CBDT, New Delhi and the notices issued by the ITO (TDS), Chittorgarh.
3. It is contended by the learned counsel for the petitioner, that (i) S. 194C of the Act covers only works contracts and does not cover the payment of transport charges for carriage of goods; (ii) the service rendered for carrying on transportation of the goods can by no imagination, be treated as covered by the words 'any work' used in S. 194C of the Act and the coverage and scope of S. 194C given in Circular No. 681; (iii) Expln. (iii) added to S. 194C of the Act, covering carriage of goods within the expression of word works is only prospective and does not cover the case of the petitioner between the period from 1st April, 1994 to 30th June, 1995; (iv) while issuing the Circular No. 681 (Annexure A) the decision of the Honble the Supreme Court in Associated Cement Co. Ltd. vs . CIT & Anr. : [1993]201ITR435(SC) has been wrongly interpreted; and (v) the CBDT has no power, authority or competence to make the law or to impose any liability by issuing the Circular No. 681, dt. 8th March, 1994. In support of his contention, learned counsel for the petitioner has placed reliance over Bombay Goods Transport Association & Anr. vs . CBDT & Ors. : [1994]210ITR136(Bom) , Delhi Goods Transport Association vs. CBDT & Anr. (1995) 80 Taxman 525, All Gujarat Federation of Tax Consultants & Ors. vs . CBDT & Anr. : [1995]214ITR276(Guj) , Madras Bar Association & Ors. vs . CBDT & Ors. : [1995]216ITR240(Mad) and Calcutta Goods Transport Association & Anr. Union of India & Ors. : [1996]219ITR486(Cal) .
4. Learned counsel for the respondents, on the other hand, has submitted that (i) the Circular No. 681 was issued by the CBDT rightly and properly in exercise of the statutory powers and is neither without jurisdiction nor nullity; (ii) the circular was issued on the proper interpretation of the judgment of the Honble Supreme Court in Associated Cement Company case and S. 194C of the Act covers the cases of payment of transport charges for carrying the goods; (iii) the Expln. (iii) added to S. 194C by the Finance Act of 1995 w.e.f. 1st July, 1995 is only clarificatory in nature and even without this Explanation the petitioner was obliged to deduct the TDS and the writ petition filed by the petitioner is without any substance and deserves to be dismissed. In support of his contention, learned counsel for the respondents has placed reliance over Associated Cement Co. Ltd. vs. CIT & Anr. (supra) and Ekonkar Dashmekh Transport Co. & Ors. vs . CBDT & Anr. .
5. Before we embark on a discussion of the controversy involved in the case, it is necessary first to state the facts which led to the present controversy. Sec. 194C of the Act making provision for deduction of the TDS from the payment made to the contractors and sub-contractors in certain cases, was originally inserted by the Finance Act, 1972 w.e.f. 1st April, 1972 and the amended section reads as under :
'Sec. 194C. Payment to contractors and sub-contractors : (1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including labour for carrying out any work) in pursuance of a contract between the contractor and :
(a) xxx xxx xxx xxx
(b) xxx xxx xxx xxx
(c) any company;
(d) to (j) xxx xxx xxx
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 (a) one per cent in case of advertising; (b) in any other case two per cent of such sum as income-tax on income comprised therein
(2) xxx xxx xxx
Explanation I. xxx xxx xxx
Explanation II. xxxx xxx xxx
Explanation III. For the purpose of this section, the expression work shall also include (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting and telecasting;
(c) carriage of goods and passengers by any mode of transport other than by railways;
(d) catering.
(3) xxx xxx xxx (4) xxx xxx xxx (5) xxx xxx xxx'
6. The provisions of, and the formalities requisite in connection with S. 194C were explained by the CBDT in its Circular No. 86, dt. 29th May, 1972 F. No. 275/9/72. Sub-cl. (ii) of cl. (I) this circular which relates to the present controversy, reads :
'(ii) The deduction of the 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 law applies only in relation to 'works contracts' and 'labour contracts' and will not cover contracts for sale of goods.'
7. The Finance Ministry received several queries from various Trade Associations and members of public seeking clarification on several points arising out of the scheme of TDS for payment made to contractor and sub-contractor in certain cases. The point, on which the enquiries were made and clarifications were sought, were answered by the respondents by the Circular No. 93, F. No. 275/100/62-ITJ, dt. 26th Sept, 1972. Question No. 5 formulated by the Ministry and answered, deals with the question : Whether the provisions of S. 194C apply to the transport contracts The question and answer stated in this circular read :
'Question No. 5 : Does the requirement apply to transport contract ?
Answer : 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 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 provides for loading and unloading is negligible, no income-tax will be deductible.'
8. The Department, in pursuance to these two circulars issued by the CBDT, in the cases of transport contracts, did not insist on the deduction of the TDS and the petitioner and other like assessee did not deduct, the TDS.
9. The matter : whether a person who credits to the account of or pays to the contractor any sum as per the terms and conditions of a contract of loading packed cement bags from its packing plant into wagons or trucks, is liable to deduct two per cent of such sum as income-tax as required under S. 194C of the Act, came up for consideration before the Supreme Court in : Associated Cement Company Ltd. vs. CIT & Anr. (supra) and the apex Court, while interpreting the words 'any work' answered the question as under :
'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.'
10. On the basis of the decision of the Supreme Court, a circular was issued by the Ministry of Finance giving instructions regarding TDS under S. 194C. In pursuance to this circular issued by the Ministry of Finance and in view of the judgment of the Supreme Court in Associated Cement Companys case, the CBDT considered that the earlier circular issued under S. 194C needs to be reviewed in the light of the judgment. The Board was of the view that the conclusion flowing from the judgment of the Supreme Court is that the provisions of S. 194C would apply to all types of contacts including the transport contract, labour contract, labour contract, service contract, etc. The Board, therefore, decided to withdraw the Circulars No. 86, 93 and 108 and issued the guidelines vide Circular No. 681 in regard to applicability of the provisions of S. 194C. The guideline No. (i) Which is relevant for adjudication of the present controversy, reads as under :
'(i) The provisions of S. 194C shall apply to all types of contacts for carrying out any work including the transport contract, service contract, advertisement contract, broadcasting contracts, telecasting contracts, labour contracts, materials contracts and works contracts.'
This circular was made effective w.e.f. 1st April, 1994 and it was made clear by this circular the tax deduction made in accordance with Circular Nos. 86, 93 and 108 upto 31st March, 1994 will be regarded as compliance of the provisions of S. 194C.
11. The Expln. III to sub-s. (2) of S. 194C of the Act was thereafter added by S. 34 of the Finance Act, 1995 w.e.f. 1st July, 1995. This Expln. III has been reproduced in the earlier part of this judgment in para 5 while quoting S. 194C.
12. The controversy raised in the present writ petition is : whether the payment to the transporters for carriage of goods from the works of the petitioner company to different destinations can be considered as payment for works involving labour or supply of labour for carrying out such work within the scope of S. 194C.
13. The answer to this controversy depends upon the interpretation of S. 194C in the light of the judgment of the Supreme Court in Associated Cement Companys case (supra). Sec. 194C casts a duty upon the person responsible for making payment of a sum to any contractor for carrying out 'any work' in pursuance of a contract between the contractor and the company to deduct a sum of TDS at the time of credit of such sum to the account of the contractor at the time of payment thereof by cash or by issuance of a cheque, draft or by any other mode whichever is earlier.
14. To attract the provisions of S. 194C, the following conditions have to be satisfied; namely, (i) there must be a contract between the person responsible for making payment and the contractor; (ii) the contract must be for carrying out 'any work'; (iii) the work is being carried through the contractor; (iv) consideration for the contract should exceed Rs. 10,000 i.e., the amount fixed by S. 194C; and (v) the payment is made to the contractor for the work carried out by him.
If these conditions are satisfied then it is obligatory upon the person responsible for making such payment to deduct TDS from the payment to be made. The expression 'carrying out any work' is the soul of the section and the applicability of the section depends upon the interpretation of this expression. The word 'any' is a word which excludes the limitation and qualification and can mean 'all', each' and 'every'. The meaning of this word given in the statute depends upon the context and the subject-matter of the statute and its generality can be restricted by the context in which it has been used. It has been used as a prefix to the word 'work' which means engagement in the performance of a task, duty or the likes. The term 'work' covers all forms of physical and mental exertions or both combined for the attainment of some object other than recreation or amusement.
15. The dictionary meaning of the words 'carrying on' implies a repetition of acts. Whether carriage of goods, therefore, amounts to carrying out work is to be seen. The words 'any work' used in S. 194C came up for interpretation before the Supreme Court in the matter of loading cement bags from its packing plant on the trucks which carry the cement bags to various destinations. The Supreme Court, in the Associated Cement Companys case, held that :
'Thus, when the percentage amount required to be deducted under the sub-section as income-tax is on the sum credited to the account of or paid to a contractor in pursuance of a contract for carrying out a work or supplying labour for carrying out a work, of any of the organisations specified therein, there is nothing in the sub-section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to 'works contracts' as was argued on behalf of the appellant. We see no reason to curtail or to cut down the meaning of the plain words used in the section. 'Any work' means any work and not a 'work 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.'
16. The Supreme Court has, thus, given a wide import to the words 'any work' used in the section and it covers all the covers all the work and not merely restricts to the work contract or supply of labour. The expression 'carrying out any work' used in S. 194C has, thus, wide amplitude and covers the works of all kinds which are carried out through the contractors by the specified organisations mentioned in S. 194C.
17. The same controversy came-up for consideration before the Bombay High Court in Bombay Goods Transport Co. & Anr. vs. CBDT & Ors. (supra). The Division Bench of the Bombay High Court, considering the judgment of the Supreme Court in Associated Cement Companys case and the earlier Circulars issued by the CBDT treating the transport contracts not falling within the purview of S. 194C, held :-
'We do not find anything in the decision of the Supreme Court to justify the reversal of the above view by the CBDT by making the Circular. The Supreme Court has not interpreted the provisions of S. 194C in the manner it is sought to be interpreted by the CBDT to apply to all types of contracts including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, material contract, works contracts etc. In our view the CBDT has committed a manifest error of law in interpreting the judgment of the Supreme Court. It is well settled that the judgment of the Supreme Court has to be read subject to the facts directed/presented for consideration before it and not effecting those matters which may lurk in the record...........
In Associated Cement Companys case : [1993]201ITR435(SC) the controversy before the Supreme Court was limited to the applicability of S. 194C to labour contract. The various Circulars of the CBDT were not before the Supreme Court. The Supreme Court interpreted S. 194C de hors those Circulars. It did not approve the narrow construction of the word 'work' to include only 'works contract'. These is nothing beyond that in the above judgment of the Supreme Court.'
With respects, we find ourselves unable to agree with the view expressed by the Division Bench of the Bombay High Court. The Division Bench of the Bombay High Court, while deciding the issue, laid much stress on the earlier circulars issued by the CBDT and mainly based the judgment on the interpretation given by the CBDT in its earlier circulars. The question before the Supreme Court in Associated Cement Companys case was to the interpretation of the words 'any work' relating to the contracts in general vis-a-vis the labour contract and not in particular to the labour contract also as pointed out by the Division Bench in the judgment. The Supreme Court has given wide connotation to the expression 'any works' used in the section. It has specifically been laid down by the Supreme Court in Associated Cement Companys case that the words 'any work' envisaged in S. 194C has wide import and covers any work which or the other of the organisations specified in the sub-section, can get carried out through a contractor under a contract.
18. The same controversy, also, came up for consideration before the Delhi High Court in Delhi Goods Transport Association vs. CBDT (supra). The Delhi High Court relied upon the judgment of the Bombay High Court in : Bombay Goods Transport Corporations case (supra) and held that the impugned circular is ultra vires the provisions of S. 194C in so far as it purported to cover the cases of actual carriage of goods of hire.' While quashing the order, the Delhi High Court relied upon the judgment of the Bombay High Court in Bombay Goods Transport Associations case (supra) and the earlier judgment of the Delhi High Court in S.R.F. Finance Ltd. vs. CBDT (1995) 4 A. D. D. 489) which relates to the business of leasing the hire-purchase of articles such as vehicle, plant and machinery, etc. No discussion has been made on the point in issue in this judgment.
19. In All Gujarat Federation of Tax Consultants & Ors. vs. CBDT & Ors. (supra) the same controversy came up for consideration and the Division Bench of the Gujarat High Court, after considering the judgment of the Supreme Court, the judgments of the Bombay, Calcutta and Madras High Courts and the circulars issued by the Board, observed that :
'The only question which fell for determination before the Supreme Court was : whether the applicability of S. 194C was confined to the 'works contracts' only and the Supreme Court decided only this limited question and held that there was no reasons to curtail or cut down the meaning of the plain word 'work' used in S. 194C to confine or restrict it to the 'work contracts' was interpreted.'
The Division Bench of the Gujarat High Court therefore, quashed and set aside the Circular No. 681.
19A. The same controversy, also, came up for consideration before the Madras High Court in : Madras Bar Association & Ors. vs. CBDT & Ors. (supra) and the Madras High Court, held that the circular is illegal and without jurisdiction so far as it has cast an obligation for deduction of the tax at source under S. 194C in respect of a contract for mere carriage of goods which do not include any other service like loading and unloading and are not, in any way, connected with 'any work' to be performed by the carrier.
20. The Calcutta High Court in Calcutta Goods Transport Co. & Anr. vs. Union of India & Ors. (supra) dealing with the same controversy held that 'mere transportation of goods by a common carrier does not affect or result in the goods carried nor are the goods affected thereby and as such cannot be brought within the scope of S. 194C ' while considering the judgment of the Supreme Court in Associated Cement Co.s case the learned judge of the Calcutta High Court observed that 'the Supreme Court has not gone on to clarify or explain or define as to the sense in which the word was being used by the Supreme Court'.
21. With respects, we find ourselves unable to agree with the view expressed by the Gujarat, Madras and Calcutta High Court in view of the judgment of the Honble Supreme Court in Associated Cement Co.s case. The Supreme Court, while considering the words 'any work' used in S. 194C, clearly took the view that the word 'work' has to be given wider connotation and its application cannot be restricted only to the 'works contract' or 'contract for labour'. The expression 'any work' used in the section covers each and every work where the work is being carried out in pursuance of a contract between the contractor and the person responsible for making payment and the consideration of the contract exceeds the sum fixed in S. 194C(iii).
22. The same controversy whether the carriage of goods amounts to carrying on 'any work', came up for consideration before the Punjab & Haryana High Court in Ekonkar Deshmesh Transport Co. & Ors. vs. CBDT & Anr. (supra) and the Punjab and Haryana High Court, after considering the judgment of the Supreme Court in Associated Cement Co.s case and that of the Bombay, Calcutta and Madras High Court, held that 'the circular issued by the Board, in so far as it provides that the transport contract falls within the mischief of S. 194C, is legal and valid and the challenge to this provision in the circular cannot be sustained.'
23. We agree with the above view of the Punjab & Haryana High Court. The company, in the present case, under the contract, transported the cement from its factory to different destinations through the approved transporters who are engaged in the system of operating their trucks for carrying the goods from one place to another. The carrying of the goods is an act or a business of transport operators involving an effort of exertion directed to a definite and expressly as a means of gaining ones livelihood. The contract of transportation of the cement bags from the factory to various destinations, thus, falls within the expression 'carrying out any work.' The consideration for the contract exceeded the amount fixed by S. 194C(iii) make therefore, the company, being responsible for making payment, was obliged to make deduction of TDS. All the necessary requirements for the applicability of S. 194C were, thus, satisfied and, therefore, it was obligatory upon the petitioner company to deduct the TDS.
24. The dispute in the present case regarding non-deduction of TDS relates only for the period w.e.f. 1st April, 1994 to 30th June, 1995, i.e., prior to the addition of the Expln. (iii) appended to S. 194C. After the addition of Expln. (iii) the compliance of S. 194C is being made by the petitioner. The Expln. (iii) added by the Finance Act of 1995 is merely clarificatory in nature. Even otherwise, without this Expln. (iii) the carrying of business of transportation of cement from the factory of the petitioner to various destinations, also, comes within the expression 'carrying of any works' and the provisions of S. 194C were, also, applicable. Expln. (iii) has been inserted merely in order to remove the doubt and clarifying the position that the provisions of S. 194C are applicable in this transaction, also.
25. The CBDT was, therefore, right in reconsidering and reviewing its earlier circular in view of the judgment of the Honble Supreme Court. We see no infirmity in the Circular No. 681 issued by the CBDT. It was issued under the authority of law and within the jurisdiction and competence of the Board.
26. In the result, we do not find any merit in this writ petition and the same is hereby dismissed.