Punjab-Haryana High Court
Ekonkar Dashmesh Transport Co. And Ors. vs Central Board Of Direct Taxes And Anr. on 31 May, 1995
Equivalent citations: [1996]219ITR511(P&H), (1995)111PLR95
JUDGMENT Jawaharlal Gupta, J.
1. Does carnage of goods amount to "carrying out" of "any work" within the meaning of Section 194C of the Income-tax Act, 1961 ? This is the short question that arises for consideration in this case.
2. The petitioners are transport operators. They hold permits for carriage of goods and provide services of transportation. They allege that the provisions of Section 194C which authorise the deduction of an amount towards income-tax from a contractor "for carrying out any work in pursuance of a contract" with the Government or any of the authorities, etc., mentioned in Clauses (a) to (i) of Sub-section (1) are not applicable in their cases. The petitioners question the validity of Circular No. 681 (see [1994] 206 ITR (St.) 299), dated March 8, 1994 (only in so far as it applies to them) issued by the Central Board of Direct Taxes. They allege that the provisions of Section 194C do not apply to "transport contracts" and that the directions to the contrary as issued through the impugned circular in spite of the clear stipulations contained in the circulars dated September 26, 1972, and March 20, 1973, are wholly illegal and without jurisdiction. Is it so ?
3. Mr. H.S. Sawhney, learned counsel for the petitioners, has contended that as stipulated in the circular dated May 29, 1972 (see [1972] 84 ITR (St.) 99) which was clarified by circular dated September 26, 1972 (see [1972] 86 ITR (St.) 30), "a transport contract cannot ordinarily be interpreted 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 under such a contract". He submits that this position was reiterated by the Government, vide its circular dated March 20, 1973. However, by totally misinterpreting the judgment of their Lordships of the Supreme Court in Associated Cement CD. Ltd. v. CIT [1993] 201 ITR 435, the respondents had wrongly taken the view that "the provisions of Section 194C shall apply to all types of contracts for carrying out any work including transport contracts...." On the other hand, Mr. R.P. Sawhney, learned counsel for the respondent-Department, has submitted that the circular issued by the Board is in strict conformity with the provisions of the Act.
4. Section 194C provides for deduction of income-tax on the sum credited to the account of or paid to a contractor in pursuance of a contract "for carrying out any work". According to Webster's Third New International Dictionary, "Work is a very general word usable in a variety of contexts". One of the meanings assigned to the word is "the labour, task, or duty that affords one his accustomed means of livelihood". Prima facie, transport of goods is a task carried out by the petitioners to earn their livelihood. It is a duty performed by them in pursuance of a contract. It may not involve supply of labour for loading and unloading. Yet, the petitioners carry out the work of transporting goods from one place to another.
5. Mr. Sawhney refers to the circular dated September 26, 1972 (see [1972] 86 ITR (St.) 30), to point out that it is only where there was a composite contract involving transport as well as loading and unloading that income-tax could be deducted. However, in the case of a contract for mere transport of goods, the deduction was not permissible.
6. It is true that in the aforesaid circular, a composite contract for transport of goods as well as supply of labour for loading and unloading has been described as a "works contract". We feel that the expression "works contract" has been loosely employed. In taxation law, the expression "works contract" has been used in contradistinction to other contracts including that for the sale of goods. To illustrate, a contract for the making of a painting is not one for sale of the canvass, paints and the frame. However, in our view, a contract for carrying out any work is not necessarily a "works contract". So long as a contractor carries out any work in pursuance of a contract, the prescribed deduction from the income has to be made. Still further, it looks anomalous to say that income accruing from a contract for the supply of labour for loading and unloading the goods on a vehicle shall be subjected to deduction but that resulting from the contract for transport wherein income may be much more, is exempted from deduction. The provision does not warrant such a narrow construction.
7. Learned counsel for the petitioners has drawn our attention to the decision of the Bombay High Court in Bombay Goods Transport Association v. CBDT [1994] 210 ITR 136 (Writ Petition No. 1277 of 1994) decided on July 28, 29, 1994, as well as the decision of the Calcutta High Court in Calcutta Goods Transport Association v. Union of India [1996] 219 ITR 486 (Matter No. 1568 of 1994) decided on November 14, 1994. It has been held in these decisions that the Board has committed a manifest error in interpreting the judgment of the Supreme Court in the case of Associated Cement Co. Ltd. [1993] 201 ITR 435. The decision of the Supreme Court has been distinguished on the ground that the case "was limited to the applicability of Section 194C to labour contracts" and that "the various circulars of the Central Board of Direct Taxes were not before the Supreme Court. It has also been held that "the word 'work' has been used as a noun in Section 194C and not as a verb". Accordingly, it has been concluded that it has to be "understood in the limited sense as product or result". With utmost respect, we are unable to accept the view taken by their Lordships. The end-product may be the "work" but the income derived by the contractor for "carrying out the work" is certainly covered by the provisions of Section 194C and the prescribed deduction has to be made therefrom.
8. It is true that the interpretation placed on the provision of a statute by the authority which administers it is worthy of consideration. The subordinate authorities are normally bound by it. Courts can also use it for the purpose of finding out the true intention and meaning. However, in a case where the view taken by the authority or the Board is contrary to the plain language of the statute, the circular cannot be used to evade the liability created by the statute. The view expressed in the two circulars relied upon by the petitioners, does not appear to be in consonance with the plain language of Section 194C. In our view, the Board committed no error in taking a cue from the judgment of their Lordships of the Supreme Court in the case of Associated Cement Company [1993] 201 ITR 435.
9. In view of the above, we are, though reluctantly, constrained to differ from the view taken by the Bombay and the Calcutta High Courts. In our view, the circular issued by the Board in so far as it provides that the "transport contracts" fall within the mischief of Section 194C, is legal and valid. The challenge to this provision in the circular cannot be sustained.
10. As a result, the writ petition is dismissed in limine. In the circumstances of the case, we make no order as to costs.