The provisions of Section 194C of the Income-tax Act, 1961, authorizing the deduction of income tax from a contractor for carrying out any work in pursuance of a contract with the Government, apply to transport contracts.

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 Websters 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