JUDGMENT [ENTITY], J.
(1) There are three petitioners; the first is the Association of truck owners, transport operators and goods carriers, the 2nd isa company engaged in the business of carriage of goods and the 3rd is a transporter engaged in the business of giving on hire trucks for the purpose of carriage of goods.
(2) The petitioners challenge [CASE NUMBER] dated 8/3/1994 issued by the Central Board of Direct Taxes, directing the application of [SECTION] of the [ACT] to several categories of persons, including the carrier of goods,like the 2nd petitioner. [SECTION] provides for deduction of the prescribed percentage by the payer of the consideration and hand over the same to theRevenue.
(3) Mr. [ENTITY] the learned Counsel for the Revenue raised a preliminary objection against the maintainability of the writ petition, on the ground that the1st petitioner is not actually carrying on the business and affidavit in support of the writ petition is not filed by the 2nd or the 3rd petitioners.
(4) Since, admittedly, the 2nd petitioner is affected by the impugned circular,we reject the preliminary objection; non-filing of an affidavit on behalf of the 2ndpetitioner can be ignored as an irregularity, since, question involved in the writpetition is purely one of law and basic facts are undisputed.
(5) On merits, it was contended, by the learned Counsel for the petitioners that carriage of goods for transportation cannot come within the scope of thewords, "Carrying out any work" and therefore. [SECTION] of the Act is notattracted to the payment made for carriage or transport of goods. The word"work' connotes the bringing out of a tangible object as in the case of a constructionwork. This apart, the petitioners rely on the earlier circulars issued by the1st respondent, immediately on the enactment of [SECTION] clarifying that transport operation would not be covered by [SECTION] Petitioners also relyon [SECTION] of the Act, indicating that the subject of transport of goods hasbeen separately dealt with and it is not possible to reconcile [SECTION] with[SECTION]
(6) This last submissions need not detain us long, because. [SECTION] wasenacted only in the year 1994, while [SECTION] was enacted in the year 1972,though it underwent several changes subsequently. Further, [SECTION], admittedly covers the cases of supply of labour for carrying out any work and thesame subject is dealt by [SECTION] also. The purpose of [SECTION] isdifferent from the scope of [SECTION] [SECTION] provides an alternativemode of computing the income and paying the tax, while [SECTION] providesfor the payer of the consideration to deduct a percentage from it for paying it tothe revenue. If excess amount is realised under [SECTION], the assessed canalways seek its refund, after computing the tax under [SECTION]. There is noconflict between these two provisions.
(7) The petitioners rely on the doctrine of 'Contemporanea expositio' and the exposition received by [SECTION] at the earliest point of time, from the 1st respondent.
(8) In [PRECEDENT]; , the Supreme Court explained the relevant principle at page 1932: "THErule of construction by reference to contemporanea expositio is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way wherethe language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction(1940 ed) where it is stated in para 219 that administrative construction (i.e.contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wronge for 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."
Thereafter the Court held: "IT is 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 assessed and this must be regarded as a strong circumstance supporting the construction which we are placing on that Sub-section".
(9) This doctrine was applied by this Court to the impugned circulars, and the earlier exposition made by the 1st respondent, in [PRECEDENT].
(10) In the aforesaid S.R.F. Finance Limited Case the Bench has referred tothe earlier circular issued by the first respondent. In fact the Board specifically clarified stating that a transport contract cannot ordinarily be considered 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 year1991 an attempt was made to widen the scope of the provision relating to tax deduction at source by introducing [SECTION] By this Section payments byway of commission or brokerage were sought to be covered by the procedure similar to [SECTION] But this provision also did not include payments made for rendering services such as carrying the goods by transport operators. Subsequently [SECTION] was deleted by the [ACT]. Recently, in a decision rendered by the Supreme Court in the case of [PRECEDENT], the Court upheld the applicability of [SECTION] to the case of the contract for supply of labour. Certain observation made in the said decision to the effect that "any work" is a word of quiteamplitude, has been taken by the first respondent, as giving a very wide meaning to the provisions of [SECTION] and therefore, the present impugned circular has been issued.
(11) In the aforesaid S.R.F. Finance Limited case a Bench of this Court, of which one of us ([ENTITY] J.) was a member, has referred to the various proposals made to enlarge the scope of the procedure similar to the one in [SECTION] But the Parliament ultimately did not enact any similar provision nor did it enlarge the phraseology of [SECTION] Therefore, it was held that the interpretation given to [SECTION] by the Board at the earliest occasion could be taken as the proper interpretation of the said provision, by the application of the doctrine of 'contemporanea expositio'.
(12) Various attempts made to enlarge the scope of such a provision as [SECTION] also indicated that [SECTION] is not as wide as is now sought to be made out by the first respondent in its circular. If [SECTION] actually governed the various cases as referred in the impugned circulars it was unnecessary for the Union Government to proceed to enact provisions like [SECTION] or [SECTION]
(13) In S.R.F. Finance Limited case this Court was concerned with the applicability of [SECTION] to the business of leasing, hire purchase of articles such as vehicles, plant and machinery etc. The Bench held that [SECTION] was notapplicable. The Bench held that these activities are activities referred as services and not "carrying out any work". A similar view shall have to be taken in the instant case also.
(14) In [PRECEDENT] a Bench of Bombay High Court also has taken a similar view that the cases of transportation of goods are not covered by the language of [SECTION] of the Act. The Bench applied the doctrine of 'contemporanea expositio' to arrive at this conclusion. We respectfully agree with the said decision. Mr. [ENTITY], the learned Counsel for the Revenue contended that in the case of services the dominant aspect is intellectual activity as observed in S.R.F. Finance Limited Case. Carriage of goods in no way involves any intellectual activity, it is a physical act of carrying goods.
(15) It is unnecessary to go into the distinction sought to be made out by Mr.[ENTITY], relying on the decision in S.R.F. Finance Ltd. case. The observations made in the context of a particular case cannot be stretched for a purpose for which the observation was not aimed at. In fact we find a discussion on this aspect of interpreting in the very decision rendered by the Court in the saidS.R.F. Finance Limited case. The observation made in a decision shall have to be appreciated in the background of the facts of the said case.
(16) In the result, the writ petition is allowed and it is declared that the impugned circular is ultra vires the provisions of [SECTION] of the [ACT] insofar as it purports to cover the cases of actual carriage of goods forhire.Mr. [ENTITY], the learned Counsel appearing for the petitioner fairly submitted that in a case where the dominant activity is loading or unloading and the carriage of goods is only incidental different considerations may apply. Therefore, we confine our declaration as made above to the factual situation where the dominant activity is carriage of goods in which incidentally there may be loading or unloading of goods. The writ petition is allowed accordingly. Rule madeabsolute. No costs.
[ENTITY], J.
(17) I have read the judgment prepared by learned Brother Honble Mr. [ENTITY]. With great respect, I agree with him in the ultimate conclusion arrived at by him. In view of the interesting point involved, I propose to say a few words of my own with a view to showing that with the help and guidance of my learned Brother I have been able to appreciate the point involved in its proper perspective. I read the judgment rendered by my learned Brother sitting with Hon'ble Mr. Justice [ENTITY] in [PRECEDENT] where the scope of [SECTION] of the [ACT] (hereinafter referred to as the Act) has been elaborately and succinctly dealt with by my learned Brother. As I said before,in view of the fact that I was very much absorbed, I am tempted to write a few lines of my own.The facts of the case which are necessary for the purpose of the present discussion are as follows :-
(18) The first petitioner is [ENTITY]. It consists of members who are carriers and one of the members of the first petitioner-Association, who is the second petitioner, M/s. South Eastern Carriers Limited. The second petitioner carrying on business as carrier for doing its business gets vehicles from truck owners like the third petitioner, [ENTITY] and other truck owners,the owners may be either societies or association of persons or companies. The three petitioners have tried to expose a common cause by stating that the activities done by the second petitioner by carrying goods would not come within the mischief of [SECTION] of the Act mainly on the ground that the department itself had understood it that their activities are outside the purview of [SECTION] of the Act and incidentally getting clue from the analysis made by my learned Brother and making a distinction between, for the purpose of appreciating the scope of [SECTION] of the Act for carrying out work is different from rendering services, that cannot be characterised as carrying out the work and,therefore, the rendering of such services would be outside the ambit of [SECTION] of the Act, the petitioners contended that the activities done by the second petitioner would be rendering services and, therefore, they are not carrying out any work and, therefore, they are not governed by [SECTION] of the Act. The Revenue contended that the position taken by the petitioners is not tenable in law and the transport contractors are only carrying out work and their activities cannot be equated to rendering any service in the sense in which it was appeared in S.R.F, Finance Limited's case (supra) and regarding the main contention the Revenue contended that after the judgment of the Supreme Court in Associated Cement Company case the Revenue has taken a different view and, therefore, the petitioners cannot rely upon the circulars issued by the Central Board of Direct Taxes and putting forth a plea that the Revenue itself had understood the term in a particular way in favor of the petitioners and, therefore, the Revenue now cannot turn round and bring them into the tax net. It was further contendedthat a new provision has been introduced as [SECTION] in the Act with effect from 1st of April 1994 and, therefore, when a specific provision has been enacted and the transport operators are obliged to file returns there is no point in applying [SECTION] of the Act to such cases. In other words, the contention on behalf of the petitioners is after the enactment of [SECTION] with reference to the petitioners [SECTION] cannot be made applicable to them at all and,therefore, according to the petitioners, when they are obliged by virtue of [SECTION] to pay tax if they receive income more than the limit prescribed under the Act, there is no purpose in making third parties from whom monies are payable to the transport operators to deduct as per [SECTION] of the Act which would cause hardship. The petitioners also tried to demonstrate by referring to certain hypothetical data how [SECTION] of the Act is wholly unworkable in the case of transport operators. So far as this aspect is concerned, even at the time of arguments we indicated our view that we are not going to touch upon this aspect because applicability of a law to a given situation cannot be decided on the basis of any hardship that may be caused to a few individuals.Any law is bound to cause hardship to a Section of a society.
(19) [SECTION] of the [ACT] reads thus:"Payments to contractors and sub-contractors.-194-C.(1) Any person responsible for paying any sum to any resident thereafter 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;(e) 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 both; or(g) any society registered under the [ACT] 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] of the University Grants [ACT] 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 the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever isearlier, deduct an amount equal to one per cent of such sum as income taxon 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 to the account of the payee and the provisions of this Section shall apply accordingly).(3) No deduction shall be made under Sub-section (1) or Sub-section (2)from-(i) any sum credited or paid in pursuance of any contract the consideration for which does not exceed (ten) thousand rupees; or(ii) any sum credited or paid before the 1st day of June, 1972; (or)(iii) any sum credited or paid before the 1st day of June, 1973, in pursuance of a contract between the contractor and a co-operative society or in pursuance of a contract between such contractor and the subcontractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the cooperative society.(4) Where the Assessing Officer is satisfied that the total income of the contractor or the sub-contractor justifies the deduction of income-tax at any lower rate or no deduction of income tax, as the case may be, the Assessing Officer shall, on any application made by the contractor or the sub-contractor in this behalf, give to him such certificate as may be appropriate.(5) Where any such certificate is given, the person responsible for paying the sum referred to in Sub-section (1) or Sub-section (2) shall, until such certificate is cancelled by the Assessing Officer, deduct income tax as the case may be."
In S.R.F. Finance Ltd.'s case (supra) the petitioner is a financing company engaged in the business of leasing hire purchase of articles such as vehicles, plant and machinery etc. The petitioner gets finance by getting deposits. These fixed deposits are secured through various brokers who are paid brokerage at particular rates depending upon the scheme and duration of the deposits. The impugned circulars purport to explain the scope of [SECTION] of the Act and direct the authorities under the Act to give effect to the provisions of [SECTION] of the Act as against the commission agents, brokers, lawyers, chartered accountants and others. The main submission in that case was that [SECTION] of the Act did not govern the amounts payable to the brokers and in elaborating the point, the submission was that [SECTION] of the Act would be applicable only to the payments made to any person for any work and not the payments made as if for services rendered or commission paid to commission agents. As in this case and also in that case the Revenue contended that [PRECEDENT] would take in professional services also within the term 'any work' mentioned in [SECTION] of the Act. At para 4.16 mylearned Brother, while dealing with the submission made, has pointed out the distinction in a very beautiful manner and that paragraph reads as follows: "[ENTITY] is right in pointing out the qualitative differences between thesubject, referred as 'work' and the subject referred as 'service'. The two words convey different ideas. In the former (i.e. 'work' the activity is predominantly physical; it is tangible. In the activity referred as "services'dominant feature of the activity is intellectual, or at least, mental. Certainly'work' also involves intellectual exercise, to some extent. Even a gardener has to bestow sufficient care in doing his job; so is the case with a mason,carpenter or a builder. But the physical (tangible) aspect is more dominant than the intellectual aspect. In contract, in the case of rendering any kind of 'service', intellectual aspect plays the dominant role. The vocation of alawyer, doctor, architect or a Chartered Accountant (there are other similar vocations also) involves deep intellectual exercise any physical skill involved in their vocational activities is minimal. A dancer's performance no doubt involves physical movement; but all the movements are projections of the talent which is natural or acquired by training. A surgery certainly involves physically visible and tangible work; bit, inherently, it is the mental skill developed by the intellectual exercise that permits the operation."
The learned Judge also relied on the judgment of the Supreme Court in [PRECEDENT]; for the doctrine of 'contemporanea expositio' and applied the doctrine in the context of the circulars issued by the Revenue. Eventually the learned Judge speaking for the Bench concluded by saying: "[SECTION] does not govern the payments of fees towards professional or technical services. The term 'any work' in [SECTION] is aimed at the type of work resulting in tangible material and by virtue of the specialinclusion, supply of labour to carry out any work also is brought into the net of tax deduction at the source. This inclusive clause ropes in the consideration for the 'supply of labour'. The word 'supply' connotes the meaning of 'procuring', 'securing' or 'bringing in' and not rendering ofone's own professional or technical services."
In my humble view that the view taken by the learned Judge may not be conclusive answer in all cases. The learned Counsel for the petitioners brought to our notice [PRECEDENT], [PRECEDENT]. The judgment of the Division Bench of Bombay High Court. Para I itself is very important to appreciate the ratio of the decision.It reads as follows: "THIS writ petition filed by the Bombay Goods Transport Association and its honorary general secretary raises an important question as to whether a contract for mere carriage of goods which does not include any other services like loading or unloading and is not in any way connected with any'work' to be performed by the carrier can be said to be a contract for carrying out any work within the meaning of [SECTION] of the [ACT] ('the Act'). Though [SECTION] is in the statute book right from1/4/1972, there was no controversy about the fact that payments made to transport contractors do not fall within the purview of the said Section. The controversy has arisen recently with the issuance of circular by the CBDT being [CASE NUMBER], dated 8/3/1944 - [PRECEDENT]. The uncontroverter position is that prior to the issuance of the above circular there were circulars and clarifications from the Cbdt to the effect that [SECTION] was not applicable to payments made for carriage of goods tothe transport operators."
On 29/5/1972 in Circular No. 86, the Deputy Secretary to the Government of India soon after the enactment of [SECTION] issued a circular stating that the deduction of income-tax should be made from sums paid for carrying out any work or for supplying labour for carrying out any work and' it was 'stated that provisions of [SECTION] would apply to only in relation to the works contract.and the labour contracts and will not cover contracts for sale of goods. Varioustrades' associations and members of the public sought after clarifications on several points relating to the scheme of tax deduction at source from payments made tocontractors and sub-contractors in certain cases. One of the points on which clarification was sought for related to transport contractors. The following clarification was issued by the Deputy Secretary to the Government of India in CircularNo. 93 dated 26/9/1972. It reads as follows: "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 andunloading, the entire contract will be regarded as 'works contract' and income-tax will have to be deducted from payments made there under.Where, however, the element of labour provided for loading and unloading is negligible, no income-tax will be deductible."
The Bombay Goods Transport Association itself by its letter dated 8/9/1972wanted clarification from the Commissioner of Bombay. The Commissioner of Bombay by his letter dated 13/10/1972 informed the association thus: "WITH reference to your letter No. BGTA/2/72/1361 dated 8/09/1972, I have been directed to state that provisions of [SECTION] are not applicable in respect of transport contractors".
It was again clarified by the Secretary to the Government of India by letter dated 3/2/1982 in reply to a query from some of the transporters staling that if the contracts are purely transport contracts involving only transportation of goods entrusted for carriage to the transport operators, the provisions of [SECTION] would not be applicable to such payments and if the contract involves execution of work including supply of labour, it may turn out to be a works contract and provisions of [SECTION] will be applicable to it. Therefore, the Bombay HighCourt concluded that there was no controversy at any point of time about the fact that the provisions of [SECTION] were not applicable to payments made to transport operators for carriage of goods from one destination to the other.
(20) The Bombay High Court noted that it was for the first time on 8/10/1993that the Central Board of Direct Taxes by its circulars sought to clarify in the light of the decision of the Supreme Court in [PRECEDENT] that 'any work in [SECTION] has to be understood in its'natural meaning', i.e., any work means any work and not only a works contract which has a special connotation in the tax law. According to the Revenue, these observations of the Supreme Court would make the contracts for carrying outany work such as transport operators, transport contracts, service contracts, labourcontracts, material contracts, as well as works contracts etc. come within the ambit of [SECTION] In para 11 the Bombay High Court noted two facts in the Associated Cement Company's case (supra). There the contractor was to be paid at a flat rate for loading packed cement bags into wagons or trucks. This rate was fixed on the basis of daily basic wages, dearness allowance, etc., and the clause dealt with in the agreement between the parties stipulated reimbursement by the appellant to the contractors in case of certain increase in the dearness allowanceetc., payable by the contractor to the workmen employed by him. The CementCompany paid the contractor the amount stipulated at a flat rate as well as amounts by way of reimbursement under Clause 13 of the agreement. It was found out that the deduction of tax at source made by the appellant under [SECTION] fell short of the deductions required to be made there under. When a show cause notice was issued, the stand taken by the Cement Company was that it was not liable to deduct any amount as the payments were not in respect of works contract. The Supreme Court observed: "THERE is nothing in the sub-Section which could make us hold that thecontract to carry out a work or the contract to supply labour to carry outa work should be confined to 'works contract' 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 nota 'works 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 contract or 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".
Therefore, in the light of the above observations, the contention on behalf of the Cement Company that payments made on account of loading packed cement bags into wagons or trucks were not coming under [SECTION] was turned down by the Supreme Court. In para 15 of the judgment, the Bombay HighCourt said that "we are of the clear opinion that the provisions of [SECTION] are not applicable to Contract that do not include any other goods loaded orunloaded". Therefore, in the light of the discussion above, I am of the view that the case of the petitioners that they are merely carrying out the transportation only and loading or unloading was only incidental and, therefore, they are outside the penumbra of [SECTION] has to be accepted.
(21) In fine, I have no hesitation in coming to the conclusion that a ratio laid down by this Court in S.R.F. Finance Ltd.'s case (supra) would completely govern this case and, therefore, the writ petition is allowed and the [CASE NUMBER] dated 8/3/94, issued by the Central Board of Direct Taxes, is quashed, in so far as the petitioners are concerned. However, there will be no order as to costs.