ASSOCIATED CEMENT COMPANY LTD. versus COMMISSIONER OF INCOME-TAX, BIHAR, PATNA AND ANR.

Citation: [1993] 2 S.C.R. 538 · Decided: 23-03-1993 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Dismissed

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Judgment (excerpt)

A 
ASSOCIATED CEMENT COMPANY LTD. 
v. 
COMMISSIONER OF INCOME-TAX, BIHAR, PATNA AND ANR. 
MARCH 23, 1993 
B 
[B.P. JEEVAN REDDY AND N. VENKATACHALA, JJ.) 
Income Tax Ac4 1961: 
Section 194C-Sub-section (J}-Scope of-Contract between Contrac-
C tor and specified organisations for canying out "any work''-Expression "any 
work" has a wide import and cannot be restricted to works contract-l'ayment 
to .Contractor for canying out "any work"-Sum credited or paid to Contrac-
tor-Liability of payer to deduct two percent tax is not confined to Contractor's 
income contponent. 
D 
E 
F 
The appellant-Company issued a letter to its Contractor containing 
the terms and conditions of a contract or loading packed cement bags from 
its Packing Plants into wagons or trucks. Under Clause U there was a 
stipulation that the Contractor shall be paid a sum for bis work at a flat 
rate of 41 paise for each tonne of cement handled in Packing Plant No.l 
and 30 paise for each tonne or cement handled in Packing Plant No.2. 
Clause 13 thereof, which contained a recital that the rate or loading in 
Clause 12 had been worked· out on the basis of dally basic wages or Rs.2.35 
paise, D.A. or Rs.1.21 paise and H.R.A. or Rs.O.SO palse per day per worker, 
stipulated a terms or reimbursement by the appellant to the Contractor of 
the difference in DA. over the amount or Rs.1.21 paise and annual incre-
ment etc. payable from month to month to every worker by him. The 
Contractor carried out his work and the appellant made payments of the 
sums payable to him under the contract. But no deductions of tax were 
made under Section 194C(l) of the Income Tax Act, 1961. The Income Tax 
Officer served two notices - One in respect or assessment years 1973-74 
G and 1974-75 and the other for 1974-75 to 1977-78 on the principal officer 
of the appellant-Company to show cause as to why action should not be 
taken against the appellant for non-compliance with Section 194C(l). The 
. appellant filed a Writ Petition before the High Court of Patna :seeking. the 
quashing of the notices but the same was dismissed. 
H 
In appeal to this Court it was contended on behalf of the appellant 
538 
> 
ASSOCIATED CEMENT CO. v. C.l.T. 
539 
that (1) the 'work' for the carrying or which the sum is required to be A 
credited to the account of or paid to a Contractor under Section 194C(l) 
of the Act is only a 'works contract' and hence deduction under that 
sub-section could arise only to the extent where the sum credited to the 
~ 
account of or paid to a Contractor for executing such 'works contract' is 
comprised of the element of income of the Contractor; (2) that the words B 
'on Income comprised therein', appearing immediately aner the words' 
deduct an amount equal to two per cent of such sum as income-tax in the 
concluding part of the sub-section must be taken to mean the percentage 
amount deductible on the income received by the Contractor under the 
contract and not on the sum credited to the account of or paid to the 
Contractor. 
c 
---.,_ 
Dismissing the appeal, this Court, 
Ht:LD: 1. There is nothing in sub-section (1) of Section 194C to show 
that the contract to carry out a work or the contract to supply labour to 
carry out a work should be confined to 'work.Ciii contract'. There is no reason D 
to curtail ur to cut down the meaning of plain words used in the Section. 
"Any work" means any work and not a. '.'works-contract", which has a special 
connotation in the tax law. 'Work' envisaged in the sub-section, therefore 
y 
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 E 
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, wo.uld have fallen outside the 'work', but 
for its specific inclusion in the sub-section. [544 8-EI 
Brij Bhushan Lal Parduman Kumar etc. v. C.l. T., Haryana, Himacha/ F 
~· 
Pradesll and New De/h~ [1979) 2 S.C.R. 16, distinguished. 
2. The words in the sub-section 'on income comprised therein' ap· 
pearing immediately after the words 'deduct an amount equal to two per 
cent of such sum as income tax' from their purport, cannot be understood G 
as the percentage amount deductible from the income of the Contractor 
'<( 
out of the sum credited to bis account or paid to him in pursuance of the 
contract. Moreover, the conc

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