MIS. BIRLA CEMENT WORKS versus THE CENTRAL BOARD OF DIRECT TAXES AND ORS.

Citation: [2001] 2 S.C.R. 198 · Decided: 28-02-2001 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
MIS. BIRLA CEMENT WORKS 
v. 
THE CENTRAL BOARD OF DIRECT TAXES AND ORS. 
FEBRUARY 28, 2001 
B 
[SP. BHARUCHA, N. SANTOSHHEGDE, YK. SABHARWAL, JJ.] 
c 
Income Tax Act, 1961--Section 194C. 
Interpretation of Statute-Taxing Statute-Tivo interpretations reason-
ably possible-Amendment making Section applicable to transpot1 contracts-
Previous circulars excluding transport contracts f1vm scope of SPction-Circu-
lar including transpo11 contracts in scope of section for period just before 
a1nendment-Circularchallenged-Held, inte1pretationfavouring assPssee and 
acted upon and accepted by Revenue for long period should not be disturbed 
except.for compelling reasons-No compelling reasons for holding that amend-
D 
ment is clarificato1y or retrospective in operation-Section before amendment 
not G:PPlicable to transport contacts-Held, circular to the extent it relates to 
~ranspo1t contracts quashed. 
Wonls & Phrases-'Work' and 'carrying out any work'-Meaning of 
E 
Appellant-Assessee manufactures cement which is transported 
through transport operators/companies. Appellant did not deduct tax at 
source from payments made by it to such transporters for the period from 
1.4.1994 to 30.6.1995 and therefore, respondent initiated penalty proceed-
ings against appellant in accordance with circular dated 8.3.1994 which 
p 
prescribes fresh guidelines regarding applicability of Section 194C of the 
Income tax Act, 1961 to all types of contracts for carrying out any work 
including transport contracts . 
. Appellant filed \Hit petition challenging legality and validity of cir-
cular dated 8.3.1994 on the ground that Section 194C was not applicable to 
G 
payments made to transport operators/companies as transportation of 
goods is not covered by words "any work" used in the Section; that by 
impugned circular CBDT has illegally withdrawn earlier circulars stating 
that Section 194C is not applicable to such transactions; and that Explana-
tion III making Section 194C applicable to transport contracts from 1st 
H 
July, 1995 was only prospective and does not cover disputed period. High 
198 
·,.; 
BIRLA CEMENT WORKS v. CENTRAL BOARD OF DIRECT TAXES 
199 
Court dismissed writ petition holding that expression "carrying out any 
A 
work" would include carrying goods; and that Explanation III was merely 
clarificatory. Aggrieved by the judgment of High Court, assessee has filed 
the present appeal. 
Appellant contended that expression "carrying out any work" in 
Section 194C indicates doing something to conduct the work to completion 
or something which produces such result and by carrying goods, no work 
to goods is undertaken and does not affect goods carried thereby. 
Allowing the appeal, the Court 
HELD : 1. There is no controversy that according to the understand-
ing of Revenue of Section 194C of the Income-tax Act from the beginning 
till issue of the impugned circular, the provision was not applicable to the 
payments made in respect of transport contracts. It is not disputed that 
prior to issue of the impugned circular, various circulars and clarifications 
were issued by the CBDT stating that the provisions of Section 194C were 
not applicable to payments made for carriage of goods to the transport 
operators. [201-H] 
2. The question whether the expression "carrying out any work'' 
would include therein carrying of the goods or not, was not ir1 issue in 
B 
c 
D 
Associated Cement Co.'s case. [204-D-E] 
E 
Associated Cement Co. Ltd. v. Commissioner of ln~ome-Ta.x and Anr., 
(1993] 201 ITR 435, explained and distinguished. 
Bombay Goods Transport Association and Anr. v. Central Board of 
Direct Taxes, (1994) 210 ITR 136; Calcutta Goods Tiansport Association v. 
F 
Union of India, (1996) 219 ITR 486; VM. Salgaocar and Bros. Ltd. and Ors. 
v. Income Tax Officer and Ors., (1999) 237 ITR 630, approved. 
Centml Board of Direct Taxes v. Cochin Goods Transpo11 A.ssociation, 
(1999) 236 ITR 993 and Ekonkar Dashmesh Transport Co. and Ors. v., 
Central Board of Direct Taxes and Anr., (1996) 219 ITR 511 overruled. 
G 
3. Two interpretations are reasonably possible on the question whether 
the contract for carrying of goods would come or not within the ambit of 
the expression "carrying out any work''. One of the two possible interpre-
tations of a taxing statute, which favours the assessee and which has been 
H 
A 
B 
200 
SUPREME COURT REPORTS 
[2001] 2 S.C.R. 
acted upon and accepted hy the Revenue for a long period should not be 
d

Excerpt shown. Read the full judgment & AI analysis in Lexace.