Bombay Goods Transport Association And Another v. Central Board Of Direct Taxes And Others

Dr. B.P Saraf, J.:— 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 anyway 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 194-C of the Income-tax Act, 1961. Though section 194-C is in the statute book right from 1st April, 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 Central Board of Direct Taxes (“CBDT”) being Circular No. 681 of 8th March, 1994. The uncontroverted position is that prior to the issuance of the above circular there were circulars and clarifications from the CBDT to the effect that section 194-C was not applicable to payments made for carriage of goods to the transport operators.

2. For a proper appreciation of the controversy, it may be expedient to set out some of the provisions of the Act, the relevant circulars and guidelines issued by the Central Board of Direct Taxes from time to time after coming into force of section 194-C and during the last two decades of its operation. section 194-C of the Act provides for deduction of tax at source from payments to contractors and sub-contractors. The said section, as far as relevant, reads as follows:

section 194-C. “Payments to contractors and sub-contractors.

(1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carving 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, or

(c) any corporation established by or under a Central, State or Provincial Act; or

(d) any company; or

(e) any co-operative society,

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 an amount equal to one per cent of such sum as income-tax on income comprised therein.

(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 sub-contractor in relation to any work (including supply of labour for carrying out any work) undertaken by the contractor for the co-operative society.

3. Soon after the enactment of the above section 194-C, a circular was issued by the Deputy Secretary to the Government of India being Circular No. 86 dated 29th May, 1972 to explain the broad effect of the provision. In this circular it was clearly stated that deduction of income-tax should be made from sums paid for carrying out any work or for supplying labour for carrying out any work. It was made clear that provisions of section 194-C would apply only in relation to “work contracts” and “labour contracts” and will not cover contracts for sale of goods. Thereafter another circular was issued by the Deputy Secretary to the Government of India being Circular No. 98 dated 26th September, 1972. The said circular was issued in response to enquiries from various trade associations and members of the public seeking clarifications on several points arising out of the scheme of tax deduction at source from payments made to contractors and sub-contractors in certain cases. Points on which enquiries-were made and clarifications given in the matter are set out in the said circular. One of the points on which clarification was sought pertained to transport contracts. Following was the clarification:

“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 and unloading, the entire contract will be regarded as “Works contract” and income-tax will have to be deducted from payments made thereunder. Where, however, the element of labour provided for loading and unloading is negligible, no income-tax will be deductible.”

4. The petitioners association by its letter dated 8th September, 1972 also sought specific clarification from the Commissioner of Income-tax, Bombay in regard to the applicability of section 194-C to transport contractors. In reply, the Commissioner of Income-tax by his letter dated 13th October, 1972 informed the petitioners as follows:

“With reference to your letter No. BGTA/2/72/1361 dated 8th September, 1972. I have been directed to state that provisions of section 194-C are not applicable in respect of transport contractors.”

5. It was again clarified in the year 1982 by the Under Secretary to the Government of India, Ministry of Finance, by letter dated 3rd February, 1982 in reply to a query from some transporter that if the contracts are purely transport contracts involving only transportation of goods entrusted for carriage to the transport operators, the provisions of section 194-C would not be applicable to such payments. However, if the contract involves execution of work including supply of labour, it may turn out to be a work contract and provisions of section 194-C will be applicable to it.

6. It is evident from the above discussion that there was no controversy at any point of time about the fact that the provisions of section 194-C were not applicable to payments made to transport operators for carriage of goods from one destination to another. It was for the first time on 8th October, 1993 that the Central Board of Direct Taxes by its circular sought to clarify in the light of the decision of the Supreme Court in (Associated Cement Co. Ltd. v. C.I.T)1, (1993) 201 I.T.R 435 that ‘any work’ in section 194-C 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. On the basis of the above observations of the Supreme Court it was mentioned that the provisions of section 194-C were applicable to all types of contracts for carrying out any work such as transport contracts, service contracts, labour contracts, material contracts, as well as works contracts etc. On receipt of the above circular the petitioners-association made a representation, to the Central Board of Direct Taxes stating that the carriage and delivery of the goods by the transport contractors do not come within the meaning of “works contract”. In reply, the Central Board of Direct Taxes forwarded to the petitioners a copy of its Circular No. 681 dated 8th March, 1994 for information and guidance. The said circular contains instructions in the matter of deduction of tax at source on payments to contractors and subcontractors under section 194-C of the Act in the light of Supreme Court's decision in Associated Cement Company v. C.I.T By the above circular the Board withdrew its earlier circulars No. 86 and 93 and para 11 of Circular No. 108. It was, however, clarified that the said circular explaining the provisions of sections 194-C would apply with effect from 1st April, 1994. This circular, so far as it is relevant, reads as follows:

“Circular No. 681, dated 8th March, 1994.

Subject: Deduction of income-tax at source under section 194-C of the Income-tax Act, 1961, from payments made to contractors/sub-contractors - Supreme Court judgment dated 23rd March, 1993, in Associated Cement Co. Ltd. v. C.I.T, Instructions - Regarding.

Sub-section (1) of section 194-C of the Income-tax Act, 1961, lays down that any person responsible for paying any sum to any resident (hereinafter referred to as “contractor”) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the bodies mentioned therein shall, at the time of credit of such sum to the account of the contractor or 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 2 per cent of such sum as income-tax on the income comprised therein.

2. Sub-section (2) of section 194-C of the Income-tax Act, 1961, lays down that when a contractor makes payment of any sum to a resident sub-contractor in pursuance of a contract made with him for carrying out the whole or any part of the work under-taken by the contractor, or, for supplying any labour, the contractor shall deduct an amount equal to 1 per cent of such sum as income-tax on the income comprised therein.

3. section 194-C was introduced with effect from 1st April, 1972. Shortly after its introduction, the Board issued Circulars No. 86, dated 29th May, 1972 (F. No. 275/9/72-ITJ), No. 93, dated 26th September, 1972 (F. No. 275/100/72-ITJ), and No. 108, dated 20th March, 1973 (F. No. 131(9)73-TPL), in this regard.

4. Some of the issues raised in the abovementioned circulars need to be reviewed in the light of the judgment dated March 23, 1993, delivered by the Supreme Court of India in Civil Appeal No. 2860(NT) of 1979 - Associated Cement Co. Ltd. v. C.I.T, (1993) 201 I.T.R 435.

5. The Supreme Court has held that “….. there is nothing in the sub-section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a work should be confined to ‘works contract’ …” Their Lordships have further held that “Any work” means any work and not a ‘work contract’, which has a special connotation in the tax law… ‘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 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 would have fallen outside the ‘work’ but for its specific inclusion in the sub-section”.

6. It may be pointed out that this appeal before the Supreme Court was by virtue of a special leave petition against the judgment in Writ Petition No. 2909 of 1978 of the Patna High Court in the case of Associated Cement Co. Ltd. v. C.I.T)2, (1979) 120 I.T.R 444. The Patna High Court, while dismissing the Writ petition of the aforesaid company, observed that “In a very broad sense, a work done by one person is service rendered to another and indeed one of the dictionary meanings of the word ‘service’ is work”.

7. The conclusion flowing from the aforesaid judgments of the Supreme Court and the Patna High Court is that the provisions of section 194-C would apply to all types of contracts including transport contracts, labour contracts, service contracts, etc. In the light of these judgments, the Board, have decided to withdraw their above mentioned Circulars Nos. 86 and 93 and para 11 of Circular No. 108 and issue the following guidelines in regard to the applicability of the provisions of section 194-C:—

(i) The provisions of section 194-C shall apply to all type of contracts for carrying out any work including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, materials contracts and works contracts.

8. It may be noted that-

(i) …..

(ii) The term “transport contracts” would, in addition to contracts for transportation and loading/unloading of goods, also cover contracts for plying of buses, ferries etc., along with staff (e.g, driver, conductor, cleaner, etc.). Reference in this regard is also invited to Board's Circular No. 558, dated 28th March, 1990.

(iii) The term “materials contracts” in the context of section 194-C would mean contracts for supply of materials where the principal contract is for work and labour and not a contract for sale of materials.

9. Board's Grcular No. 86, dated 29th May, 1972, and No. 93, dated 26th September, 1972, and para II of Circular No. 108, dated 20th March, 1973, are hereby withdrawn. Board's Circular No. 558, dated 28th March, 1990, is reiterated.

10. It is clarified that this circular explaining the provisions of section 194-C will apply with effect from 1st April, 1994. Tax deductions made in accordance with Circulars Nos. 86, 93 and 108 upto 31st March, 1994, will be regarded as compliance of the provisions of section 194-C.

(Emphasis added)

7. By the above circular, the provisions of section 194-C are sought to be applied to transport contracts which would include not merely contracts for works like loading, unloading etc. but contracts for carriage of goods also. This interpretation of section 194-C is the subject matter of challenge in this writ petition.

8. The petitioners contend that the above circular of the CBDT is beyond the scope and ambit of section 194-C of the Act. It is further submitted that the Central Board of Direct Taxes misinterpreted and misconstrued the ratio of the decision of the Supreme Court in Associates Cement Company's case and the observations made therein in regard to the meaning of the expression “any work” and has issued the circular on the basis of such erroneous construction of the said judgment. Learned Counsel for the petitioners Mr. C.U Singh submitted before us that the language of section 194-C of the Act is clear and unambiguous. It has been correctly interpreted by CBDT althroughout in the past and the interpretation has been acted upon both by the income-tax department as well as the assessees. There is no reason to depart from the interpretation consistently placed on section 194-C of the Act for the past two decades. The decision of the Supreme Court in Associated Cement Company's case, according to learned Counsel, in no way justifies such a departure. Learned Counsel further submitted that the meaning of section 194-C is further clear from the legislative intent which can be gathered also from the amendment sought to be made by the Parliament in the year 1987 by insertion of section 194-C of the Act by the Finance Bill, 1987 and the introduction of section 194-H in the Act by the Finance (No. 2) Act, 1991 with effect from 1-10-1991 which was, however, made inoperative with effect from 1st June, 1992. By the insertion of section 194-E, the Parliament intended to provide for deduction of tax at source on payments by way of fees or professional services or royalty or fees for technical services or loan or commission (not being insurance commission referred to in section 194-D). The proposal to insert the said section was later withdrawn on account of the representations made on behalf of various professional bodies. However, provision was, in fact made in the Act in the year 1991 by insertion of section 194-H for deduction of tax on payments made by way of commission, brokerage etc. Commission or brokerage has been defined in the said section to mean any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing Professional services are also defined to mean services rendered by a person in the course of carrying on a legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such other profession as is notified by the Board for the purposes of section 44-AA of the Act. Section 194-H, however, ceased to be operative with effect from 1st June, 1992. The above two sections i.e proposed section 194-E and section 194-H as inserted with effect from 1st October, 1991 clearly go to show that what was sought to be introduced by section 194-E and what was brought in by section 194-H in the net of deduction at source were not covered by the existing section 194-C. Had it not been so, there was no necessity of introducing new sections.

9. Learned Counsel submits that the transport services rendered by the members of the petitioner association do not fall within the scope and ambit of the expression “any work” in section 194-C of the Act and, as such, the circular of the CBDT seeking to extend the said section to payments made on account of transportation charges is wholly illegal and without jurisdiction. Reliance is placed on the definition of transport in the Motor Vehicles Act, 1939, to show that the activities of the transporters are known as “transport services”. It is also stated on behalf of the petitioners that the decision of the Supreme Court should be read as a whole in the context of the controversy before the Supreme Court and so read it does not give any different meaning to the word ‘any work’ than what had been given by the CBDT itself in the past althroughout.

10. In reply Mr. G.S Jetly, learned Counsel for the respondents, submitted that the fact that the revenue had interpreted section 194-C in a particular manner in the past cannot take away its power to interpret the section differently with prospective effect if it is found that its earlier interpretation was not correct. According to him grievance on this account can be made only if such departure is made retrospectively which is not the case here. Mr. Jetly further submitted that section 194-C should be construed by this Court de hors the circulars or the judgment of the Supreme Court and so construed the word “any work” will have to be interpreted to include all services including the transport services. Counsel submitted that the circulars of the Board cannot detract from the Act and in case of any conflict the provisions of the Act ought to be given effect to ignoring the circulars. Reliance was placed in this connection on the decision of the Supreme Court in (Kerala Financial Corporation v. Commissioner of Income Tax)3, 1994 (2) Scale 1026. Mr. Jetly referred to the meaning of the word ‘contract’ as also the word ‘work’ as given in various dictionaries such as Black's law Dictionary, Chambers Dictionary, Oxford Dictionary in support of his contention that the word ‘contract’ is wide enough to include a contract for carriage of goods and the word ‘work’ includes services also.

11. We have carefully considered the rival submissions. The controversy, in our opinion, is in a very narrow compass. section 194-C has been in the statute book almost in the same form ever since its inception in the year 1972. It provides for deduction of tax at source on payments made for carrying out any work including supply of labour for carrying out any work in pursuance of a contract between the contractor and the persons specified therein. The crux of the section is “payment made for carrying out any work”, which by virtue of specific inclusion also includes supply of labour for carrying out any work. The requirement that such work should be carried out in pursuance of a contract between a contractor and the persons concerned is an additional requirement. To attract section 194-C, it is, therefore, necessary that the payment should be made “for carrying out any work”. If this condition is fulfilled then and then only the next condition becomes relevant i.e such work should be carried out in pursuance of a contract between the contractor and the person concerned. The word ‘contract’ is a word of wide import and includes agreements oral or written. There is no dispute in this case that there is a contract or agreement between the transporter and the owner of the goods for carriage of goods. The case of the petitioner is that “carriage of goods” does not amount to “carrying out any work” and the payments made on that account, therefore, cannot be said, to be payments made for carrying out any work. We find force in the above submission. The word ‘any work’ has been interpreted by CBDT itself which is the highest authority under the Income-tax Act for implementation of the provisions of the Act from time to time. It has been made clear in the very first circular on the subject being Circular No. 86 dated 29th May, 1972 that section 194-C applies only to work contracts and labour contracts and it does not apply to contracts for sale of goods. In reply to enquiries from various trade associations and members of the public including the petitioners association, by Circular No. 98 dated 26th September, 1972, it was reiterated that 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. It was further made clear that in the case of a composite contract involving transport as welt as loading and unloading, the entire contract will be regarded as “work contract” and Income-tax will have to be deducted from payments made thereunder. Where, however, the element of labour provided for loading and unloading is negligible, no Income-tax will be deductible. In answer, to another question it was even clarified that pipeline/pumping charges for use of pipelines owned and operated by port trusts for movement of petroleum products by pipeline from refinery to port installations would not fall within the purview of section 194-C of the Act. Again on 13th October, 1972, in a letter written to the petitioner Association itself, it was specifically stated that provisions of section 194-C were not applicable in respect of transport contractors. The same view was reiterated in yet another letter of 3rd February, 1982. There is no change in the situation during the last 20 years to justify a departure from the above interpretation of section 194-C given by the CBDT and accepted by the tax payers. The CBDT has reviewed the above instructions and changed the interpretation given by it and acted upon it for more than two decades only on the basis of certain observations of the Supreme Court in the case of Associated Cement Company's case (supra). According to the CBDT, some of the issues raised in the circulars issued by it earlier from 1972 onwards needed review in the light of the above judgment. Accordingly by Circular No. 681 dated 8-3-1994 it opined that the provisions of section 194-C shall apply to all types of contracts for carrying out any work including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, material contracts and works contracts. The term ‘transport contracts’ has been defined to cover in addition to contracts for transport and loading/unlonding of goods also to cover contracts for plying buses. The term ‘service contracts’ has also been defined to include services rendered by such persons as lawyers, physicians, surgeons, engineers, acountants, architects, consultants etc. In Writ Petition No. 1052 of 1994 the very same circular was challenged in so far as it purports to include payments made to professionals on account of services rendered by them by including them in service contracts. By our judgment dated 14th July, 1994 we have held that section 194-C is not applicable to payments made to professionals for services rendered by them. We have also discussed the ratio of the decision of the Supreme Court in Associated Cement Company's case.

12. We have carefully gone through the decision of the Supreme Court in the aforesaid case in the light of the controversy before it. In the case before the Supreme Court, under the Terms and Conditions of an agreement between the appellant and a contractor, 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 Clause 13 of the agreement stipulated reimbursement by the appellant to the contractor in case of certain increase in the dearness allowance etc., payable by the contractor to the workmen employed by him. The appellant paid the contractor the amount stipulated at a flat rate as well as amounts by way of reimbursement under Clause 13. But the deduction of tax at source made by the appellant under section 194-C(1) of the Act fell short of the deductions required to be made thereunder. On a show cause notice being issued the appellant contended that it was not liable to deduct any amount under the said section, as the payments were not in respect of “works contracts”. It is in this context that the Supreme Court observed:

“..there is nothing in the sub-section which could make us hold that the contract to carry out a work or the contract to supply labour to carry out a 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 not a “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 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 would have fallen outside the “work” but for its specific inclusion in the sub-section.”

13. In the light of the above, the contention of the appellant that section 194-C was not applicable to payments made on account of loading packed cement bags into wagons or trucks was turned down by the Supreme Court. We find that similar was the interpretation of the revenue itself even in the very first circular issued by it on 29th May, 1972 soon after the coming into force of section 194-C of the Act. It was clearly stated therein that the provisions of section 194-C would apply to “works contracts” and labour contracts”. Labour contracts were covered by the expression ‘any work’ in section 194-C of the Act althroughout. In the second circular the CBDT was required to specifically say whether transport contract would fall within the purview of section 194-C or not. The CBDT was always of the clear opinion that though section 194-C was applicable to “labour contracts” it was not applicable to transport contracts as according to it “transport contracts, cannot be said to be contracts for carrying out any work”. We do not find anything in the decision of the Supreme Court to justify the reversal of the above view by the CBDT by the impugned circular. The Supreme Court has not interpreted the provisions of section 194-C in the manner it is sought to be interpreted by CBDT to apply to all types of contracts including transport contracts, service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, material contracts, works contracts etc. In our opinion, the CBDT has committed a manifest error of law in interpreting the judgment of the Supreme Court. It is well settled that judgment of the Supreme Court has to be read subject to the facts directly presented for consideration before it and not affecting those matters which may lurk in the record. In (C.I.T v. Sun Engineering Works P. Ltd.)4, (1992) 198 I.T.R 297, at page 320, the Supreme Court itself observed:

“It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete ‘law’ declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasoning.”

14. In the Associated Cement Company's case the controversy before the Supreme Court was limited to applicability of section 194-C to labour contracts. The various circulars of the CBDT were not before the Supreme Court The Supreme Court interpreted section 194-C de hors those circulars. It did not approve the narrow construction to the expression ‘any work’ to include only “works contracts”. There is nothing beyond that in the above judgment of the Supreme Court.

15. Mr. Jetly, learned Counsel for the respondents, stated that we should interpret section 194-C without reference to the circulars of the CBDT and the decision of the Supreme Court because the particular aspect of the matter which is subject matter of controversy in the present case was not a question involved in the Associated Cement Company's case (supra). We have carefully considered the above submission and read and reread the-provisions of section 194-C of the Act. We, however, do not find anything in it to justify the interpretation which is sought to be put on it by the CBDT. In our opinion, the expression ‘any work’ used in section 194-C means “works contracts” and “contracts for work” i.e ‘labour contracts’ but not service contracts or “transport contracts”.

16. We may, however, like to make it clear that apart from their binding character the circulars of the CBDT clarifying the scope and ambit of a statutory provision are entitled to considerable weight in interpretating the provisions of the relevant statute unless they go coaster to the plain and unambiguous language of the statute itself. They provide an useful aid to construction of a statute to ascertain the true intention of the legislature as well as the intention of those in charge of its administration.

17. The proposed insertion of section 194-E in the Act in the year 1987 and insertion of section 194-H in the year 1991 further goes to show that according to the legislature section 194-C was not applicable to “service contracts” or “contracts” brought within the purview of deduction of tax at source by section 194-H of the Act. The observation of the Supreme Court in Associated Cement Company's case to the effect that the ‘work’ envisaged in the sub-section 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 contractor under a contract cannot be construed in a manner not intended by the Supreme Court. The Supreme Court merely affirmed the interpretation that had been put by the CBDT on section 194-C of the Act to include not only works contracts but also “labour contracts”. The Supreme Court made it clear that “labour contract” would have fallen outside the “work” envisaged by section 194-C but for its specific inclusion in sub-section (1).

18. In the light of the above discussion, we are of the clear opinion that the provisions of section 194-C of the Act are not applicable to contracts for mere carriage of goods which do not include any other services like loading or unloading. The circular of the Board No. 681 dated 8th March, 1994, in our opinion, is based on an erroneous reading of the decision of the Supreme Court in Associated Cement Company's case (supra) and certain observations made therein. We, therefore, hold that the said circular is illegal and without jurisdiction in so far as it requires deduction of tax at source under section 194-C to contracts for mere carriage of goods which do not include any other services like loading and unloading and are not in anyway connected with any work to be performed by the carrier. In the result this writ petition is allowed and rule is made absolute in the above terms. Under the facts and circumstances of the case there shall be no order as to costs.

19. Mr. Jetly, learned Counsel for the respondents, applies for stay of the operation of this order for a period of four weeks from today. We do not find any reason to do so particularly in view of the fact that the operation of the impugned circular of the Board of Direct Taxes had been stayed by this Court at the time of filing of this writ petition itself which is operative even today.

20. Petition allowed.