ASSOCIATED CEMENT COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE prayer, in this application under Articles 226 and 227 of the Constitution, is to quash annexs. 5 and 7, appended to it, as being illegal and without jurisdiction. THEre is also a prayer to issue a writ of mandamus to direct the respondents to refund Rs. 39,480, illegally recovered under Section 226(3) of the I.T. Act, 1961. Annexure 5 is a communication by the ITO, A-Ward, Jamshedpur (respondent No. 2), to the petitioner, directing it to state whether deductions under Section 194C of the I.T. Act for periods mentioned therein have been made in respect of contract work done by a contractor, S. P. Nag, and credited to the account of the Central Government within the prescribed time. It is further stated in it that if no deductions have been made cause should be shown why action under Section 226(3) be not taken for default as also penalty under Section 221 be not imposed and interest under Section 201 be not charged in respect of the default. Annexure 7 is a communication from the respondent No. 1, the CIT, stating that the denial of responsibility for making deductions under Section 194C was incorrect.

(2.) THE Associated Cement Company Ltd., the petitioner, is a public limited company, registered under the Companies Act and has one of its factories known as Chaibasa Cement Works at Jhinkpani in the district of Singhbhum. THE company manufactures cement for which it collects various raw materials which are transported to its factory. It has also to transport cement from place to place. For these purposes, the company entered into a contract with one S. P. Nag for loading packed cement bags in trucks and wagons on terms and conditions incorporated in a letter dated November 5, 1973 (annex. 1). According to the terms, the payment to be made to Nag was at the flat rate of forty-one paise per ton of cement. This figure, it is said, was arrived at on the basis of daily wages, dearness allowance and house rent allowance per day per worker. A further stipulation in the contract provided that if excess payment had to be made to the workers on account of dearness allowance, annual increment, etc., as might be provided on the basis of the recommendations of the Second Wage Board, the same would be reimbursed by the company.

(3.) UNDER this provision, the responsibility for deducting an amount equal to two per cent. of the payment made to the contractor arises only when the contract is " for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract ". In the present case, it is not disputed that the contract was for supply of labour. It has to be seen whether it was for carrying out any work. Loading of packed cement into trucks and wagons is certainly a work, as it is commonly understood, and even on the submission made on behalf of the company, the resultant thing is the accomplishment of the loading. 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. In the case before us, by loading packed cement into trucks and wagons, work was being done by the contractor and, in a manner of saying, it was service rendered to the company. However, that does not make any difference as the contract was to supply labour " for carrying out a work " which was loading of packed cement into trucks and wagons.