By TIOL News Service

RAJKOT, AUG 04, 2015: THE issue before the Bench is - Whether when assessee has not taken possession of vehicles and made payment for composite amount of work done on hourly basis, provisions of Sec 194I do not get attracted. YES is the answer.

Facts of the case

The assessee is engaed in construction activity. The issue was regarding TDS liability of Rs.5,80,529/- in respect of dumpers/JCB & tractors hire charges. AO observed that assessee had paid Rs.53,30,000/- as dumper hire charges to three parties. It had deducted @ 2.06% u/s.194C. AO held that tax should have been deducted @ 10.3% as required u/s.194I, therefore it had computed default by way of short deduction of tax at Rs.4,39,192/-. Similarly, assessee paid tractor hire charges of Rs.17,20,000/- on which it had deducted tax at source @ 2.06% u/s. 194C. AO held that tax should have been deducted @ 10.3% as required u/s. 194I. Assessing Officer computed default by way of short deduction of tax at Rs.1,41,278/-.

On appeal, CIT(A) had granted relief to the assessee. The Revenue's counsel opposed the order of CIT(A) and submitted that CIT(A) was not justified in deleting the order passed u/s. 201(1) of Rs.5,80,529/- and interest charged u/s.201(1A) of Rs.70,064/-.

Having heard the matter, the Tribunal held that,

++ assessee has made payment for composite amount of work on hourly basis, there was no transfer of possession and vehicles would go back to the owners after work was done, cost of fuel, maintenance, salary was done by the owner of vehicles and assessee had only availed of their services by way of getting work done for digging and transporation. This sort of arrangement does not amount to renting of vehicle but is a contractual arrangement for getting specified work done by dumpers and other vehicles and thus, covered u/s.194C and not under the provisions of Section 194I as held by Assessing Officer;

++ Gujarat High Court in case of CIT(TDS) vs. Shri Mahalaxmi Transport Co. 339 ITR 484 has held that CIT(A) found that the assessee had given sub-contracts of transportation of goods from one place to another. To prove the nature of contracts, the assessee had produced various bills issued by such sub-contractors to show that the contracts were mainly carried out for shifting of goods from one place to another. According to CIT(A), since the assessee had given subcontracts for transportation of goods and not for the renting out of machineries or equipment, such payments could not be termed as rent paid for the use of machinery and the provisions of section 194-I would not apply to such contracts. It had accordingly held that the assessee has rightly deducted TDS under section 194C of the Act; that there was no default on the part of the assessee under the TDS provisions and as such there was no short deduction of tax and set aside the levy of interest u/s 201 (IA). In this background, CIT(A) was justified in holding that assessee had properly deducted tax as per provisions of Section 194C instead of Section 194I. Thus, there was no default committed by assessee regarding TDS in respect of these payments. Thus, CIT(A) was justified in granting relief to assessee. This reasoned legal and factual finding of CIT(A), needs no interference from our side. We uphold the same. Similar issue raised in ITA No. 626/Rjt/2014 for A.Y. 2010-11. Facts being similar, so, following same reasoning, we are not inclined to interfere in the finding of CIT(A) who has deleted the order passed u/s.201(1) of the Act of Rs.83,569/- and interest charged u/s.201(1A) of the Act of Rs.3,343/-. Same is upheld. In the result, appeals filed by Revenue for both years are dismissed.

(See 2015-TIOL-1200-ITAT-RAJKOT)