2015 (8) TMI 1513 - AT - Income Tax

Short deduction of tds - TDS u/s 194C or 194I - payments made for hiring of JCB, Porkland, breaking and bucket machines etc. - CIT-A deleted the addition by holding hiring of the machines as works contract AND held that the assessee has rightly deducted tax at source u/s. 194C on the payments made - HELD THAT - We find that the facts in the present case are similar to the issue decided by the Co-ordinate Bench in the case of Bharat Forge Ltd. Vs. Addl. CIT 2013 (11) TMI 1263 - ITAT PUNE We are of the considered view that the assessee has rightly deducted tax at source on the payments made for hiring of JCB, Porkland etc. u/s. 194C. The payments made for hiring machines are in nature of works contract and not rent as defined in Explanation to section 194I - No infirmity in the findings of the Commissioner of Income Tax (Appeals). - Decided in favour of assessee.

Summary

Issues Involved:
Assessment years 2008-09 and 2009-10 - Whether TDS should be deducted under section 194C or 194I for payments made for hiring of machinery for excavation.

Analysis:
The appeals were filed by the Revenue against the order of Commissioner of Income Tax (Appeals) for assessment years 2008-09 and 2009-10. The primary issue in both appeals was regarding the deduction of tax on payments made for hiring machinery for excavation. The Assessing Officer contended that the payments should be treated as 'rent' and tax should have been deducted under section 194I, whereas the Commissioner of Income Tax (Appeals) held that the payments were for works contract and tax deduction under section 194C was correct.

The Department argued that the assessee erred in deducting TDS at a lower rate under section 194C, as the machines were hired on an hourly basis and the payments were in the nature of 'rent'. The Department emphasized that the provisions of section 194I(a) should have been applied due to the nature of the payments made for hiring the machines.

On the other hand, the assessee's representative contended that the payments were not solely for hiring machinery but included a composite payment for excavation work, which involved manual labor, machinery usage, and transportation of materials. The representative argued that the case was similar to a previous decision by a Co-ordinate Bench, where the nature of payments was considered under works contract.

After considering the submissions from both sides and reviewing the orders of the authorities below, the Tribunal analyzed the nature of the payments made for hiring machinery for excavation. It was noted that the payments were part of a composite contract that included various elements such as manual labor, machinery usage, and maintenance responsibilities of the contractor. The Tribunal found that the case was akin to the previous decision where the provisions of section 194C were deemed applicable.

Based on the analysis, the Tribunal concluded that the assessee had correctly deducted tax at source under section 194C for the payments made for hiring machinery for excavation. The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) and dismissed the appeals of the Revenue for lacking merit.

In conclusion, the Tribunal's judgment clarified the applicability of tax deduction provisions under sections 194C and 194I for payments made for hiring machinery for excavation, emphasizing the nature of the contract and the responsibilities of the parties involved in determining the correct tax treatment.