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TMI Blog2011 (7) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... installation of Sugar Mill/Paper Mill/Power Plants on job work basis. During the course of assessment proceedings it was noticed by assessing officer that a sum of Rs.55,67,964/- was debited by the assessee in the profit and loss account under the head 'lease rent for crane'. According to assessing officer such payments made by the assessee for cranes were in the nature of payments made to contractors, hence liable for deduction of tax under the provisions of section 194C of the Income-tax Act, 1961 [Act]. He requires assessee to explain as to why such amount should not be disallowed as assessee failed to deduct tax at source under the provisions of section 194C of the Act. In response it was submitted that assessee is hiring cranes of different sizes. Those cranes were given on time basis say monthly. The cranes are provided with an operator, who operates the cranes. No work is decided to be undertaken by the crane owners. Whether the crane is used or not the payment has to be made on daily basis and such hiring of cranes does not come within the purview of work contract as envisaged in section 194C of the Act. Reference was made to the decision of Hon'ble Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59,700 1,91,940 Reduced to 50,000 Telephone expenses 1,91,422 38,284 Reduced to 12,000 Vehicle running expenses 5,08,230 1,01,646 Reduced to 30,000 Medical expenses 2,57,561 51,512 Fully deleted. " 5.1 In appeal filed before the ld. CIT (Appeals) the submissions made before assessing officer were re-iterated. It was submitted that it was only a case of hiring of equipment. The work was to be carried on by the assessee himself and it was not in the nature of contract. Reference was also made to the following decisions of the Tribunal to contend that on hiring of machinery no tax was deductible :- (i) Dy. CIT v. Satish Aggarwal & Co. [2010] 122 ITD 35 (Asr.) (ii) Mythri Transport Corpn. v Asstt. CIT [2010] 124 ITD 40 (Visakha). 5.2 Upon these submissions the ld. CIT (Appeals) has observed that perusal of quotations will reveal that the payment of rental was made for the use of cranes with operators on the basis of time of use and there was no co-relation between the payment of hire charges with the output of the work done by the said cranes. As per quotation the rental was to be increased on pro-rata basis with reference to the period of utilization. In genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any "work". Therefore, he pleaded that the ld. CIT (Appeals) has rightly held that the payment made by the assessee in this respect does not require any deduction of tax under section 194C of the Act. He submitted that while holding that the assessee was liable for deduction of tax under section 194C the assessing officer has ignored vital facts relying upon which relief has been given by the ld. CIT (Appeals). He submitted that hiring of cranes does not fall under Explanation (iii)(c) to section 194C as the same speaks of carrying of goods or passengers. The crane on lease has been used for lifting and placement of heavy objects viz. the machinery etc. and were not at all used for carriage of goods and passengers. He submitted that the rent paid by the assessee for hiring of cranes was based on the period of use irrespective of the fact that actually the cranes were used or not and the operative cost of use of crane was to be incurred by the assessee. He also relied upon the CBDT Circular No. 681 dated 8th March, 1994, copy of which is placed at pages 43 to 46 of the paper book in which it has been mentioned as under :- "(iii) The provisions of section 194C would not apply in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 194C (1) casts an obligation upon any person responsible for paying any sum to any resident (referred to as the 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 authorities and persons specified in clause (a) to (k) of sub section (1) to section 194C, which inter alia, included clause (j) any firm; or clause (k) any individual or Hindu undivided family etc. to deduct tax at source at the time credit of such amount 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 mode, whichever is earlier, deduct an amount equal to 1 per cent in the case of advertisement and in any other @ 2 per cent. A plain reading of the said section will reveal that if any person has paid to any resident any amount in respect of carrying out any work which includes supply of labour or for carrying out any work he has to deduct tax @ 2 per cent from the said payment. The work has been defined in explanation (iii) which, inter alia, includes under clause (c) thereof as "carries on goods and passengers" by any mode etc. other than by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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