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TMI Blog2011 (8) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount (Rs.) Alok Jaiswal 1,07,305/- APCON 8,36,560/- SBP Associates 9,07,180/- SR Enterprise 6,58,680/- Ajay Dutta 1,30,693/- BMJ Enterprise 2,65,000/- Bapi Mondal 99,910/- Assessee contended before Assessing Officer that payments made to abovenamed parties are rent for use of Dozers, Excavators, earth moving machineries, etc. for carrying out Civil Works contract awarded by HIDCO and Bridge Roof. Assessee enclosed copy of works contract in his reply to Assessing Officer. It was contended that the provision of section 194-I relating to deduction of TDS on rent paid for use of machineries or plants or equipments came into force w.e.f. 01.06.2007. Payment of rent for use of any machinery or plant or equipment is covered under section 194-I and not under section 194C of the Act. Therefore, assessee was not required to deduct any TDS on the said sum of ₹ 30,05,398/- paid/ payable to abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, it was contended that neither Assessing Officer nor ld. CIT(Appeals) brought on record any material to suggest that there existed any sub-contract between assessee and seven parties by way of a composite contract for hiring the machineries and skilled labour. It was contended that equipments had to be necessarily operated by the owner of the respective machineries and that itself could not be a ground to state that it was a sub-contract under section 194C(2) inasmuch as the engagement of the service of the skilled operator for operating those machines would have been purely an incidental one. It was contended that payments constituted rent for hiring of machinery and skilled labour within the meaning of section 194-I of the Income Tax Act. Since provisions for deducting TDS on hiring of machinery were introduced in section 194-I of the Act w.e.f. 01.06.2007, assessee was not liable to deduct tax on such payments. It was contended that hiring charges aggregating ₹ 30,05,398/- were incurred by assessee prior to 10.09.2004, the date when the assent of Hon ble President of India was given on Finance (No. 2) Act, 2004 w.e.f. 01.04.2005 inserting Section 40(a)(ia) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pages 17 to 30 of the paper book, which are the copies of bills in respect of abovenamed parties and on perusal thereof, it is observed that payments were made to them indicating rent for hiring of Dozers, Excavators, etc. Considering the above facts and in absence of any material on record brought by the Department, we find substance in the submission of ld. AR that assessee made the payments aggregating ₹ 30,05,398/- to abovenamed seven parties as rent for use of Dozers, Excavators, earth moving machineries, etc. for the purpose of executing the contracts awarded to it by WBHIDCO and Bridge Roof. Hence, we agree with ld. AR that provision of section 194C of the Act in respect of above payments is not attracted. Now the question comes if the above amount paid is rent, whether assessee was required to deduct TDS in the assessment year under consideration or not. There is no dispute to the fact that in the assessment year under consideration, assessee was not required to deduct TDS on payment of rent as TDS @ 2% from rent on plant machinery equipments is required to be deducted w.e.f. 01.06.2007 on account of Amendment made by the Finance (No. 2) Act, 2007. Hence, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclosed before Assessing Officer with his submission. 11. Ld. CIT(Appeals) did not agree with the above contention of assessee. Ld. CIT(Appeals) observed that there need not necessarily be any contract in writing. An oral contract is also a contract. Payments made/ payable to goods vehicle owners are contractual payments and accordingly, action of Assessing Officer to disallow of ₹ 60,30,480/- made under section 40(a)(ia) of the Act was upheld. Hence, assessee is in further appeal before the Tribunal. 12. At the time of hearing, ld. AR submitted that assessee was awarded an order from Bridge Roof Co. (India) Ltd. for supply of well graded quarry crushed stone etc. (known as Stone Chips in market) at Paradip Project Site, Orissa. Ld. AR referred pages 188 to 191 of the paper book, which is a copy of the purchase order under consideration. Ld. AR submitted that the said purchase order states the amount divided under consideration into two parts, i.e. cost of materials and transportation charges from quarry to the Project site at Paradip including loading and unloading at both points. He submitted that assessee raised bills on Brief Roof for supply of crushed stone for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had not paid any transportation charges to any of the suppliers of material. Ld. AR submitted that similar issue also came up before ITAT, Mumbai Bench in the case of Utility Powertech Ltd. vs.- ACIT in ITA No. 5502/Mum./2009 and referred pages 222 to 224 of the paper book, which is a copy of the said order 13. On the other hand, ld. DR merely relied on the order of ld. CIT(Appeals). 14. We have carefully considered the submissions of ld. representatives of the parties and the orders of authorities below. We have also perused the copies of bills placed at pages 31 to 50 of the paper book and also statement of Profit Loss A/c. placed at page 75 of the paper book. It is a fact that in the bills placed at pages 31 to 50 of the paper book, it is only mentioned the cost of supply of material, i.e. stone chips and no separate narration is given for charging of any transportation cost of material in the bills. We observe that at page 12 of the paper book, which is a copy of ledger account, the cost of total purchases of material from the abovenamed six parties is aggregating to ₹ 1,07,92,702/- and the said amount is appearing in the Statement of Profit Loss A/c. as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he product purchased. The assessee could not be said to be an assessee in default for nondeduction of tax at source in terms of section 194C of the Act on the amount of freight billed separately by T. As a consequence, the provisions of section 40(a)(ia) of the Act could not be applied to disallow the amount of such freight . Considering the above cases and the facts of the case before us and in absence of any material brought on record by the Department that assessee made payments to transporters, we are of the considered view that provisions of section 194C(2) of the Act are not applicable to the facts of the case. Accordingly, we delete the said addition of ₹ 60,30,480/- by allowing Grounds No. 3 4 of the appeal taken by assessee. 15. Ground No. 5 of the appeal reads as under :- That without prejudice to Ground Nos. 1 to 4 above, the ld. Commissioner of Income-tax (Appeals) erred in not following the decision of Jaipur Bench of Income Tax Appellate Tribunal in the case of Jaipur Vidyut Vitran Nigam Ltd. vs.- DCIT (123 TTJ 888) while confirming the disallowances under section. 40(a)(ia) on the amounts of expenditure which did not remain outstanding as on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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