Law:

Section:

I. Section 194C, read with section 194H, of the Income-tax Act, 1961 - Deduction of tax at source - Contractors/sub-contractors, payments to (Handling charges) - Assessment year 2006-07 - Assessee-hospital had a drug store of its own which it found difficult to manage and, therefore, to faciliate administration and management of same, it engaged two ladies who were to ensure availability of drugs in store - To enable them to procure drugs and supply same to drug store payment was made by assessee to manufacturers - During relevant assessment year assessee paid drug handling charges to said ladies and deducted tax therefrom under section 194C - Assessing Officer held that TDS was to be deducted under section 194H - Whether on facts no commission or brokerage had been paid and, therefore, section 194H was not attracted - Held, yes [Para 6] [In favour of assessee] II. Section 194-I of the Income-tax Act, 1961 - Deduction of tax at source - Rent (Equipment hire charges) - Assessment year 2006-07 - Whether prior to 13-7-2006, section 194-I was not applicable in case of any payment in relation to use of any equipment - Held, yes [Para 11] [In favour of assessee] FACTS â–  The assessee-hospital had a pharmacy or drug store of its own. As it was finding it difficult to manage it by its own staff, it decided to manage it with the help of two ladies who were to ensure availability of the drugs and medicines for the patients getting treated in the hospital. To enable them to procure drugs and supply them to the drug store the payment was made by assessee to the manufacturers. â–  During relevant assessment year, the assessee made certain payment to said two ladies as drug handling charges and deducted tax therefrom under section 194C. â–  The Assessing Officer held that payment was in nature of brokerage and commission and, therefore, tax was to be deducted under section 194H. â–  On appeal, the Commissioner (Appeals) as well as the Tribunal held that no commission or brokerage had been paid and, therefore, section 194H was not attracted. â–  On revenue's appeal : HELD â–  Section 194H is contemplating deduction of tax at source for payment…

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