Law:

Section:

Section 194C, read with sections 194J and 201(1), of the Income-tax Act, 1961 - Deduction of tax at source - Contractors/sub-contractors, payments to - Assessment year 2007-08 - Assessee-transporter had given sub-contracts to dumper owners for transportation of goods - Dumpers were not taken on hire/rent - Whether payments to sub-contractors would attract provisions of section 194C and not provisions of section 194-I - Held, yes [In favour of assessee] FACTS The assessee was engaged in the business of transportation. The assessee had taken dumpers on hire/rent from various parties and had paid Rs. 1,18,29,647 as rent and deducted TDS at the rate of 1.12 per cent, which, according to the Assessing Officer, was not correct. He held that, as the assessee has taken dumpers on hire/rent such payments were governed under section 194-I. He, accordingly, held that the assessee had short deducted TDS of Rs. 17,74,378 and, accordingly, passed an order under section 201(1) holding the assessee to be an assessee in default. On appeal, the Commissioner (Appeals) held that the assessee was not in default of deduction of tax and that the levy of interest under section 201(1A) was not justified. The revenue's appeal before the Tribunal was dismissed. On appeal: HELD Section 194C of the Act makes provision for deduction of tax at source in respect of payments made to contractors whereas section 194-I makes provision for deduction of tax at source in respect of income by way of rent. [Para 8] From the findings of fact recorded by the Commissioner (Appeals) it is apparent that the assessee has not taken the dumpers on hire/rent from the parties in question. The assessee has given contracts to the said parties for the transportation of goods and has not taken machineries and equipment on rent. In the circumstances, the Commissioner (Appeals) was justified in holding that the transactions in question being in the nature of contracts for shifting of goods from one place to another would be covered as works contracts, thereby attracting the provisions of section 194C; that since the assessee had given sub-contracts for transportation of goods and not for the renting out of…

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