Law:

Section:

Section 194C of the Income-tax Act, 1961 - Deduction of tax at source - Contractor/sub-contractors, payments to - Assessment year 1994-95 - Assessee-company was engaged in business of transportation of coal entered into an agreement with State Electricity Board for transporting coal - In pursuance of said agreement, assessee hired ships belonging to other shipping companies for transporting coal - Assessee paid hire charges to those shipping companies without deducting tax under section 194C on said payments - Assessing Officer, however, directed assessee to pay tax under section 201 and also levied interest under section 201(1A) - Whether since assessee simply hired ships on payment of hire charges for utilising same in its business, payment of hire charges would not fall within provisions of section 194C and, hence, no tax could be deducted on said payments - Held, yes FACTS The assessee-company was engaged in the business of transportation of coal entered into a contract with the State Electricity Board for transporting coal. Since the ships owned by the assessee were not sufficient to carry out the said contract, the assessee hired ships pertaining to other shipping companies for carrying the goods from one place to another. The assessee paid hire charges to those shipping companies but it did not deduct tax under section 194C before making payment of hire charges to the shipping companies. Therefore, the Assessing Officer treated the assessee as in default and directed the assessee to pay the tax under section 201 and also levied interest under section 201(1A). On appeal, the Commissioner (Appeals) held that the agreement in question was for mere hiring of ships and the payment of the hire charges would not be subject to TDS obligation under section 194C. On further appeal, the Tribunal confirmed the order of the Commissioner (Appeals). On revenue's appeal : HELD Under section 194C, the tax is to be deducted when a contract was entered into for carrying out any work in pursuance of a contract between the contractor and the entities mentioned in sub-section (1) of section 194C. In the instant case, there was no contract between the assessee and the shipping…

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