TMI Blog2013 (2) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... of labour. Therefore, the provisions of s. 194C were not applicable to the facts of the assessee's case, as such no disallowance was called for under s. 40(a)(ia) of the IT Act. See CIT Versus Poompuhar Shipping Corporation Ltd.(2006 (1) TMI 60 - MADRAS HIGH COURT) The provisions of section 194-1 are not applicable to the facts of the present case because the previous year relevant to the assessment year under consideration ends on 31st March 2006 while insertion of the words "machinery or plant or equipment" has been made effective from 13th July, 2006 i.e. much after the end of the previous year relevant to the assessment year under consideration. Therefore, the provisions of s. 194-1 of the Act are also not applicable to the facts of the present - in favour of assessee. - IT APPEAL NO. 1493 (HYD.) OF 2012 - - - Dated:- 18-1-2013 - CHANDRA POOJARI AND SAKTIJIT DEY, JJ. V.V. Ramana Rao for the Appellant. Mohd. Afzal for the Respondent. ORDER Chandra Poojari, Accountant Member - This appeal by the Revenue is directed against the order of the CIT(A)-V, Hyderabad dated 12.7.2012 for assessment year 2006-07. 2. The Revenue raised the following grounds: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery Plant and Equipment" were specifically added w.e.f. 13.7.2006 so that TDS could be deduced on these as well. Further, clauses (a) (b) of the above mentioned section originally read as under: "(a) fifteen per cent if the payee is an individual or a Hindu undivided family: and (b) twenty per cent in other cases:" Whereas the same clauses were amended w.e.f. 1.6.2007 to reads as below: "(a) ten per cent for the use of any machinery or plant or equipment; (b) fifteen per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings where the payee is an individual or a Hindu undivided family; and (c) twenty per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings where the payee is a person other than an individual or a Hindu undivided family:" 7. The CIT(A) held that from the above, it is further clear that in the year in question, TDS was not supposed to be deducted on machinery hire. Moreover, machinery hire is not a contract for work and cannot be covered und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk in the present case, for which, payments were made by the assessee, was hiring of machinery. In Poompuhar Shipping Corpn. Ltd. (supra), payment of hire charges for taking temporary possession of ships was held not to fall within the provisions of s. 194C of the Act. It was held that hiring of ships for the purpose of using them in the assessee's business did not amount to a contract for carrying out any work as contemplated in s. 194C of the Act. 12. Explanation III to s. 194C of the Act not being applicable to the assessment year under consideration before the Hon'ble High Court in Poompuhar Shipping Corpn. Ltd. (supra), the applicability thereof was not gone into by their Lordships, holding that the said Explanation would be applicable prospectively w.e.f. 1st July, 1995, the date on which it was introduced. 13. Explanation III to s. 194C is applicable to the assessment year before us. However, it does not apply to the facts of the present case. This is so because the provisions of s. 194C of the Act are applicable to payments for carrying out any work in pursuance of a contract. Now, in keeping with Poompuhar Shipping Corpn. Ltd. (supra), under s. 194C, tax is to be deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is a contract by which one gives to another temporary possession and use of property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. Therefore, when the assessee entered into a contract for the purpose of taking temporary possession of machinery from the plant and machinery owners, it did not amount to the assessee entering into any contract for carrying out any work. Once the contract was not for carrying out any work, as per Poompuhar Shipping Corpn. Ltd. (supra), the provisions of s. 194C are not attracted. 16. In the instant case, it is not in dispute that the machines and equipments taken on hire by the assessee were utilized in the business at the discretion of the assessee and payments under the contract accrued with reference to the time length of the usage of the machines and not with reference to the quantum of any work done. Therefore in the present case, the lender neither had any work obligation nor any command, control and possession of the machines after they were temporarily handed over to the assessee on hire basis. In the instant case, the provisions in the contract for drivers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y out any work. Therefore, the main condition prescribed in s. 194C is that there must be carrying out of any work whether tangible or intangible. In the instant case, the assessee was not under an obligation to carry out the work as it was not under the control of the lender and the possession of the machinery temporarily was passed to the assessee after entering into agreement with the lender. Therefore, in the present case, taking of the machinery and equipment on hire would not amount to a contract for carrying out any work as contemplated in s. 194C of the Act. The said contract i.e. taking of machinery and equipment on hire also cannot be treated with a contract for supply of labour. Therefore, the provisions of s. 194C of the Act were not applicable to the facts of the assessee's case, as such no disallowance was called for under s. 40(a)(ia) of the IT Act. 18. On a similar issue the Hon'ble Madras High Court in the case of Poompuhar Shipping Corpn. Ltd. (supra) has held as under: "Under s. 194C of the IT Act, 1961, the tax is to be deducted when a contract is entered into for carrying out any work in pursuance of a contract between the contractor and the entities mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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