TMI Blog2016 (11) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying out work as well as hiring of machinery, then the provision of section 194C of the Act would be attracted, we are of the view that it is neither the case made out by the AO nor the case made out in the grounds of appeal before the Tribunal. Nevertheless a perusal of the relevant bills evidencing the payment of hiring charges shows that these were payments made independently of any contract for carrying out work and was hiring simpliciter. There is no material on record to show that the payment in question was part of a composite payment for carrying out a work as a part of which machinery was also hired. We are therefore of the view that the provision of section 194C of the Act are not attracted.- Decided against revenue. - I.T.A No. 130/Kol/2014 - - - Dated:- 19-10-2016 - Shri P. M. Jagtap, AM And Sri N. V. Vasudevan, JM For the Appellant : Shri Debasis Banerjee, JCIT, Sr.DR For the Respondent : Shri Subash Agarwal, Advocate ORDER Per N. V. Vasudevan, JM This is an appeal by the Revenue against the order dated 26.08.2013 of CIT(A)-I, Kolkata, relating to AY 2005-06. 2. The grounds of appeal raised by the revenue reads thus: 1.For that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making the aforesaid payment towards hire charges. According to the AO the payments in question are in the nature of payments made to a contractor for carrying out work within the meaning of section 194C of the Income Tax Act, 1961 (Act). Since the assessee did not deduct tax at source on the aforesaid payment the AO invoking the provision of section 40(a)(ia) of the Act disallowed the expenses which were claimed as deduction in computing the income of the assessee under the head Income from Business . 4. Before CIT(A) the assessee submitted that the payment in question made on account of hire was not in the nature of payment made to a contractor for carrying out the work within the meaning of section 194C of the Act. The assessee further pointed out that the payment in question was in the nature of rent paid for use of machinery, plant, machinery or equipment. Section 194I of the Act provides for obligation for deduction of tax at source when then person paying any income by way of rent. For the purpose of section 194I of the Act, prior to the amendment of the said definition of Rent for the purpose of Sec.194I of the Act, by Taxation Laws (Amendment) Act 2006 w.e.f. 13.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was engaged in the business of earth moving contract, it has to be verified as to whether the payment for hiring of equipments, machinery were made as part of the composite contract for carrying out work of earth moving. According to him in case it was the payment for composite contract, then the provision of section 194C of the Act would be attracted and the disallowance made by the AO has to be sustained. 8. The ld. Counsel for the assessee on the other hand relied on the order of CIT(A) and submissions made before CIT(A). It was further submitted by him that it was nobody s case that the payment for hiring of machinery and equipment was part of the composite contract to carry out work. In this regard he drew our attention to the copies of various bills raised by the parties which are placed in the paper book filed by the Assessee. 9. We have given a very careful consideration to the rival submissions. We shall first take a look at the relevant statutory provisions: 10. Sub-clause (ia) of clause (a) of section 40 was inserted by the Finance (No.2) Act, 2004 with effect from 1st April, 2005 read as under:- 40. Notwithstanding anything to the contrary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny subsequent year, the sum of payment shall be allowed in computing the income of the previous year in which such tax has been paid. The proposed amendment will take effect from 1st day of April, 2005 and will, accordingly, apply in relation to the assessment year 2005- 2006 and subsequent years. [Clause 11] 12. Thereafter the Finance Act, 2008 made amendment to clause (a) in sub-clause (ia) in section 40 with retrospective effect from 1st April, 2005. The section as amended by the Finance Act, 2008 read as under:- (ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been paid,- (A) in a case where the tax was deductible and was so deducted during the last month of the previous year, on or before the due date specified in sub-section (1) of section 139 ; or (B) in any other case, on or before the last day of the previous year. Provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of- (a) two per cent. for the use of any machinery or plant or equipment; and (b) ten 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: 16. For the purpose of Sec.194I, rent was defined to mean any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee. 17. By the Taxation Laws (Amendment) Act, 2006 (w.e.f. 13-7-2006), the definition of rent for the purpose of Sec.194I was amended and the following definition was substituted : Explanation.-For the purposes of this section,- (i) rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any, - (a) l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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