Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue is against the order of Commissioner of Income Tax (Appeals)-XII, Kolkata dated 06.11.2013. Assessment was framed by JCIT(OSD), under CIT-IV, Kolkata u/s 143(3)/147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.11.2011 for assessment year 2006-07. Shri K.M.Roy, Ld. Authorized Representative appeared on behalf of assessee and Shri Sallong Yaden, Ld. Departmental Representative appeared on behalf of Revenue.
Solitary issue raised by Revenue is as regards that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for an amount of ₹72,51,950/- u/s 40(a)(ia) of the Act on account of non deduction of Tax Deducted at Source (TDS for short).
ITA No.317/Kol/2014 A.Y. 2006-07 ITO Wd-10(1) Kol. vs. M/s Dustan G Engineers Pvt. Ltd. Page 2 3. Facts in brief are that assessee in the present case, is a Private Limited Company and has filed its return of income declaring total income of ₹26,29,296/-. Thereafter case was selected for scrutiny u/s 147 of the Act for non deduction of TDS and accordingly notices u/s. 148/143(2) of the Act was issued. The assessee, during the year, has claimed machine hired charges for an amount ₹72,51,950/-. During the course of assessment proceedings, AO observed that the provision of TDS has been violated by the assessee by not deducting TDS and therefore he invoked the provision of Sec. 40(a)(ia) of the Act by disallowing the machine hired charges for an amount of ₹72,51,950/-. The machine hire charges were disallowed and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO by observing as under:- “I have considered the submissions,. Guideline (iii) of CBDT’s Circular No 681 dated 8.3.1994 reiterated that the provisions of section 194C would not apply in relation to payments made for hiring or renting of equipments, etc., the amendment in section 194I to enlarge the meaning of “rent” and to include items (d) to (h) in respect of machinery, plant, etc., has been brought about by section 15 of the Taxation Laws (Amendment) Act, 206 (29 of 2006), whereby clause (i) has been substituted w.e.f. 13- 7-2006, for n from A.Yr. 2007-08. In the case of Asstt. CIT vs. Rewa Publication Pvt. Ltd. (2010) 16 TTJ 49 (Tribunal Indore), where the assessee took machinery on rent along with staff. AO held that it was payment of work u/s. 194C and therefore TDS should have been deducted. Assessee contended that it was payment of rent and therefore TES should not made, if was held that look to CBDT Circular No. 3 dated 26.09.1972, it is payment for rent and TDS shall not be deducted. When indisputably section 194I came to provide for tax deduction at source in respect of machinery/equipment only with effect from 1-6-2007, and the relevant assessment year is 2006-07, there was no scope to find fault with the appellant assessee for any violation of section 40(a)(ia) as held in CIT v. D.Rathinam (011) 335 ITR 101 (Mad.) cited supra. Therefore, the disallowance as made by the Assessing Officer under sec. 40(a)(ia) of the Act is unjustified. The consequent addition of Rs.72,51,950/- is hereby deleted.”
Being aggrieved by this order of Ld CIT(A) Revenue is in appeal before us.
Before us both parties relied on the orders of Authorities Below as favourable to them.
ITA No.317/Kol/2014 A.Y. 2006-07 ITO Wd-10(1) Kol. vs. M/s Dustan G Engineers Pvt. Ltd. Page 3 6. We have heard both the parties and perused the materials available on record. From the foregoing discussion, we find that the TDS provisions on the machines hiring charges were not the subject matter of Sec. 194-I of the Act for the year under consideration i.e. financial year 2005-06. The provisions of TDS on rent on machines & equipments became applicable with effect from 01.06.2007. The instant case relates to the financial year 2005-06, therefore it is clear that the machines hired charges were not applicable for AY 2006-07. Accordingly, in our considered view, the provision for deducting TDS, in the instant case, does not apply. In this connection, we are relying in the judgment of Hon’ble Madras High Court in the case of CIT Vs. Poompuhar Shipping Corporation Limited 282 ITR 3 (Mad). The relevant extract of the order is reproduced below.
“Under s. 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-s. (1) of s. 194C. In the present case, there was no contract between the assessee and the shipping companies to carry out any work. On the other hand, the assessee-company hired the ships belonging to other shipping companies for a fixed period on payment of hire charges. The hired ships were utilised by the assessee in the business of carrying the goods from one place to another in pursuance of an agreement entered into between the assessee and the Tamil Nadu Electricity Board. There was no agreement for carrying out any work or transport any goods from one place to another between the assessee and the other shipping companies. The assessee-company simply hired the ships on payment of hire charges and it was utilised in the business of the assessee at their own discretion. It is not the case of the Revenue that the assessee entered into the said contract with the shipping company for transport of coal from one place to another. The hiring of ships for the purpose of using the same in the assessee’s business would not amount to a contract for carrying out any work as contemplated in s. 194C. The term "hire" is not defined in the IT Act. So, one has to take the normal meaning of the word "hire". Normal hire is a contract by which one gives to another temporary possession and use of the 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 ships in the shipping company it could not be construed as if the assessee entered into any contract for carrying out any work, and when the contract is not for carrying out any work, the Revenue cannot insist that assessee ought to have deducted tax at source under s. 194C. The Explanation introduced is w.e.f. 1st July, 1995. Hence it will be applicable only for the future assessment orders and it will not be applicable to the assessment year in consideration. The Tribunal also considered the fact that the shipping companies which received the hire charges are also income-tax assessees and they had shown the hire charges in their respective IT returns and paid the taxes on the same. The said fact was also not disputed by the Revenue. So, the payment of hire charges for taking temporary possession of the ships by the assessee-company would not fall within the provision of s. 194C and hence no tax is required to be deducted, and there is no error or infirmity in the order of the lower authorities. Hence, no substantial
ITA No.317/Kol/2014 A.Y. 2006-07 ITO Wd-10(1) Kol. vs. M/s Dustan G Engineers Pvt. Ltd. Page 4 question of law arises for consideration of the Court.—Sedco Forex International Drill Inc. & Ors. vs. CIT & Anr. (2005) 199 CTR (SC) 320 : (2005) 279 ITR 310 (SC) relied on.” As in the present case, the contract was for machine hiring on rent and not for a work contract as specified under section 194-C of the Act. Therefore, the provision of Sec. 194C of the Act was not applicable in the facts of the present case. As regards to the applicability of provision of Sec. 194-I of the Act it was noticed that the provision are applicable for the payment of rent and tax is to be deducted at source on the payment of specified rent, meaning of “rent” for the purpose of this section has been mentioned in the Explanation-I appended to Sec. 194I of the Act. In the Explanation-I the words “machinery / equipment” has been added with effect from 13.06.2006 by the Finance Act, 2006. Therefore, the provision of Sec. 194-I of the Act is not applicable in the facts of the present case because the previous year relevant to AY under consideration ends on 31st March, 2006. In view of the above, we find no reason to interfere into the order of Ld. CIT(A). We hold accordingly. This ground of Revenue’s appeal is dismissed. 6. In the result, Revenue’s appeal stands dismissed. Order pronounced in open court on 24/08/2016
Sd/- Sd/- (S.S.Viswanethra Ravi) (Waseem Ahmed) Judicial Member Accountant Member *Dkp �दनांकः- 24/08/2016 कोलकाता / Kolkata आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-ITO Ward-10(1), Aayakar Bhawan, 3rd Fl, Room No.78, P-7, Chowringhee Square, Kolkata-700 069 2. ��यथ�/Respondent-M/s Dustan G Engineers Pvt. Ltd., Metro Point, 26, N.S.C. Bose Road, Kolkata-700 040 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता