Akshatam Construction LLP Vs DCIT (ITAT Ahmedabad)
Admittedly the assessee has paid car hire charges of Rs. 1,21,775/- and the AO was of the view that hiring of car falls under the provision of section 194C of the Act. Thus the assessee was required to deduct the tax as per section 194C of the Act but failed to do so. Therefore the AO invoked the provision of section 40(a)(ia) of the Act and disallowed the deduction of car hire charges which also confirmed by the ld. CIT-A. The case of the learned AR of the assessee is that the transaction of car hire falls under the provision of section 194I of the Act where threshold limit to deduct tax at source is of payment exceeds Rs. 1.8 Lacs, but in the case of the assessee, the same is of Rs. 1,21,775/- only. Therefore question of invoking the provision of section 40(a)(ia) does not arise. In this background we proceed to adjudicate the issue on hand.
There is very thin line between weather hiring of car falls under contract for availing the services or under the category of rental agreement. In our considered view if car is hired for purpose of specific usage and charges paid on the basis of such specific uses without bearing running and maintenance cost then it should fall under the category of contract for services and provision of section 194C will be applicable. On the other hand car is hired not to perform specific services and charges are not paid on the basis of specific uses but the same is hired for availability of car for particular time or period without specification of particular services and charges paid on fixed basis then such hiring should be considered as rental contract under the provision of section 194I of the Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-5, Vadodara, dated 01/08/2019 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2014-15.
2. The assessee has raised the following grounds of appeal:
1. Disallowed labour expenses:
Learned AO has erred in la\v and facts by disallowing labour expenses ofRs. 3,87,500/- without proving Unreasonableness of payment to relative.
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