Case Law Details
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 section 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 section 194C of the Act were not applicable to the facts of the assessee’s case, as such no disallowance was called for u/s 40(a) (ia) of the I. T. Act.
Please note that this case law is related to Assessment Year 2006-07 and so may not help for cases related to Assessment Year 2007-08 and thereafter as W.e.f. Assessment year 2007-08, the Taxation Laws (Amendment) Act, 2006 have enlarged the scope of rent for the purpose of Sec. 194I, so as to include machinery, plant and equipment, whether rented together with building or separately, irrespective of the fact whether they are owned by the payee or not?
Relevant Extract from the High Court Judgment
1. The appeal was admitted on following substantial question of law:
“Whether on the fact and in the circumstances of the case, the learned Income Tax Appellate Tribunal has erred in law in upholding deletion of disallowances of Rs. 13,32,39,725/ under Section 40(a) (ia) by holding that the assessee was not liable to deduct any TDS under Section 194C on payment of Rs. 20,26,24,890/ made by it to M/s Jai Prakash Associates Ltd.?”
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