Ms Bhangal Construction Co. Vs ITO (ITAT Jalandhar)
Simpliciter payment towards hiring charges of cranes cannot be brought within the sweep of the definition of the term work as envisaged in Sec. 194C of the IT Act. We thus are of the considered view that the lower authorities had erred in concluding that as the assessee had failed to deduct tax at source under Sec. 194C of the IT Act on the payments made towards hiring charges of cranes aggregating to Rs. 9,50,600/-, hence the said amount was liable to be disallowed under Sec. 40(a)(ia) of the IT Act. In our considered view, as the assessee was under no obligation to deduct tax at source under Sec. 194C in respect of the payments made towards hiring charges of cranes, therefore, the lower authorities had erred in disallowing the same for the said reason by invoking the provisions of Sec. 40(a)(ia) of the IT Act. We thus not being in agreement with the view taken by the lower authorities that it was obligatory on the part of the assessee to deduct tax at source under Sec. 194C on the payments made towards simpliciter hiring charges of cranes, set aside the order of the CIT(A) and vacate the disallowance of Rs. 9,50,600/- made by the A.O under Sec. 40(a)(ia) of the IT Act.
8. The appeal of the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-2, Jalandhar, dated 17.07.2017, which in turn arises from the assessment order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short ‘I.T. Act’) for A.Y. 2013-14, dated 28.03.2016. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal:-
“1 That the CIT(A) was not justified in sustaining the disallowance of Rs. 950600/- made by the AO u/s 40(a)(ia) of the income Tax Act, 1961.
2. That CIT(A) while sustaining the disallowance failed to appreciate that the provisions of section 194C were not applicable to the assessee hence disallowance made by the AO u/s 40(a)(ia) could not have been
3. That adhoc disallowance of Rs. 100000/- made by the AO out of the expenses has wrongly been sustained by the CIT(A) despite various judgments of various higher authorities including jurisdictional Pb & Haryana High Court.
4. That the orders of the CIT(A) and AO are against the law and facts of the case”
2. Briefly stated, the assessee firm which is engaged in the business of a civil contractor had filed its return of income for A.Y. 2013-14 on 31.03.2014, declaring total income at Rs. 11,54,100 / -. The return of income filed by the assessee was processed as such under Sec. 143(1) of the I.T. Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2)
3. During the course of the assessment proceedings it was observed by the A.O that the assessee firm had paid hiring charges aggregating to Rs. 9,50,600/- to the following parties :-
