Gujarat High Court
Commissioner Of Income Tax(Tds) vs M/S Amit Corporation....Opponent(S) on 27 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/82/2011 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 82 of 2011
==========================================================
COMMISSIONER OF INCOME TAX(TDS)....Appellant(s)
Versus
M/S AMIT CORPORATION....Opponent(s)
==========================================================
Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
MR B S SOPARKAR, ADVOCATE for the Opponent(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 27/06/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. While admitting the appeal following question of law was framed:
"Whether the Appellate Tribunal is right in law and on facts in deleting the order passed under section 201(1) read with section 194C of the I.T.Act of Rs. 21,09,572/- and interest charged under section 201(1A) of Rs.11,65,542/- of the IT Act for A.Y.2003-2004 by the Assessing Officer. Though there was a contract for transport between assessee company and contractee and it was not a contract for hiring or renting of equipment ?"
2. Briefly stated the facts are that for the assessment year 2003-04, the Assessing Officer called upon the assessee to justify why on the higher charges of Rs. 4.54 crores (rounded off) made to two Page 1 of 4 HC-NIC Page 1 of 4 Created On Wed Jun 29 02:28:53 IST 2016 O/TAXAP/82/2011 ORDER transport companies, the assessee had not deducted tax at source in terms of Section 194C of the Income Tax Act, 1961 ['the Act' for short]. It appears that during the assessment proceedings, the assessee failed to respond to such queries, upon which, the Assessing Officer held that the assessee had violated Section 194C of the Act. He, therefore, levied tax including interest under Section 201 of the Act on such charges. The assessee carried the matter in appeal. CIT(Appeals), after calling for multiple remand reports, believed that the charges were for renting or hiring of equipments such as earth-movers, JCB machines, loader-machines, mixture machines etc. He was of the opinion that, if the Assessing Officer thought that expenditure was not genuine, the entire expenditure could have been disallowed, however, not with the aid of Section 194C of the Act since on charges for hiring of equipments, requirement of deducting tax at source would not apply. This issue was carried in appeal before the Tribunal by the Revenue. The Tribunal, by the impugned judgement, rejected the appeal making following observations:
"4. We have considered the rival submission and perused the material placed before us. On a careful consideration of the same we are in agreement with the learned CIT(A) that provisions of section 194C is not attracted in respect of equipments hiring charges. In the instant case assessee has hired certain equipments like earth movers, dumpers, JCBs. Loader machines, mixture machines, cutter-miller, road rollers etc. from three parties and paid the hire charges. These payments do not fall within the purview of section 194C of the Act as it stood at the relevant point of time. It is only from 01.06.2005 Page 2 of 4 HC-NIC Page 2 of 4 Created On Wed Jun 29 02:28:53 IST 2016 O/TAXAP/82/2011 ORDER that hire charges in respect of equipments attract the provisions of section 194C. The Explanation for the purposes of clause(i), "goods carriage" shall have the same meaning as in the Explanation to sub section (7) of section 44AE. Therefore, the hire charges would within the purview of section 194C only with effect from 01.06.2005. Moreover, in this case, during the course of hearing, the ld. AR has drawn out attention to the decision of Hon'ble Madra High Court in the case of CIT vs. Poompuhar Shipping Corporation Ltd. 282 ITR 3 (Mad.) wherein it was held that the shipping company does not attract section 194C. It was observed that shipping company which had received hire charges is also assessed to income tax and has showed hire charges in its return and paid tax on the same. So payment of hire charges pertaining to temporary possession and use of the property other than money for payment of compensation and later agrees to return the property after the expiry of the agreed period would not attract provisions of section 194C of the Act. During the course of hearing, the ld. AR has submitted copies of the returns filed by the recipients of the hire charges and paid taxes thereon. Therefore, in our humble opinion, the ld. CIT(A) is justified in cancelling the order passed u/s./ 201(1) & 201(!A) of the Act."
3. The Revenue also does not seriously dispute that prior to 01.06.2005, as Section 194C stood, requirement of deducting tax at source of higher charges for hiring equipments did not arise. We have noted the findings of the CIT(Appeals) and the Tribunal with respect to the nature of charges and question. CIT(Appeals) held that such expenditure was in relation to hiring of construction related equipments such as earth- movers, JCB machines etc. In fact, the Assessing Officer also had proceeded on the basis that the assessee had incurred higher charges by making payments to transport companies. We must, therefore, proceed on the basis of these factual findings which Page 3 of 4 HC-NIC Page 3 of 4 Created On Wed Jun 29 02:28:53 IST 2016 O/TAXAP/82/2011 ORDER the Revenue has also not challenged before us. Thus, coupled with the fact that the requirement of deducting tax at source for such charges arose only after the amendment post 01.06.2005, we have no hesitation in upholding the judgement of the Tribunal. The question is, therefore, answered against the Revenue. Tax appeal is dismissed.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) Jyoti Page 4 of 4 HC-NIC Page 4 of 4 Created On Wed Jun 29 02:28:53 IST 2016