M/s S.R.Constructins & Builders, Bhopal V. The Assistant Commissioner of Income Tax 1(1), Bhopal

ITA 540/IND/2010

• Counselvise Citation: 54022714 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 18-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 10-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Section: 143(3); 194C; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAZFS 9906J I.T.A.NO. 540/IND/2010 A.Y. : 2007-08 M/S. S. R. CONSTRUCTION & BUILDERS, ACIT, 1(1), BHOPAL. BHOPAL. VS APPELLANT RESPONDENT APPELLANT BY : SHRI PRAKASH JAIN, C. A. RESPONDENT BY : SHRI ARUN DEWAN, SR. DR DATE OF HEARING : 22.09.2011 DATE OF PRONOUNCEMENT : 29.09.2011 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 20.04.2010 FOR THE ASSESSMENT YEAR 2007-08, IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INC OME-TAX ACT, 1961. -: 2: - 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE OF CLAIM OF RENT PAID FOR THE MACHINER Y BY INVOKING PROVISIONS OF SECTION 40A(IA) READ WITH SE CTION 194(C) OF THE INCOME-TAX ACT, 1961. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. DURING THE COURSE OF THE ASSESSMENT, THE A O DISALLOWED PAYMENT MADE FOR MACHINE HIRE CHARGES ON THE PLEA THAT THE ASSESSEE HAS NOT DEDUCTED TDS U/S 194 (C), ACCORDINGLY, THE AMOUNT WAS DISALLOWED U/S 40A(IA) AFTER HAVING THE FOLLOWING OBSERVATIONS :- 1. DURING THE COURSE OF SCRUTINY IT WAS FOUND THAT THE ASSESSEE HAS PAID MACHINE HIRE CHARGES AMOUNTING TO RS. 2724202. THE COPY OF ACCOUNT IS ENCLOSED AS ANNEXURE A TO THIS ORDER. IT WAS SUBMITTED BY THE ASSESSEE THAT HE HAS NOT DEDUCTED TDS ON THE SAID AMOUNT. ON PERUSAL OF PROFIT AND LOSS ACCOUNT FOLLOWING TRANSACTION WERE NOTICED ON WHICH NO TDS WAS DEDUCTED BY THE ASSESSEE. DATE PARTICULARS NATURE OF VCH.NO. DEBIT -: 3: - 3 PAYMENT 30.4.2006 TO SAJID BHAI TRACTOR 25 32500 TO P.RAJU TRACTOR 27 45100 TO R.PRAJAPATI TRACTOR 28 36900 TO SAUD AHMED TRACTOR 29 48000 TO JAI HIND CONSTN. TRACTOR 30 42800 TO BHAGMAL SAHU TRACTOR 31 47800 TO NASEEM BHAI TRACTOR 32 48600 TO PRASHANT KEWAT TRACTOR 33 30100 TO PRASHANT KEWAT TRACTOR 34 15900 TO BASHIRE BHAI TRACTOR 35 28600 TO K.K.TIWARI TRACTOR 36 47500 TO SAJID BHAI TRACTOR 37 17000 TO RAMMANI TRACTOR 61 20500 TO VIJAY PATEL TRACTOR 62 25300 TO SANJEEV PATEL TRACTOR 63 35400 TO SUJEET BARNALA TRACTOR 66 30100 TO N TIWARI TRACTOR 69 30000 TO S. CHANDRA TRACTOR 70 34800 TO AMIT SHARMA TRACTOR 71 31500 TO SABUR AHMED TRACTOR 72 27900 TO SATYAPAL TRACTOR 73 29600 1.6.2006 TO CASH TRACTOR 326 55600 4.6.2006 TO CASH TRACTOR 345 25300 10.6.2006 TO CASH TRACTOR 420 45200 29.6.2006 TO CASH TRACTOR 577 24500 TO CHOUHAN CRANES TRACTOR 114 35600 TO GHANSHYAM PATIDAR TRACTOR 122 30900 TO O.P. GAUTAM TRACTOR 123 36700 TO RAKESH SINGH DUMPER 124 27400 -: 4: - 4 TO S.S.CHOUDHARY TRACTOR 125 45700 TO SONU DUMPER SERVICE TRACTOR 126 18600 TO MUSHIR BHAI DUMPER 127 40800 10.7.2006 TO CASH TRACTOR 686 15680 12.7.2006 TO CASH TRACTOR 698 4500 TO CASH TRACTOR 699 2000 TO CASH TRACTOR 700 2000 TO CASH TRACTOR 701 2000 TO CASH TRACTOR 702 2000 TO CASH TRACTOR 703 2000 TO CASH TRACTOR 704 2000 TO CASH TRACTOR 705 2000 TO CASH TRACTOR 706 2000 17.7.2006 TO CASH TRACTOR 727 7200 25.7.2006 TO CASH TRACTOR 794 150 2.8.2006 TO CASH TRACTOR 833 1400 TO CASH TRACTOR 834 1400 TO CASH TROLLY TRACTOR 835 3350 30.8.2006 TO CASH TRACTOR 1019 1000 20.9.2006 TO CASH TRACTOR 1129 15400 7.10.2006 TO CASH TRACTOR 1254 500 23.10.2006 TO CASH TRACTOR 1332 1000 4.11.2006 TO CASH TRACTOR 1399 500 15.11.2006 TO CASH TROLLY 1469 15000 25.11.2006 TO CASH TRACTOR 1525 28100 30.11.2006 TO ANIL LALCHANDANI DUMPER 260 40700 TO RAKESH NAGRANI DUMPER 262 30500 28.2.2007 TO CASH TRACTOR 2210 25000 TOTAL 12,99,580 -: 5: - 5 THE ABOVE PAYMENT ARE IN NATURE OF TRANSPORT AND CO VERED U/S 194(C) OF THE ACT ON WHICH EVERY ASSESSEE HAS T O DEDUCT TDS IF THE SUM EXCEED RS. 20,000/-. HOWEVER, THE ABOVE ASSESSEE HAS FAILED TO DEDUCT TDS ON THE SAID AMOUNT. THEREFORE, THE SAID EXPENDITURE IS DISALLOW ED U/S 40A(IA) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE AFTER HAVING THE FOLLOWING OBSERVATION S :- THE APPELLANT HAS ENGAGED THE TRACTORS AND DUMPERS FOR THE WORK OF CARRIAGES OF UNUSABLE SOIL FROM ONE PLACE TO ANOTHER AND THE APPELLANT WAS LIABLE FOR DEDUCTION OF TDS AS PER PROVISION OF SECTION 194C. SINCE, THE APPELLANT HAD NOT DEDUCTED TDS AS REQUIRED, THE EXPENSES WERE NOT ALLOWABLE AS DEDUCTION AS PER SECTION 40A(IA) OF THE INCOME-TAX ACT, 1961. THE AO WAS, THEREFORE, JUSTIFIED IN MAKI NG THE DISALLOWANCE U/S 40A(IA) OF THE ACT. HOWEVER, T HE AO IS DIRECTED TO DISALLOW, AFTER VERIFICATION, ONL Y OF -: 6: - 6 THOSE EXPENSES WHERE THE SUM PAID OR CREDITED WAS IN EXCESS OF RS. 20,000/- OR AGGREGATE OF AMOUNTS PAID OR CREDITED DURING THE FINANCIAL YEAR TO A PAR TY WAS IN EXCESS OF RS. 50,000/- AS ENVISAGED U/S 194C(5). ACCORDINGLY,, THIS GROUND IS DISPOSED OF . 5. AGAINST THIS ORDER OF CIT(A), THE ASSESSEE IS IN FU RTHER APPEAL BEFORE US. 6. IT WAS ARGUED BY THE LD. AUTHORIZED REPRESENTATIVE THAT TRACTORS AND DUMPERS ARE NOT TRANSPORT VEHICLE S, THEREFORE, THE AO WAS NOT JUSTIFIED IN TREATING THE SAME AS TRANSPORT VEHICLES AND PAYMENT MADE TO THEM AS COVE RED U/S 194C OF THE INCOME-TAX ACT, 1961, RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE GAUHATI HIGH COURT IN THE C ASE OF NANDLAL PARSHURAM, 239 ITR 497, WHEREIN IT WAS HELD THAT SECTION 2(44) OF THE MOTOR VEHICLES ACT, 1988, DEFI NES TRACTOR AS MOTOR VEHICLE, WHICH IS NOT ITSELF CONSTRUCTED T O CARRY ANY LOAD. IT WAS, THEREFORE, HELD THAT TRACTOR, WHICH W AS USED BY THE ASSESSEE FOR TRANSPORTING TEA IN THE TEA GARDEN WAS ELIGIBLE FOR INVESTMENT ALLOWANCE. SIMILARLY, IN CASE OF CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS LIMITED, 281 ITR 297, HO N'BLE -: 7: - 7 GUJARAT HIGH COURT HELD THAT TRACTOR TRAVELER USED FOR LIFTING AND CARRYING EQUIPMENT AND MATERIALS WITHIN THE FAC TORY CONSTITUTED PLANT AND MACHINERY ENTITLED TO INVESTM ENT ALLOWANCE. THE HON'BLE COURT OBSERVED THAT ROAD TR ANSPORT VEHICLE AS USED IN COMMON PARLANCE REFERS BUSES, TR UCKS AND TAXI ETC., BUT WHICH CERTAINLY NOT INCLUDED TRACTOR S. THE LD. AUTHORIZED REPRESENTATIVE ALSO REFERRED TO BOARDS INSTRUCTION F.NO. 202/34/72-ITA II DATED 15 TH MARCH, 1975, WHEREIN BOARD HAS DIRECTED THAT THE TEST AS TO WHETHER A PA RTICULAR VEHICLE WAS A ROAD TRANSPORT VEHICLE OR NOT WOULD BE THE TEST OF THE USE TO WHICH THE VEHICLE IS ORDINARILY PUT A ND NOT MERELY THE FACT THAT IT IS CAPABLE OF MOVING ON THE ROADS. THE BOARD EXPRESSED THE VIEW THAT DUMPERS AND TIPPERS COULD N OT BE TREATED AS ROAD TRANSPORT VEHICLES WITHIN THE MEANI NG OF SECTION 33(1) OF THE INCOME-TAX ACT, 1961. 7. THE JUDGEMENT OF HON'BLE RAJASTHAN HIGH COURT IN TH E CASE OF CIT VS. ABDUL KAREEN STONE CONTRACTORS, 225 ITR 1032 WAS ALSO CITED IN SUPPORT OF THE PROPOSITION THAT D UMPERS ARE NOT TRANSPORT VEHICLES. -: 8: - 8 8. IN VIEW OF THE ABOVE PROPOSITIONS BY VARIOUS HIGH COURTS, THE LD. AUTHORIZED REPRESENTATIVE CONTENDED THAT LOWER AUTHORITIES WERE NOT JUSTIFIED IN TREATING TH E TRACTOR AND DUMPER AS TRANSPORT VEHICLES ENGAGED FOR CARRYING M ATERIAL FROM ONE PLACE TO OTHER, SO AS TO ATTRACT LIABILITY U/S 194C. 9. ON THE OTHER HAND, THE LD. SENIOR D.R. RELIED ON TH E ORDERS OF THE LOWER AUTHORITIES. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT ASSESSEE IS ENGAGED IN THE BUSINES S OF CIVIL CONSTRUCTION WORK. PAYMENT WAS MADE BY THE ASSESSEE ON ACCOUNT OF MACHINE HIRE CHARGES IN RESPECT OF TRACT OR AND DUMPER TAKEN ON DAILY/MONTHLY HIRE BASIS. HOWEVER, THE AO HAS TREATED THE PAYMENT AS HAVING BEEN MADE FOR CAR RYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CON TRACTOR AND A SPECIFIED PERSON I.E. ON ACCOUNT OF TRANSPORT ATION OF GOODS U/S 194C OF THE INCOME-TAX ACT, 1961. AS PER PROVISIONS OF SECTION 194C, THE ASSESSEE IS REQUIRED TO DEDUCT TAX IN RESPECT OF THE PAYMENT MADE FOR CARRYING OUT ANY WO RK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WOR K OR -: 9: - 9 CARRIAGE OF GOODS IN PURSUANCE OF A CONTRACT BETWEE N THE CONTRACTOR AND A SPECIFIED PERSON. IN THE INSTANT C ASE PAYMENT WAS NOT MADE FOR CARRIAGE OF GOODS, HOWEVER, THE AS SESSEE HAD TAKEN TRACTOR AND DUMPER ON MONTHLY/DAILY HIRE CHAR GES. ASSESSEE HIMSELF WAS USING THE TRACTOR AND DUMPER T AKEN ON MONTHLY/DAILY RENT. DIESEL AND DERIVER WAS ASSESSEE S PERSON AND HE WAS USING THE SAME FOR MOVING THE SOIL AT TH E PLACE OF ITS CONSTRUCTION. MACHINE HIRE CHARGES IS IN THE NA TURE OF RENT COVERED BY SECTION 194I OF THE ACT WHEREIN THE ASSE SSEE IS REQUIRED TO DEDUCT TAX, WHERE TOTAL PAYMENT TO A PE RSON IN A YEAR EXCEEDS RS. 1.20 LAKHS. THIS RESTRICTION IS WI TH RESPECT TO THE PAYMENT MADE TO A PERSON. TOTAL OF A PAYMENT MA DE TO ANY PERSON IN A YEAR IS TO BE ADDED FOR ATTRACTING PROVISIONS OF SECTION 194-I AND ONCE THE TOTAL OF SUCH PAYMENT EX CEEDS RS.1.20 LAKHS, THE ASSESSEE IS STATUTORILY REQUIRED TO DEDUCT TAX THEREON AS PER THE RATES PRESCRIBED. IN THE INS TANT CASE, THE PAYMENT WAS MADE TO DIFFERENT PERSONS ON ACCOUN T OF DAILY/MONTHLY HIRE CHARGES OF TRACTOR, DUMPER, TROL LEY ETC. TO A SINGLE PERSON, THE PAYMENT WAS UNDISPUTEDLY BELOW R S. 1.20 -: 10: - 10 LAKHS IN A YEAR, THEREFORE, NO TAX WAS REQUIRED TO BE DEDUCTED EVEN U/S 194-I OF THE ACT. 11. FOR BETTER UNDERSTANDING, THE PROVISIONS OF SECTIO N 194-C AND 194-I ARE REPRODUCED HEREBELOW :- PAYMENTS TO CONTRACTORS. 47 194C. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR 48 ) FOR CARRYING OUT ANY WORK 48 (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON SHALL , AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CO NTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER , DEDUCT AN AMOUNT EQUAL TO (I) ONE PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; ( II ) TWO PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. (2) WHERE ANY SUM REFERRED TO IN SUB-SECTION (1) IS CREDITED TO ANY ACCOUNT, WHETHER CALLED SUSPENSE ACCOUNT O R BY ANY -: 11: - 11 OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON L IABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. (3) WHERE ANY SUM IS PAID OR CREDITED FOR CARRYING OUT ANY WORK MENTIONED IN SUB-CLAUSE ( E ) OF CLAUSE ( IV ) OF THE EXPLANATION, TAX SHALL BE DEDUCTED AT SOURCE ( I ) ON THE INVOICE VALUE EXCLUDING THE VALUE OF MATER IAL, IF SUCH VALUE IS MENTIONED SEPARATELY IN THE INVOIC E; OR ( II ) ON THE WHOLE OF THE INVOICE VALUE, IF THE VALUE O F MATERIAL IS NOT MENTIONED SEPARATELY IN THE INVOICE . (4) NO INDIVIDUAL OR HINDU UNDIVIDED FAMILY SHALL B E LIABLE TO DEDUCT INCOME-TAX ON THE SUM CREDITED OR PAID TO TH E ACCOUNT OF THE CONTRACTOR WHERE SUCH SUM IS CREDITED OR PAI D EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDIVIDUA L OR ANY MEMBER OF HINDU UNDIVIDED FAMILY. (5) NO DEDUCTION SHALL BE MADE FROM THE AMOUNT OF A NY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID T O THE ACCOUNT OF, OR TO, THE CONTRACTOR, IF SUCH SUM DOES NOT EXC EED 48A [ THIRTY ] THOUSAND RUPEES : -: 12: - 12 PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SUMS CREDITED OR PAID OR LIKELY TO BE CREDITED OR P AID DURING THE FINANCIAL YEAR EXCEEDS 48B [ SEVENTY-FIVE ] THOUSAND RUPEES, THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRE D TO IN SUB-SECTION (1) SHALL BE LIABLE TO DEDUCT INCOME-TA X UNDER THIS SECTION. (6) NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITE D OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PR EVIOUS YEAR TO THE ACCOUNT OF A CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, ON FURNI SHING OF HIS PERMANENT ACCOUNT NUMBER, TO THE PERSON PAYING OR CREDITING SUCH SUM. (7) THE PERSON RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB-SECTION (6) SHALL FUR NISH, TO THE PRESCRIBED INCOME-TAX AUTHORITY OR THE PERSON AUTHO RISED BY IT, SUCH PARTICULARS, IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( I ) SPECIFIED PERSON SHALL MEAN, ( A ) THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT; OR -: 13: - 13 ( B ) ANY LOCAL AUTHORITY; OR ( C ) ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT; OR ( D ) ANY COMPANY; OR ( E ) ANY CO-OPERATIVE SOCIETY; OR ( F ) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER ANY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, OR FOR BOTH; OR ( G ) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA; OR ( H ) ANY TRUST; OR ( I ) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSITY GRANTS COMMISSION ACT, 1956 (3 OF 1956); OR ( J ) ANY GOVERNMENT OF A FOREIGN STATE OR A FOREIGN ENTERPRISE OR ANY ASSOCIATION OR BODY ESTABLISHED OUTSIDE INDIA; OR ( K ) ANY FIRM; OR ( L ) ANY PERSON, BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS, IF SUCH PERSON, ( A ) DOES NOT FALL UNDER ANY OF THE PRECEDING SUB- CLAUSES; AND ( B ) IS LIABLE TO AUDIT OF ACCOUNTS UNDER CLAUSE ( A ) OR CLAUSE ( B ) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE -: 14: - 14 FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR; ( II ) GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO SUB-SECTION (7) OF SECTION 44AE ; ( III ) CONTRACT SHALL INCLUDE SUB-CONTRACT; ( IV ) WORK SHALL INCLUDE ( A ) ADVERTISING; MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER.] ( B ) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; ( C ) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; ( D ) CATERING; ( E ) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER.] XXXXXXXXXXXXXXX [ RENT. 70 194-I. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO 71 [A RESIDENT] ANY INCOME BY WAY OF RENT 72 , SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE O R AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR -: 15: - 15 DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, 73 [DEDUCT INCOME-TAX THEREON AT THE RATE OF 74 [( A ) TWO PER CENT FOR THE USE OF ANY MACHINERY OR PLAN T OR EQUIPMENT; AND ( B ) TEN PER CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTINGS:]] PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOUNT OF, OR TO, THE PAYE E, DOES NOT EXCEED 74A [ ONE HUNDRED AND EIGHTY THOUSAND RUPEES ] : 75 [ PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOV ER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE ( A ) OR CLAUSE ( B ) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING TH E FINANCIAL YEAR IN WHICH SUCH INCOME BY WAY OF RENT IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME- TAX UNDER THIS SECTION.] EXPLANATION. FOR THE PURPOSES OF THIS SECTION, 76 [( I ) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CALLE D, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY, ( A ) LAND; OR ( B ) BUILDING (INCLUDING FACTORY BUILDING); OR ( C ) LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING); OR ( D ) MACHINERY; OR -: 16: - 16 ( E ) PLANT; OR ( F ) EQUIPMENT; OR ( G ) FURNITURE; OR ( H ) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE;] ( II ) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHET HER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SU CH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. ] 12. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT LIABILIT Y TO DEDUCT TAX U/S 194C ARISES WHEN ANY PAYMENT IS MADE FOR CARRYING OUT ANY WORK IN PURSUANCE OF THE CONTRACT BETWEEN THE CONTRACTOR AND THE ASSESSEE, WHEREAS U/S 194I L IABILITY TO DEDUCT TAX ARISES WHEN THE PAYMENT MADE FOR USE OF MACHINERY EXCEEDS RS. 1,20,000/- IN A YEAR. 13. IN VIEW OF THE ABOVE DISCUSSION, WE ARE NOT IN AGREEMENT WITH THE ORDER PASSED BY LOWER AUTHORITIE S, SO AS TO MAKE THE ASSESSEE LIABLE FOR NON DEDUCTION OF TAX U /S 194C. AS THE NATURE OF PAYMENT MADE BY THE ASSESSEE IS CO VERED U/S 194-I, NO DISALLOWANCE CAN BE MADE BY INVOKING PROV ISIONS OF -: 17: - 17 SECTION 194C. SINCE PAYMENT TO INDIVIDUAL PERSON IN A YEAR ON ACCOUNT OF HIRE CHARGES DID NOT EXCEED RS. 1.20 LAK HS, EVEN WITHIN THE PROVISIONS OF SECTION 194-I, ASSESSEE WA S NOT LIABLE TO DEDUCT ANY TAX ON THE HIRE CHARGES SO PAID, THER EFORE, NO DISALLOWANCE WAS WARRANTED U/S 40A(IA) OF THE INCOM E-TAX ACT, 1961. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH SEPTEMBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH SEPTEMBER, 2011. CPU*