Entering into a contract for hiring of trucks is not equivalent to entering into a contract for carrying out any work as contemplated in section 194C; therefore, Explanation III to section 194C is not attracted to the facts of such case.
RELEVANT EXTRACTS:
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8. The question here is as to whether the addition made by the A.O. has rightly been deleted by the learned CIT(A), holding that the provisions of section 194C of the Act are not attracted. Undisputedly, the transaction herein is taking of trucks on hire by the assessee. As per the A.O., Explanation III to section 194C of the Act is squarely applicable to such a transaction. Explanation III to section 3(c) to section 194C of the Act reads as under:-
"For the purpose of this section, the expression "work" shall also include:-
(a)......................................................................
(b)......................................................................
(c) carriage of goods and passengers by any mode of transport other than by railways;"
9. In "CIT Vs. Poompuhar Shipping Corporation Ltd.", 282ITR 3 (Mad.), the assessment year involved was 1994-95. Explanation III to section 194C of the Act was incorporated, w.e.f. 1-7-1005. In "CIT Vs. Poompuhar Shipping Corporation Ltd." (supra), the Hon'ble High Court held that the Explanation is prospective and not retrospective. The year under consideration is 2005-06. Therefore, the Explanation III to section 194C of die Act is directly applicable. As per the Explanation, "work" shall also include carriage of goods or passengers by any mode of transportation other than railways. The expression used in section 194C(1) is "any work", including supply of labour for carrying out any work. The work in the present case, for which, payments were made by the assessee, was hiring of trucks. In "CIT Vs. Poompuhar Shipping Corporation Ltd." (supra), payment of hire charges for taking temporary possession of ships was held not to fall within the provisions of section 194C of the Act. It was held that hiring of ships for the purpose of using them in the assessee's business did not amount to a contract for carrying out any work as contemplated in section 194CoftheAct.
10. Explanation III to section 194C of the Act not being applicable to the assessment year under consideration before the Hon'ble High Court in "CIT Vs. Poompuhar Shipping Corporation Ltd." (supra), the applicability thereof was not gone into by their Lordships, holding that the said explanation would be applicable prospectively w.e.f. 1-7-1995, the date on which it was introduced.
11. Explanation III to section 194C is applicable to the assessment year before us. However, it does not apply, in our considered opinion, to the facts of the present case. This is so because the provisions of section 194C of the Act are applicable to payments for carrying out any work in pursuance of a contract. Now, in keeping with "CIT Vs. Poompuhar Shipping Corporation Ltd."(supra), under section 194C, tax is to be deducted when a contract was entered into for carrying out any work. In the present case, like therein, there was no contract between the assessee and the owners of the trucks to carry out any work. The assessee hired the trucks belonging to the truck owners for a fixed period, on payment of hire charges. The hired trucks were utilised by the assessee in its business of civil construction. There was no agreement for carrying out any work or to transport any goods or passengers from one place to another. The assessee simply hired the trucks on payment of hire charges. Like in "CIT Vs. Poompuhar Shipping Corporation Ltd." (supra), here also, it is not the case of the department that the assessee entered into any contract with the truck owners for transportation of goods or passengers or one place to another. Thus, the hiring of trucks for the purpose of using them in the assessee's business would not amount to a contract for carrying out any work, as contemplated in section 194C of the Act, as held in "CIT Vs. Poompuhar Shipping Corporation Ltd." (supra).
12. For carrying out any work, man power is the sine qua non and without man power, it cannot be said that work has been carried out. Under section 194C of the Act "carrying out any work" is the substance for making a payment relating to such work, liable for deduction tax at source. The provisions of section 194C are attracted only where any sum is paid for carrying out any work including supply of labour for carrying out any work. In the present case, it is not the case of the department that the trucks taken on hire by the assessee from the truck owners were supplied by the truck owners to the assessee along with man power, i.e., drivers and/or conductors. The trucks were undeniably put to use by the personnel of the assessee. Thus, nothing has been brought on record by the department to the effect that man power was provided alongwith the trucks to the assessee by the truck owners. Mere providing of the trucks without any man power" cannot be termed as carrying out of any work by the truck owners, for which, any payment was made by the assessee.
13. The department has not disputed the case of the assessee that the payment was made for hiring charges regarding hiring of trucks. As explained in "CIT Vs. Poompuhar Shipping Corporation Ltd." (supra), hiring is a contract by which one gives to another temporary possession and use of property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. Therefore, when the assessee entered into a contract for the purpose of taking temporary possession of trucks from the truck owners, it did not amount to the assessee entering into any contract for carrying out any work. Once the contract was not for carrying out any work, as per "CIT Vs. Poompuhar Shipping Corporation Ltd." (supra), the provisions of section I94C are not attracted.
14. Explanation III to section 194C explains the expression "work" as used in sections 194C(1) and (2) of the Act. Obviously, the Explanation cannot operate beyond the field of the section read with the Explanation. The Explanation would be applicable if the assessee had made any payment for carrying out any work including, as per the Explanation, carriage of goods and passengers by any mode of transport other than by railways. The Explanation cannot apply to a situation not amounting to a contract for carrying out any work as contemplated in section 194C, and entering into a contract for hiring of trucks is not equivalent to entering into a contract for carrying out any work. Therefore, Explanation III to section 194C is not attracted to the facts of the present case.
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