By Ajay R. Singh, Advocate
CIT (TDS) vs. M/s. UB Engineering Ltd. [ Income tax Appeal
no 1312 of 2014 With 1313 of 2014, dt : 23/01/2017 (Bombay High Court)].
[ITO , (TDS – 3), vs. M/s. UB Engineering Ltd. [ ITA NO.
2025 & 2026/PN/2012; Bench : A ; dated 30/09/2013 ; A Y:2007-08 &
2008-09. Pune. ITAT ]
The assessee is engaged in the business of erection and
commissioning of Industrial Plants and also in A.Ys. 2008-09 & 2009-10
undertakes maintenance of operational plants. The assessee undertakes such work
on contractual basis. Amongst the machinery deployed, it includes ‘cranes’
which are mobilised for movement of heavy machinery. Apart from the deployment
of machinery, assessee also allocated specific activities to labour
contractors. In the case of such activities, assessee incurred expenditure of
Rs.1,21,14,506/- for mobilisation of cranes. The assessee company deducted tax
at source on such payments treating the same to be contractual payments and
applying the provisions of section 194C of the Act. Accordingly, the assessee
deducted tax at source u/s. 194C @ 1% whereas as per the AO the tax was liable
to be deducted in terms of the provisions of section 194I of the Act @ 10% plus
surcharge, treating the payments as rental payments. For the said reason, the
AO treated the assessee as an assessee in default in terms of section 201(1) of
the Act for short deduction of tax to the extent of Rs.12,39,043/- and also
held the assessee liable for the payment of interest on such short deduction in
terms of section 201(1A) amounting to Rs.4,46,055/-.
The CIT(A) considered the facts of the case and concluded
that assessee had correctly applied the provisions of section 194C of the Act
while deducting the tax at source on the impugned payments. The CIT(A) has
noticed that assessee hired services of cranes for which entire maintenance,
repairs, drivers’ salaries etc. was borne by the supplier. The CIT(A) relied
upon the decision of the Pune Tribunal in the case of Wings Travels, ITA No.
1136/PN/2009 and also the judgement of the Hon’ble Gujarat High Court in the
case of Swayam Shipping Services (P) Ltd., 339 ITR 647 (Gujarat) and concluded
that the AO was not justified in invoking the provisions of section 194I of the
Act in respect of the ‘crane hire charges’.
The Tribunal observed that factually, it is not in dispute
that the crane owner not only provides the services of a crane but is also
responsible to provide the operator and incur maintenance & repairs costs, etc.
The Hon’ble Gujarat High Court in the case of Swayam Shipping Services (P) Ltd.
(supra) held that the payments for hiring cranes and Trailers were
liable for deduction of tax at source in terms of section 194C of the Act and
not in terms of section 194I of the Act. The Tribunal also relied on decision,
of the Pune Bench decision in the case of Wings Travels (ITA
No.1136/PN/2009, dated 30th August, 2011 and Bharat Forge Ltd.
vs. Addl. CIT vide ITA No.1357/PN/2010, wherein a similar view to the
effect that in cases where the crane owner provides the operator as also is
responsible for day-to-day maintenance and operating costs, the payments made
for hiring of cranes would be liable for deduction of tax at source u/s. 194C
of the Act and not u/s. 194I of the Act, as contended by the Revenue. Accordingly,
the order of the CIT(A) was affirmed.
Being aggrieved, the Revenue carried the issue in appeal to
the High Court. The High Court observed that the impugned order dismissed the
Revenue’s appeal before it by inter
alia placing reliance upon the decision of the coordinate
bench in the case of Wings
Travels (Supra). In the affidavit dated 13th January, 2017, Mr.
Rajesh Gawali, Deputy Commissioner of
Income Tax (TDS) stated that the
decision of the coordinate bench
of the Tribunal in Wings Travels (supra) has been accepted by the Income
Tax Department in view of an earlier
view taken in the case of Accenture
Services (P) Ltd. (ITAT No.5920,
5921 and 5922/Mum/2009).
In the above view, Revenue Appeal was dismissed.
