Payments for hiring of trucks does not come within the purview of “works contract”—Hence, provisions of section 194C are not applicable.

The assessee made payments worth Rs. 17,40,000/- towards
hiring charges of trucks. No tax was
deducted on the said payments. The AO disallowed the expenditure u/s 40(a)(ia)
of the Income-tax Act, 1961 on the ground that the tax was deductible u/s 194C,
as the payments were having the character of “work” as defined in Explanation
III to s. 194C. The contention of the assessee was that there was no contract
between the appellant and the truck owners for carrying goods or passengers;
hence tax was not deductible u/s 194C and no disallowance was warranted.

Following the decision of Poompuhar Shipping Corpn. Ltd., the
Tribunal held that there was no contract between the assessee and the owners of
the trucks for carrying out any work. The assessee simply hired the trucks and
they were utilised in his business of civil construction. For carrying out any
work, manpower is the sine qua non, and without manpower, it cannot be said that
work has been carried out. Merely providing trucks without any manpower cannot
be termed as carrying out work by the truck owners, for which payment was made
by the assessee. Section 194I was also not attracted as its provisions became
applicable on payments made for the use of capital assets with effect from
1.6.2007. Hence, entering into a contract for carrying out work is not
equivalent to contract for hiring trucks. Consequently, there was no need to
deduct tax u/s 194C, and disallowance
u/s 40(a)(ia) was deleted.