The assessee was engaged in the transportation of building materials, etc. In the A.Y. 2007-08, the assessee paid Rs.1,18,29,647 as rent for hiring dumpers and deducted tax at source at the rate of 1.12%. as applicable u/s.194C of the Income-tax Act, 1961. The Assessing Officer held that the payment was governed by section 194-I and accordingly passed order u/s.201(1) holding the assessee to be in default and levied interest u/s.201(1A) of the Act. The Commissioner (Appeals) and the Tribunal held that the assessee was not in default and that the levy of interest was not justified.
On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under:
“(i) The assessee had given contracts to the parties for the transportation of goods and had not taken machinery and equipment on rent. The Commissioner (Appeal) was justified in holding that the transactions being in the nature of contracts for shifting of goods from one place to another wood be covered as works contracts, thereby attracting the provisions of section 194C of the Act. Since the assessee had given sub-contracts for transportation of goods and not for the renting out of machinery or equipment, such payments could not be termed as rent paid for the use of machinery and the provisions of section 194-I of the Act would not be applicable.
(ii) The Tribunal was, therefore, justified in upholding the order passed by the Commissioner (Appeals).”