The ITAT Ahmedabad bench comprising Shri Waseem Ahmed, Accountant Member, and Ms Madhumita Roy, Judicial Member sees that the car hiring fees come beneath the provision of section 194I of the Income Tax Act, 1961 and the TDS is chargeable when the payment surpasses the limit of Rs. 1.8 lakhs.
The assessee has a limited liability partnership firm and is involved in the business of the civil contractor.
AO revealed that the taxpayer has incurred car hiring charges which stand in the amount of Rs 1,21,775 that comes beneath the TDS under section 194C of the Act. However, the taxpayer would not deduct the TDS on these expenses. Thus the AO would not permit that and added to the total income of the taxpayer.
To the tribunal, the taxpayer said that the impugned expenses of the car hiring charges would not come beneath section 194C of the Act. while on the other side these expenses come beneath the provision of section 194I of the act in which the limit to deduct the TDS is Rs 1.80 lacs in which the taxpayer has incurred an expense of Rs. 1,21,775 and hence no TDS was deducted.
Post to exploring the truth along with the arguments from both sides, the Tribunal mentioned that it comprises of the small difference between whether the hiring of the car slips under contract towards claiming the services or beneath the category of the rental agreement.
Read Alos: TDS Deduction on Property Sale Under Section 194IA with Penalty
“In our considered view if Car is hired for purpose of specific usage and charges paid on the basis of such specific uses without bearing running and maintenance cost then it should fall under the category of contract for services and provision of section 194C will be applicable. On the other hand, the car is hired not to perform specific services and charges are not paid on the basis of specific uses but the same is hired for the availability of a car for a particular time or period without specification of particular services and charges paid on fixed basis then such hiring should be considered as a rental contract under the provision of section 194I of the Act, the Tribunal articulated.”
Permitting the petition of the taxpayer, Tribunal mentioned that the transaction of car hiring charges comes beneath the provision of section 194I of the act however the taxpayer paid hiring/rental charges less than the limit of Rs 1.8 lacs and thus the taxpayer was not needed to deduct the TDS, hence the taxpayer would not be rendered guilty beneath the provision of section 40(a)(ia) of the Act.
