Delhi ITAT: No TDS Payable U/S 194C in Case of Shifting Site Machine, Road Construction & Crane Hiring

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled that Tax Deduction at Source (TDS) under Section 194C of the Income Tax Act, 1961 does not apply to casual labour expenses incurred for activities such as road construction, crane hiring, and site machine shifting.

The entity in question, Amtech Engineers, is a partnership firm specializing in providing mechanical engineering services. These services encompass tasks like fabrication, erection, piping equipment installation, steel structural work, civil work, painting, and more, all provided to clients on a sub-contract basis, often in remote areas.

During the fiscal year, Amtech Engineers received a sub-contract that necessitated incurring casual labour expenses, including those related to site machine shifting, road construction, and crane hire. Consequently, during the assessment proceedings, Amtech Engineers contended that the provisions of Section 194C should not be applied to these specific transactions. However, this contention was not accepted by the tax authorities. Subsequently, when the firm appealed to the CIT(A), their appeal was dismissed.

Subsequently, the assessee pursued a second appeal before the tribunal.

During the appeal proceedings, Mr Sanjay Sharma, representing the assessee as their counsel, argued that the expenses related to site road construction, crane hiring, and site machine shifting should be categorized as labour expenses.

However, owing to a lack of clarity, particularly regarding the interpretation of whether TDS should be deducted in these cases, and the absence of professional guidance on the matter, the assessee failed to withhold or deposit TDS on the aforementioned payments.

Mr. Kanav Bali, representing the Revenue, supported the decision made by the assessing officer.

After a thorough evaluation of the arguments put forth by both parties, the two-member bench consisting of Dr. B.R.R. Kumar (Accountant Member) and C.M. Garg (Judicial Member) dismissed the assessee’s appeal, affirming that Tax Deduction at Source (TDS) is not applicable under Section 194C of the Income Tax Act for the casual labour expenses made in road construction, crane hiring, and site machine shifting.