Sachin (Taxation) (74 Points)
18 February 2011Please guide me under which section we have to deduct TDS with reasons/notification, if we have given contract for one party for shifting machinery for one place to another place. (party has used his crane for shifting for machinery.)
Sachin
(Taxation)
(74 Points)
Replied 18 February 2011
But we got the notice from IT office stating that "you have deducted TDS u/s 194 C intested of 194I"
Please guide me how to reply to them.
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 18 February 2011
Sachin,
Please refere to Income Tax Circular no.558 issued in 1990. This circular has been dealt with the matter as mentioned by u.
In that circular , the Board have been advised that although the contract may appear to be a single hire contract i.e. for hiring of crane services, it is actually a service contract (for shifting of machinery from one place to other) entered into between the you and the owner of the crane for using his crane for shifting of machinery.
In such cases, the provisions of section 194C are applicable and tax will have to be deducted at source from the payments made to crane owner. If the entire crane has been given by crane owner to you with driver for certain specific job and responsibility of execution of particular job (i.e. in this case is shifting of machinery) rests with crane owner, then its definately be a works contract as crane is only a resource assigned by crane owner for execution of specific work allotted to him.
I think the circular mentioned above is very much clear in iteself that to classify such transaction under sec 194C and u would not face any further issues. Please first go through the circular carefully and proceed accordingly.
Thanks and Regards,
Manoj B. Gavali
Pankaj Arora
(Learner)
(3134 Points)
Replied 18 February 2011
Write a letter to AO of your ward with notice issue by ITO and contract agreement.
Sachin
(Taxation)
(74 Points)
Replied 18 February 2011
one more thing mentioned in I.T. notice for the F.Y.2006-07, we have made payment to a party for computer hire, and we have deducted TDS u/s 194C on it, now I.T.Dept saying it is u/s194I.
Please help me to sort out this issue because amount is huge (194I rate was 11.33% and 194C rate was 2.266%)
Pankaj Arora
(Learner)
(3134 Points)
Replied 18 February 2011
For hire charges you have to deduct tax u/s 194I or if its contract between you and party than you have to deduct tax 194C.
Sachin
(Taxation)
(74 Points)
Replied 18 February 2011
Dear Mr.Pankaj I am not getting you point, request you to please explain me briefly for making reply to I.T.Dept.
Pankaj Arora
(Learner)
(3134 Points)
Replied 18 February 2011
you are saying in your question that you hire computer. hiring any machinery or capital goods comes u/s 194I
Pankaj Arora
(Learner)
(3134 Points)
Replied 18 February 2011
hey was hiring of computer was in contract ? if no than you have to pay taxes
Sachin
(Taxation)
(74 Points)
Replied 18 February 2011
Even we have to pay tax, if party has paid the diffrential tax in their I.T.return for the F.Y.2006-07?
If we take stand party has filed their return and they paid the Income tax on the same, if we pay the tax party will not claim it. if we pay tax it will be a double taxation?.
Pankaj Arora
(Learner)
(3134 Points)
Replied 18 February 2011
Yes you are right party could not claim but its revenue of government and he don’t want to lose it.
25 Hours GST Scrutiny of Return and Notice Handling(With Recording)
Survey, Search and Seizure under Income Tax Act 1961
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