Crane charges

U/s 194C for contract given.

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.

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

Write a letter to AO of your ward with notice issue by ITO and contract agreement.

Thanks a Lot Mr.Pankaj & Mr.manoj !!!!

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%)

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.

Dear Mr.Pankaj I am not getting you point, request you to please explain me briefly for making reply to I.T.Dept.

you are saying in your question that you hire computer.  hiring any machinery or capital goods comes u/s 194I 

Then we have to pay diff. TDS amount??????

hey was hiring of computer was in contract ? if no than you have to pay taxes

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?.

Yes you are right party could not claim but its revenue of government and he don’t want to lose it.