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Tds on hire charges

avinash annam (C.A-IPCC article student) (79 Points)

17 January 2012

hai friends!

regarding tds on hire charges.i am not able to get clarity under which section it attracts whether 194c or 194i

please help me in detail.

thank you!

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9 Replies

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 17 January 2012

It is like a contract....depend on term of agreements...

my opinion it will be 194 C...

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CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 17 January 2012

It is like a contract....depend on term of agreements...

my opinion it will be 194 C...

Vineet Goyal (Assistant Manager - Finance & Accounts) (702 Points)
Replied 17 January 2012

What have you taken on hire?

avinash annam (C.A-IPCC article student) (79 Points)
Replied 17 January 2012

we r in audit the co policy is to deduct tds @ 2% i.,e u/s 194i and they r taking machinary and vehicles et

mainly repairs and maintanance were borne by the hire provider and some times co supplies the deisel and that was recovering from the hire provider from the bill.

Vineet Goyal (Assistant Manager - Finance & Accounts) (702 Points)
Replied 17 January 2012

TDS will be deducted u/s 194I @ 2%

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avinash annam (C.A-IPCC article student) (79 Points)
Replied 17 January 2012

i heard that if the repairs&maintanance were borne by the hire provider then it will be under 194c and if the repairs&maintanance were borne by the co then 194i applies.

was this statement right!

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 17 January 2012

Hi Friends

Under which section TDS to deducted depends upon the substance of the transaction. If contract is purely for hire of machinery, section 194I would have been applicable. Where contract is for hiring of machinery coupled with some specified work, it would come under teh defination of work contract and hence 194C would be applicable.

E.g. if contract is for hiring for machinery for carrying some specified work and not general work, it would be treated as contract is for completion of specified work like crane taken on hire for installation of machinery on so and so site. However if bill is only for hire of crane and contract doesnt specifed any specific work.

There is neither any case law nor any circular as such which provides that if repairs and maitenance expenses incurred by service provider, it has to be consider u/s 194C and where it incurred by service receiver, it has to be consider u/s 194I.

Hope this solves ur query.

Thanks and Regards,

Manoj B. Gavali

LALIT KUMAR GANERIWAL (accountant) (241 Points)
Replied 17 January 2012

194c or 194i is depend upon word of agreement

surinder singh (accounting firm) (53 Points)
Replied 18 January 2012

Totally agree with the others that the same is depend upon the agreement. But as you mentioned above that the repair & maint is borne by the service provider/owner of the vehicle so it means the control over the vehicles remains in the hands of Service provider & section 194C will be applicable in this case. There are lot of judgements has been passed in favour of Assess by the tribunial in these types of cases.