2006 (1) TMI 60

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....nces of the case, the Tribunal was right in holding that the contract entered into by the assessee was a mere contract of hire of ships and would therefore not fall within the purview of section 194C of the Act?" The facts leading to the above question of law are as under: The respondent-assessee is a Tamil Nadu Government Undertaking. The relevant assessment year is 1994-95 and the corresponding accounting year ended on March 31, 1994. The assessee was engaged in the business of transportation of coal from the ports of Haldia, Visakhapatnam and Paradeep to Chennai and Tuticorin under contracts executed with the Tamil Nadu Electricity Board. The assessee owned three ships. Since three ships were not sufficient to carry out the contrac....

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....nies for the purpose of transport of coal from one port to another, and therefore, Circular No. 681 dated March 8, 1994 (see [1994] 206 ITR (St.) 299), of the Central Board of Direct Taxes is squarely applicable to the facts of the present case. She further submitted that section 194C was amended with effect from July 1, 1995, incorporating the Explanation. This Explanation clarifies the existing provisions of section 194C of the Income-tax Act, and therefore it would be applicable retrospectively. Further it is also submitted that the carriage of goods and passengers was included within the expression "work". Therefore, the carriage of coal from one port to another has to be treated as contract for carriage of goods. Hence, the provision o....

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.... "hire". Normal hire is a contract by which one gives to another temporary possession and use of the property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. Therefore, in our view, when the assessee entered into a contract for the purpose of taking temporary possession of ships in the shipping company it could not be construed as if the assessee entered into any contract for carrying out any work, and when the contract is not for carrying out any work, the Revenue cannot insist the assessee ought to have deducted tax at source under section 194C of the Act. Further, the other argument of counsel was, section 194C was amended with effect from July 1, 1995, inco....