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Sec 194I or 194C

This query is : Resolved 

will expenses incurred on car hire charges attract 194I or 194C

No. Section 194C deals with Works Contracts and section deals with rent for land/buildings. Car hire charges neither comes in the definition of works contracts nor in land/buildings.

well as far as i know 194I also deals with rent on machineries and what i want to know is that will cars taken on hire will fall under the definition of machineries.
If not then this will obviously attract 194C as there exists a contact between the two parties.
I also feel that cars will fall under the defn of machines
correct me if i am wrong

As per the explanation to section 194 I - "(i) "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee"
as such car hire charges doesnot attract section 194 I for sure.
Sec 194 C deals only with works contract and as such care hire charges dosnot fit in there also.
Thus 194 I & C would not be attracted

i hate to disagree, but the definition given by Mr. Amit has been substituted by the taxation laws (amendment) act, 2006 w.e.f 13.07.06.The new definition of rent also includes machineries, plant and equipment.
Moreover w.e.f 01.06.07 the TDS rate is be 10% irrespective of the nature of the payee.
Correct me if i am wrong

would be waiting for a reply

Mr. Abhishek, you are absoultly right about TDS rate & Defination. but the main matter is car taken on hire can be included in the defination of Machineries.

Mr. Sanjeev, according to me car will fall under the definition of machineries.

if we reffer to singhanias ready reckoner, para 48.3 which talks about block of assets, sec 2(11) we will see that cars used in the bussiness of running them on hire will fall under Plant and Machinery Block 7

Mr abhisek u r 100% in correct position Sec. 194 I would attract on hiring of car i.e. car is trated as machinery because car is the combinition of mechanical part.

The matter has been settled by now in a recent case by Bombay High Court.

Motor car is plant only for the purpose of section 28 to 41 and should not be stretched beyond that.

You may refer to :

can i please get the case details

Mr. Abhishek I read your query i thought that if the car is hired on full mode like the driver & all is maintance is paid by us then we deduct the TDS as Rent rate (194I) but when we hire car & the driver is also given by car owner & maintance is alo paid by him he is only received one payment from us then this is a contract case and we deduct the TDS as contract rate (194 C ) so please chk this



sachin kumar sharma

Dear Mr. Abhishek,

Please check the following link for the case details.

The judgement relates to chartering of ships. However, the ratio of the case squarely applies to hiring of other vehicles also.

Very useful input.

neither 194I nor 194C

mr ABHishek correct answer

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