- (1.) THE assessee is a company engaged in re -rolling of M.S. Structurals. The assessee filed a return of income for the Assessment Year 1998 -99, which was scrutinized by the Assessing Officer, who found that the assessee had debited a sum of Rs. 13,86,220/ - in profit and loss account under the head "manufacturing and other expenses" as equipment hire charges. The Assessing Officer noticed that the aforesaid amount was paid as rent for use of the factory premises owned by M/s Usha Udyog Ltd., to whom the assessee paid an amount of Rs. 200/ - per ton on manufacturing of steel items, as per the terms of agreement dated 06.03.1997.
(2.) THE Assessing Officer concluded that the assessee company was under an obligation to deduct tax under Section 194 -I of the Income Tax Act, 1961 (hereinafter referred to as the Act) and since the assessee did not do so, the Assessing Officer treated the assessee in default and passed an order under Section 201 of the Act directing the assessee to pay income tax of Rs. 2,77,244/ - and interest under Section 201 (1A) of the Act amounting to Rs. 31,119/ -.
(3.) BEING aggrieved, the assessee filed an appeal, which was dismissed. The assessee thereafter filed a second appeal before the Tribunal, which was allowed and the additions were deleted. The Tribunal held that the assessee was not liable to deduct tax at source under Section 194 -I of the Act. The Department, being aggrieved by the order of the Tribunal, has filed the present appeal under Section 260A of the Act, which was admitted on the following questions of law: "1. Whether on the facts and circumstances of the case the Hon'ble I.T.A.T. was justified in holding that the assessee was not liable to deduct the tax at source u/s 194 -I of the I.T. Act on the amount of rent paid by it to M/s Usha Udyog Limited, the owner of the factory building which was being used by the assessee company together with plant and machinery installed therein. 2. Whether on the facts and in the circumstances of the case the Hon'ble I.T.A.T. was justified in holding that there was no use of factory land and building by the assessee and the assessee paid the rent for use of only plant and machinery installed in the factory premises ignoring the fact that the plant and machinery being installed in the factory building, the assessee used land and building also and paid the rent accordingly." We have heard Sri Shambhu Chopra, the learned counsel for the appellant.;