TMI Blog2010 (10) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned vendors for hiring of cars which clearly establish that there being no specific cars identified and earmarked for the assessee and it was only the arrangement for providing cars of a particular category to facilitate transportation of the employees and guests of the assessee from one place to another, the tax at source from the payment of car hire charges was required to be made by the assessee as per the provisions of section 194C read with Explanation (iv)(c) thereto - Decided in the favour of the assessee what is to be seen in order to ascertain whether section 194C is applicable or section 194J is the exact nature of work against which payment is made and not to whom the said payment is made and even the ld. D.R. has not disputed this position - The work involved was mainly for interior work done at the call centres of the assessee and it involved making of partitions, doors, carpeting and flooring, painting, electrification etc - the designing charges were paid separately by the assessee and tax at source was deducted from the said payment as per the relevant provisions - Decided in the favour of the assessee - 6282 to 6285 and 6410, 6413 (Mum.) of 2009 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness. It was contended that there was no agency relationship between the assessee and Bajaj and the arrangement between the parties was to share the premium, risk etc. on principal-to-principal basis. It was also contended that reinsurance commission was nothing but meant to take care of the cost of procurement, cost of funding claims till recovery is made from the reinsurers and to account for any non-recovery in the event of their going insolvent. It was pointed out that a similar issue has already been decided by the Mumbai Bench of ITAT in favour of the assessee the case of General Insurance Corpn. of India v. Asstt. CIT [2009] 28 SOT 453. On appreciation of the relevant facts involved in the case of the assessee vis-a-vis the facts involved in the case of General Insurance Corpn. of India (supra), the ld. CIT(A) found that a similar issue involving identical facts was decided by the Tribunal in favour of the assessee in the case of General Insurance Corpn. of India (supra). Accordingly, he followed the decision of the Tribunal and held that the provisions of section 194D were not applicable to the payment of reinsurance commission paid by the assessee to Bajaj. Accordingly, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of remuneration or reward for soliciting or procuring of insurance business. As noted earlier, remuneration or reward would be related to services rendered in connection with soliciting or procuring business. In this case the payment of discount is made to insurance companies but the payee companies have not solicited or procured insurance business for the assessee. For the sake of arguments, it may be accepted that the assessee company has solicited or procured insurance business from the insurance companies but the payment is not made to the solicitor or procurer of insurance business but to those from whom business has been solicited or procured. In the present case, payer would be a solicitor or procurer of insurance business but not the payee companies. For attracting section 194D, the payment has to be by way of remuneration or reward not for giving business to the assessee but for soliciting or procuring the insurance business. 5. For the reasons given above as well as for the detailed discussion made in its order dealing with the other relevant aspects of the matter, the Tribunal finally held in para No. 37 that the insurance companies have not provided any service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that the carriage of passengers by any mode of transportation will also cover hiring of cars and since the assessee had not made any payment for use of particular motor cars but for the facility of transport from one place to another, tax at source was deductible from the payment of car hire charges as per the provisions of section 194C. Relying on the Board Circular No. 5, dated 30-7-2002, it was contended that the assessee had entered into an arrangement for hiring of cars which was in the nature of rate contract for providing specified types of cars at pre-determined rates and since specific cars were not made available at the disposal of the assessee as per the said arrangement, the provisions of section 194C were applicable and not the provisions of section 194-I. To further support and substantiate this stand, the assessee also filed a sample copy of invoice issued by the vendor to show that services rendered by the vendor were with respect to facility of transport of the assessee s employees from one place to another and specific cars were not earmarked for the assessee for this purpose. 9. The ld. CIT(A) found merit in the submissions made on behalf of the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs was for hiring of only particular category of cars and cars were not earmarked by the appellant. Based on the above, it is amply clear that the nature of arrangements made by the appellant is in the nature of Service Contract only as the appellant does not enjoy the control over the vehicles and also the running and maintenance expenditure is borne by the car providers. Thus in view of the above facts I hold that the payment made by the appellant to the cars providers fall within the ambit of the provisions of section 194C of the Act. Accordingly, the appellant is treated assessee in default for not deducting tax at source. To this extent, the order of the Assessing Officer is confirmed. 10. The ld. D.R. submitted that the charges paid by the assessee for hiring the cars were clearly in the nature of rent paid for the cars and the provisions of section 194-IA were squarely attracted as rightly held by the Assessing Officer. He contended that the assessee thus was required to deduct tax at source at the higher rate as per the provisions of section 194-I as against tax deducted at low rate relying on the provisions of section 194C, which were not applicable. 11. The ld. cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied and earmarked for the assessee and it was only the arrangement for providing cars of a particular category to facilitate transportation of the employees and guests of the assessee from one place to another, the tax at source from the payment of car hire charges was required to be made by the assessee as per the provisions of section 194C read with Explanation (iv)(c) thereto. As held by the ld. CIT(A), the assessee thus had rightly deducted tax at source from the payment of car hire charges as per the provisions of section 194C and the Assessing Officer was not correct in holding that the tax was required to be deducted by the assessee at higher rates as per the provisions of section 194-I. We, therefore, find no infirmity in the orders of the ld. CIT(A) on this issue and upholding the same, we dismiss ground No. 2 of the revenue s appeal for assessment years 2007-08 and 2008-09. 13. Now, we shall take up the appeals of the assessee. The first common issue relating to the liability of the assessee to deduct tax at source from bus hiring charges is involved in ground Nos. 1 and 2 of the assessee s appeal for assessment years 2007-08 and 2008-09. 14. During the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to various parties by way of bus hire charges was in the nature of rental of plant and machinery/equipment and therefore liable for withholding tax under section 194-I of the Act. On the other hand the appellant contended that its case is covered by section 194C. The expression work has been defined in section to include payment in respect of carriage of goods and passengers by any mode of transport. The appellant had placed reliance on CBDT Circular 558 dated 28-3-1990 and Question No. 6 of Circular 715 dated 8 August, 1995. The Agreement made between the appellant and M/s Suresh Travels transpires that the appellant agrees to pay monthly fixed rent of Rs. 23,000 to the contractor for carrying out the services to the satisfaction. The Agreement is valid for one year. From the Agreement it is clear that the amount is paid by the appellant as a rent to the bus owner on fixed monthly basis which is covered under section 194-I of the Income-tax Act. In this case the charges are not fixed movement-wise or per kilometer or time duration-wise. Since the buses are hired on monthly basis, it is not correct to say that there was no control of the appellant over the buses used. I a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that the terms and conditions of the relevant agreements clearly show that the assessee had no control whatsoever over the buses which were hired and the arrangement with the contractor was only for providing bus services to the commuting staff between office premises and specific railway station. He contended that the payment made by the assessee for bus hire charges as per the said agreement thus was not in the nature of rent but the same was for the work of carriage of passengers by buses as a mode of transport and deduction of tax was rightly made by the assessee as per the provisions of section 194C. In support of this contention, he relied on the decision of Hon ble Supreme Court in the case of Associated Cement Co. v. CIT [1993] 201 ITR 4351 and Board Circular No. 558, dated 28-3-1990. 16. The ld. D.R., on the other hand, submitted that the arrangement between the assessee and the concerned parties was for hiring of buses and the income arising from such arrangement from hiring was in the nature of rent as rightly held by the Assessing Officer as well as by the ld. CIT(A). He invited our attention to the copy of sample agreement placed in the paper book of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed twenty thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. 18. The Assessing Officer as well as ld. CIT(A), however, held that tax at source was required to be deducted by the assessee at higher rates from the payment of bus hire charges as per the provisions of section 194-I which as applicable to the years under consideration are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t specific timings. As further agreed, the assessee was to pay a total monthly fixed amount of Rs. 23,000 with Service tax Education Cess (as applicable) to the contractor for carrying out the services to its satisfaction on the basis of invoice to be raised by the contractor in this regard. As per the said agreement, the contractor had assured the assessee that for the purpose of providing bus services, they had employed adequate and well trained staff such as drivers, cleaners and team of skilled personnel for fulfilling their agreement. The contractor had also undertaken to provide 23 seater bus for this purpose. The contractor had also agreed to provide a first party insurance cover for the employees of the assessee availing the bus services in a case of accident/damage etc. Both these parties had also agreed to increase the monthly compensation for use of bus services with a mutual consent as a result of any increase in the rates of taxes, dues and hike in diesel or oil prices. Even the formula to increase the compensation on the basis of increase in diesel or oil prices was also agreed between the assessee and the contractor. After having taken into consideration all these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of leasehold charges is raised in ground Nos. 1 and 2 of the assessee s appeals for assessment years 2005-06 and 2006-07 and ground Nos. 3 and 4 in its appeal for assessment years 2007-08 and 2008-09. 21. During the years under consideration, the assessee had made payments for contract of work such as carpentry, loose furniture, carpets, partitions and flooring, civil work, internal lighting and power network, light fixtures, plumbing etc., carried out at various locations taken on lease by it. Tax at source from the said payments was deducted by the assessee in accordance with the provisions of section 194C. According to the Assessing Officer, the said payments were made by the assessee for the work which was in the nature of fees for professional and technical services . He therefore held that the assessee was liable to deduct tax at source at higher rate from the said payments as per the provisions of section 194J. Before the ld. CIT(A), it was submitted on behalf of the assessee that the nature of work for which the impugned payments were made was not of fees for professional and technical services as contemplated under section 194J. It was submitted that it was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the above submission very carefully and have perused the order of the Assessing Officer. I find that the Assessing Officer has held that amount paid for the work was in the nature of fees for professional and technical services and therefore liable to TDS under section 194J of the Act. On the other hand the appellant has tried to establish that the payment made on account of leasehold charges are covered under section 194C of the Income-tax Act. A perusal of bills issued by the various vendors show that the work is undertaken by the interior decorators or by the architectural experts i.e., by Nivea Enterprises Interior Contractors, allies Enterprises - Interior Decorators, Designer, civil Job, Concept Interiors, Sthapati Consultants- Architects, Interior Designers Construction, Management consultants. All this clearly indicates that the payment are covered under section 194J as fees for professional or technical services . The appellant has tried to bifurcate the fees paid towards professional and technical service and payment made for execution of work. But the fact is that the entire work has been done by the experts like interior designer/decorators and architects. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant material on record. As rightly contended by the ld. Counsel for the assessee, what is to be seen in order to ascertain whether section 194C is applicable or section 194J is the exact nature of work against which payment is made and not to whom the said payment is made and even the ld. D.R. has not disputed this position. It appears from the impugned order of the ld. CIT(A) that he has decided this issue on the basis that the payments in question were made by the assessee mainly to interior decorators and designers overlooking the exact nature of work done by them. In order to ascertain the exact nature of work done by the concerned parties, we have carefully perused the copies of bills raised by them which are placed at page Nos. 83 to 129 of the assessee s paper book. It is clearly evident from the description of work given in the said bills that the work undertaken by the concerned parties was for repairs and renovation carried out in the premises taken by the assessee on lease. The work involved was mainly for interior work done at the call centres of the assessee and it involved making of partitions, doors, carpeting and flooring, painting, electrification etc. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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