TMI Blog2010 (10) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... l within the ambit of the provisions of section 194C of the Act - since the appellant has rightly deducted taxed as per the provisions of section 194C of the Act, the assessee shall not be treated as “assessee in default” under section 201(1) of the Act - Thus decided in the favour of the assessee - ITA No. 5920, 5921 and 5922/Mum/2009 - - - Dated:- 20-10-2010 - SHRI S V MEHROTRA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER Appel lant by : Shri Ji tendra Yadav Respondent by : Shri R R Vora JUDGMENT PER VIJAY PAL RAO, JM These appeals by the revenue are directed against the three different orders of the CIT(A) dated 18.08.2009 arising from the orders passed under sect ion 201(1) and 201(1A) of the Income Tax Act, 1961. These appeals pertain to the assessment years 2007-08, 2008-09 and 2009-10. In all these appeals issue involved is applicability of sect ion 194-I or 194- C. Therefore, for the sake of convenience, these appeals were heard together and are being decided by this composite order. 2. Solitary common ground raised by the revenue in these appeals is as under : On the facts and circumstances of the case and in law, the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since as per the Rule 5 of the Income Tax Rules, 1962 the motor vehicle used in the business of running them on hire falls within the ambit of plant and machinery, therefore, the payment made towards rental of motor vehicles would attract the TDS under the provisions of section 194-I of the Act. The ld. DR has further contended that after the amendment of section 194-I the circular no.N681 dated 8.03.1994 is not applicable. The learned DR has referred sub-para (3) of paragraph 7 of the said circular and submitted that even as per the said circular, the payment made for hiring or renting the equipment would not fall under the provisions of section 194-C. . The ld. DR submitted that the circular relied upon by the assessee as well as by the learned CIT(A) are not applicable when the vehicles is treated as plant and machinery for the purpose of depreciation under sect ion 32. The same cannot be treated different for the purpose of deduction under TDS. The ld. DR has referred the agreement and particularly the Annexure A of the agreement for providing the transportation services by the service provider between the assessee and the service provider. Thus, the ld. DR has submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responsible for maintenance and the up-keeping of the vehicles and transporting the assessee s employees. The key expenses such as fuel cost, repair and maintenance charges, remuneration of the vehicle staff and other expenses of the employees of the service provider are born by the service provider. He has further pointed out that the service provider is also responsible for the attending the necessary problems, licence for running the vehicles and transport of the working employees of the assessee. The drivers and other staff of the vehicles were under the supervision and control of the service provider. The service provider is also responsible to supervise each movement of the vehicle transporting the assessee employees and self passage of the employees of the assessee. The vehicles operated by the transport service provider were under the control of the service provider and cannot be said to be at the disposal or under the control of the assessee. Thus, the payment made to the transport service provider are in the nature of Payments for availing the transporting service and not rent for hi ring vehicles. He has submitted that as per the Explanation III to sect ion 194C, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has availed the services of the transporter vehicles and al l the services provided which is similar to the nature of charting the vehicles. The learned AR has relied upon the decision of in the case of Indian Nat ion al Ship Owners Association and others V/s CIT (TDS) and others (writ petition number 400 of 2007). He has also relied upon the decision in the case of Nat ional Panasonic India (P) Ltd V/s DCIT reported in (2005) 3SOT 16(Del). The ld. AR alternatively submitted that when the transport service provider has paid tax on income by way of advance tax and TDS in respect of the payment made by the assessee then the AO cannot again raised the demand under sect ion 201(1) of the Act. He has relied upon the various decisions in support of his contentions : Hindustan Coca Cola Beverage (P). Ltd. v. CIT (2007) 293 ITR 226 (SC) M/s Mahindra and Mahindra v. The DCIT (TDS) range 1(1)(MUM) 2009-TIOL-255 ITAT-MUM-SB) M/s Larsen and Tourbo John Deere Pvt. Astt. 2008-TIOL-449-ITAT-Pune M S Chahal v. ITO (2004) (82 TTJ 841) Ars ACIT v. British Airways (2005) (95 TTJ 980) (Del) CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation of service provider. The CBDT has clarified in circular No. 681 dated 8.03.1994 as under : 7 . (i) the provisions of section 194 shall apply to all types of contracts for carrying out any work including transport contract , service contracts, advertisement contracts, broadcasting contracts, telecasting contracts, labour contracts, materials contracts and works contract ; (ii) .. (iii) (iv) (v).. Service contracts would be covered by the provisions of this section since service means doing any work as explained above It was further clarified in sub-para (ii) of paragraph 8 of circular no. 681 (ii) the term transport contracts would, in addition to contracts for transportation and loading/unloading of goods, also cover contracts for plying of buses, ferries, etc, along with staff (eg. Driver, conductors, cleaner etc) Reference in this regard is also invited to Board s circular no. 558, dated 28.03.1990 8. Thus, it is made clear by the Board that the provisions of section 194-C shall apply to all types of contracts for carrying out any work including transport contract, service contract etc. Under sub-paragraph (ii ) of paragraphs 8 of circular, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch cases, the provisions of sect ion 194C are applicable and tax will have to be deducted at source from the payment made to the private bus owner. It may, therefore, be kept in mind that the applicability of the provisions of section 194 in such cases may be considered on merits in the light of the aforesaid observations, and to this extent the clarification given in question no.5 in Board s circular no.98, dated Sept 26 1972 stands modified Further in circular no.715 dated 8.8.1982, the Board has again clarified in answer to in question no.6 as under : Q.No.6 whether payment under a contract for carriage of goods or passengers by any mode of transport would include payment made to a travel agent for purchase of a tickets or payment made to a clearing and forwarding agent for carriage of goods? A. The payments made to a travel agent or an airlines for purchase of a tickets for travel should not be subjected to tax deduction at source as the privity of the contract is between the individual passenger and the airlines/ travel agent , notwithstanding the fact that the payment is made by an entity mentioned in sect ion 194C (1). The provisions of section 194C shall, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than by railways and fright payments have to be deducted under this section and not under section 194-I . 15. Apart from the above, respondents themselves in consonance with the above interpretation or view have issued certificate under section 197-I of the Act in relation to the deduction of tax in favour of one of the members of the first petitioner. Association, i.e. M/s Varun Shipping Company Ltd. accepting the contentions which the petitioner have advanced in this case, Needless to mention that the department cannot make discrimination between the similarly circumstances shipping companies 10. The explanatory note on provisions relating to Finance Act, 2007 vide paragraphs 56.2 and 56.3 of Circular no.3 of 2008 dated 12.03.2008 has explained that as amended by the Tax Laws, the Amendment Act, 2006 w.e.f. 13.07.2006, the definition of rent on three new items plant, machinery and equipment has been inserted Subsequently, as per the Financed Act 2007 the rate of deduction of tax at source was reduced 15% to 10% in respect of income payable by way of rent for use of any machinery or plant or equipment. Thus, it is clear that the provisions of section 194-I is confined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en no demand can be raised u/s 201(1) otherwise it will amount to double taxation. The CIT(A) has decided the issue in paragraph 6. to 6.7 as under : 6. I have gone through the facts, of the case, material on record, submissions made by the appellant and also the order of the assessing officer. I have also analyzed the sample copies of the agreement entered by the appellant with its transport service providers. As per the terms of the agreement, the contract entered by the appellant with its transport service providers. As per the terms of the agreement, the contract entered by the appellant with the transport service provider is primarily in the nature of transport contract for the transportation of its employees. The terms of the transport contract clearly provide that as such vehicle is not at the disposal of the appellant and the appellant has to run the vehicles on predetermined routes only. The agreement also makes the transport service providers responsible for the provisions of derivers, running and maintenance of the vehicle (e.g. petrol) insurance licensce, permit). The drivers for vehicles work under the supervision and control of the transport service provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable in case of hire payments made for the hiring of transport vehicle. 6.5 The carriage of goods and passengers by any mode of transport other than railway are specifically covered by the expression work as defined in the explanation I I I to sect ion 194C of the Act. The contracts entered by the appellant with the transport service providers are for the transportation of its employees. Hence the same should be covered by the Explanation I I I to section 194C of the Act ; 6.6 Thus, in view of the above facts, I agree with the contention of the appellant and hold that the payments made to the transport service provider fall within the ambit of the provisions of section 194C of the Act; 6.7 As held above, since the appellant has rightly deducted taxed as per the provisions of section 194C of the Act, the assessee shall not be treated as assessee in default under section 201(1) of the Act 12. In view of the above discussion, we do not find any error or illegality in the order of the learned CIT(A) who has discussed the issue in detailed and the findings are based on the decision of the Hon. Jurisdictional High Court as well as on the basis of Board circulars. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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