TMI Blog2011 (11) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on facts and in law in directing that the payment of hiring charges of tanker is liable for TDS u/s 194-C and not 194-I of the I.T Act, 1961, as applied by the A.O. 1.2 In directing so, CIT(A) has failed to appreciate the following: (i) The payment was made essentially for hiring of tankers which were given in exclusive possession and use of the assessee for a fixed tenure and the tankers were also customized as per the requirement of the hirer. (ii) The assessee, being the hirer was not only in exclusive possession of the vehicle, but could also use them in the manner it wanted and no other person could use them in the manner it wanted and no other person could use them during the tenancy period. (iii) Ld. CIT(A) has erred in holding that the exclusive right to use the tankers was not vested with the assessee company whereas the very first clause of the contract deed provides for such exclusive rights to use by the assessee company and the company has the exclusive possession of the tankers to the complete exclusion of the owner of vehicles for the duration of tenancy. (iv) Section 194-I(a) (introduced w.e.f. 01.06.2006) is applicable which provides TDS @10% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of an agreement with the respective transporters termed as The Carrier' in the agreement. The tax on such payments has been deducted at source @2% in terms of the provisions of section 194C of the Act. However, the Assessing Officer (A.O. in short) was of the opinion that the assessee was required to deduct tax @10% per annum in terms of amended provisions of 194-I of the Act until 30.9.2009 and @2% w.e.f 1.10.2009 onwards. In response to a show cause notice by the A.O. as to why the assessee may not be treated in default for not deducting tax at the stipulated rates in terms of provisions of sec. 194-I of the Act, the assessee while referring to CBDT Circular No. 681 dated 08.03.1994 and Circular No. 558 dated 28.03.1990, contended that the agreement between the company and the carriers is similar to the contract discussed in the aforesaid circulars and, therefore, they deducted at source in terms of provisions of section 194C of the Act. However, the AO did not accept the contentions of the assessee and while analyzing various clauses of the sample agreement concluded that the assessee was required to deduct tax at source @10% until 30.9.2009 @2% w.e.f. 1.10.2009 in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the facts of the case as also the aforesaid decisions. The issue before us is as to whether the assessee company was required to deduct tax at source in terms of provisions of sec. 194C or u/s sec. 194-I of the Act while making payments to the carrier for transportation of petroleum products in accordance with agreement, a sample copy of which is placed at pg. 59 to 72 of the paper book. The relevant provisions of sec. 194C , stipulating deduction of tax at source from payments to contractors fall under Part B of the chapter-XVII of the Act. In terms of these provisions, any person responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of cheque or draft or any other mode, whichever is earlier, deduct an amount equal to the percentage specified thereunder of such sum as income tax. The term 'work' defined in clause (iv) of the explanation to the sec. 194C of the Act includes in sub-clause (c) carriage of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tank truck and recover the difference in transportation charges from the carrier. The assessee company, in terms clause 6 of the agreement, is required to pay for the transportation work in accordance with stipulated rates on per KL per KM basis. Inter alia, it is stipulated that no idle charges would be payable. In terms of clause 8, the carrier is responsible for loading and discharge and in the event of shortage, the carrier is made responsible. After considering various clauses of the sample agreement, we are of the opinion that the said agreement is essentially for transportation of bulk petroleum products and not for hiring of tank trucks. We find that the Hon'ble Gauhati High Court in their decision dated 27.2.2009 in CR3997/1998 in the context of deduction of tax u/s 27(a) of the Assam General Sales Tax Act, 1993, after analyzing the terms of a similar agreement in the case of the assessee observed that the said agreement obliged the contractor to operate the vehicles for the purpose of carrying petroleum and petroleum products, as per the directions of the assessee company, from one place to another. If the vehicle remained off the road and, consequent thereupon, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner (Appeals) upon appreciation of the evidence on record has found that the assessee had given sub-contracts of transportation of goods from one place to another. To prove the nature of contracts, the assessee had produced various bills issued by such; sub-contractors to show that, the contracts were mainly carried out for shifting of goods from one place to another. The Commissioner (Appeals) also found that the charges were collected by sub- contractors on the basis of the quantity of goods transported and the number of trips carried out; the assessee had not acquired dumpers on rent or lease; and that the possession and control of vehicles was with the sub-contractors, who only provided services of shifting of goods from one place to another place. It was noted that evidence in support of above was submitted to the Assessing Officer during assessment proceedings. In the background of the aforesaid findings of fact recorded by him, the Commissioner (Appeals) was of the view that when the transportation contract was in the nature of shifting of goods from one place to another, such contracts would be covered as works contracts and provisions of section 194C would be applicable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d equipments. Section 194-I of the Act makes provision for deduction of tax at source where any person who is responsible for paying to a resident any income by way of rent where as section 194C of the Act makes provision for deduction of tax at source where any person is responsible for paying any sum to any resident for carrying out any work including supply of labour for carrying out any work in pursuance of a contract between the contractor and a specified person. In the facts of the present case, there is nothing to indicate that the assessee has taken trailers/cranes on rent so as to attract the provisions of section 194-I of the Act The assessee had given sub-contracts for transportation of goods. In the circumstances, the said transactions would fall within the purview of section 194C of the Act as the assessee was responsible for paying the amount in question for carrying out work in pursuance of contracts between the assessee and the transporters and as such was required to deduct tax at source at the rate prescribed under the said section. The Commissioner (Appeals) was, therefore, justified in holding that the assessee was not an assessee in default within the meaning o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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