TMI Blog2012 (7) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... 194-I has been wrongly applied in the matter by the AO. - provision of section 194C would apply. - ITA Nos.14 & 15/Agr/2010, ITA Nos.41 & 42/Agr/2010, ITA Nos.98 & 99/Agr/2010, ITA Nos.103 & 104/Agr/2010 - - - Dated:- 25-5-2012 - SHRI BHAVNESH SAINI, SHRI A.L. GEHLOT, JJ. Assessee by : Shri R. Murlidhar, Advocate Revenue by : Shri Waseem Arshad, Sr. D.R. ORDER PER BENCH: These are Cross Appeals filed by the assessee and Revenue. ITA Nos.14 15/Agr/2010 by the assessee and ITA Nos.41 42/Agr/2010 by the Revenue have been filed against common orders dated 15.12.2009 for F.Ys. 2007-08 2008-09 and ITA nos.98 99/Agr/2010 by the assessee and ITA Nos.103 104/Agr/2010 by the Revenue have been field against common orders dated 15.01.2010 for F.Ys. 2007-08 2008-09 respectively passed by the learned CIT (Appeals)-I, Agra. ITA Nos.14 15/Agr/2010 by the Assessee and ITA Nos.41 42/Agr/2010 by the Revenue 2. The common grounds raised in these appeals pertain to rate of deduction of tax at source on transportation charges paid to the transporter for carriage of goods from one location to another location. 3. The brief facts of the issue are that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the order of the CIT(A) raising a ground that the CIT(A) has erred in directing that only 50% of the payment of hire charges of tanker is liable for TDS under section 194-I of the Act. The CIT(A) ought to have held that the entire payment is subject to TDS under section 194-I of the Act. The assessee is in appeal raising effective ground that the CIT(A) has erred in holding that 50% of payment is subject to TDS under section 194-I of the Act whereas the assessee was correctly following in making tax deducted at source under section 194C @ 2%. 6. We have heard the ld. Representatives of the parties and records perused. The ld. Authorised Representative after briefing on the terms and conditions of the agreement and facts of the case submitted that the issue is covered n favour of the assessee by various decisions of I.T.A.T. and Hon ble High Courts including assessee s own case by Delhi Bench in the case of I.T.O., Hardwar vs. Indian Oil Corporation (Marketing Division) in ITA Nos.1829 to 1834/Del/2011 and C.O. Nos.166 to 171/Del/2011 order dated 16th November, 2011. The relevant finding of I.T.A.T. is reproduced as below :- We have heard both the parties and gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks for road transportation of bulk petroleum products from its various storage points to customers/other storage points. As per clause 1 of the agreement, the carrier engaged in the business of operating tank trucks, agreed to provide a stipulated number of tank trucks for the exclusive use of the company. Clause 2 stipulates that each tank truck would be attached to a particular loading/storage point for transportation of bulk petroleum products and the assessee company can assign a particular tank truck to different loading/storage point. In terms of clause 3 of the agreement, the carrier alone is required to provide crew (driver cleaner) for efficient operations. In other words, in the instant case the tank truck owners not simply confined themselves to the extent of providing vehicles at the disposal of the assessee in lieu of rent but also engaged their drivers in driving such vehicles and thereby in transporting petroleum products from one place to the other. In effect, tank truck remains in possession of the staff of the carrier. In the event tank truck is not made available on any particular day, the assessee company is free to use the services of any other tank truck and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions do not amount to transfer of the right to use the goods in as much as the contractor, as a trustee of the petroleum and petroleum products, carries the same in the identified vehicles or in exceptional circumstances, in such a manner as have been agreed to by the parties concerned ...... 5.3 In nutshell, the Hon'ble Gauhati Court concluded that the contract was essentially for transportation of petroleum products and not for hiring of trucks/tankers. Following the view taken in this decision, the Id. CIT(A) concluded that provisions of sec. 194C were applicable in the instant case and not the provisions of sec. 1941 of the Act. The Id. DR did not place any material before us in order to controvert the aforesaid finding of facts recorded by the Id. CIT(A) nor brought to our notice any contrary decision. 6. We further find that the Hon'ble Gujarat High Court while adjudicating a similar issue in respect of deduction of tax at source from payments for hiring dumpers for transporting building material concluded in their decision dated 11.01.2001 in the case of Shree Mahalaxmi Transport Co. in ITA no.1038 of 2009 in the following terms:- 5. The Commissioner (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts for shifting of goods from one place to another would be covered as works contracts, thereby attracting the provisions of section 194C of the Act. That since the assessee had given subcontracts for transportation of goods and not for the renting out of machineries or equipments, such payments could not be termed as rent paid for the use of machinery and the provisions of section 194-I of the Act would not be applicable. The Tribunal was, therefore, justified in upholding the order passed by the Commissioner (Appeals). 7. Likewise, in their another decision dated 11.1.2001 in the case of CIT Vs. Swayam Shipping Services Pvt. Ltd. in ITA no.1037 of 2009, Hon'ble Gujrat High Court concluded as under:- 6. The facts are not in dispute. The assessee has carried out freight and transportation works contracts with three transporters who transported the goods belonging to the assessee and its clients to various places through their vehicles. The assessee had not taken the trailers/cranes on hire or rent from the said parties. The assessee has given sub-contracts to the said parties for the transportation of goods and not for renting out of machineries and equipments. Section 194-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression "work" means carriage of goods and passengers by any mode of transport other than by railways and tax from freight payments have to be deducted under this section and not under section 194-I of the Act. Following the view taken in this decision, lTAT in the case of Accenture Services (P) Ltd., 2010-TIOL-618-ITAT-Mum held that expression plant and machinery used in explanation to sec. 194-I of the Act refers only to the plant and machinery used by the assessee in their business by hiring them but not the hiring the transport services. The ITAT Delhi Bench in their decision in the case of Lotus Education Society (supra) held that provisions of section 194-I of the Act could not be applied in the case of payments made to bus operators, providing pick up and drop facility to school students. In Ahmedabad Development Authority, ITAT Ahmedabad Bench in their decision dated 10.3.2011 in ITA no.1637/Ahd./2010 held in the context of deduction of tax at source from fixed rent payments for hiring cars that provisions of section 194C of the Act were applicable in respect of payment for vehicle hire charges and not the provisions of section 194-I of the Act. 10. In the light of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e.f. 01.06.2007 the assessee is liable to deduct tax at source under section 194-I of the Act @ 10%. The Assessing Officer accordingly created additional demand and charged interest, the details of which are as under :- Financial Year Short Deduction Interest Charged Total Demand 2007-08 21,20,277 4,27,579 25,47,856 2008-09 (till Dec 08) 10,21,826 1,00,152 11,21,978 TOTAL 31,42,103 5,27,731 36,69,834 11. The CIT(A) after considering the assessee s submission and after examining the clause-wise agreement of vehicle hire found that some of the clauses pertaining to rent part is liable for deduction of tax under section 194-I and some of the clauses pertaining to work part is liable for deduction of tax @ 2%. The CIT(A) accordingly apportioned the payment as per section 194C and 194-I and directed the Assessing Officer to compute the tax and interest under section 201(1)/201(1A) of the Act. 12. We have heard the ld. Representatives of the parties and records perused. As per the discussions made above while deciding the appeals relating to tax deducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the assessee had hired the cars on fixed rent payment owned and maintained by contractor. The Assessee paid vehicle hire charges and all the expenditure are borne by the contractor. It is also admitted fact that vehicle charges were paid in connection with plying of employees from one place to another. Thus, it implies that the passengers were transported by the drivers and vehicles of the vehicle owner/contractor and in consideration of that the vehicle owners/contractors were paid by the assessee the fixed amount. Therefore, sub-clause (c) to Explanation (iii) of the provisions of Section 194C of the IT Act would apply in the case of the assessee. In our opinion the above payment of vehicle hire charges clearly falls within the scope of section 194C of the IT Act. The assessee, therefore, correctly deducted tax thereof as per the provisions of section 194C (Explanation (iii)(c) of the IT Act. Same view is taken by ITAT Ahmedabad B Bench in the case of M/s. Mukesh Travels Co. (supra) copy of which is placed on record. The AO however, noted that the provisions of section 194-I of the IT Act would apply in the matter being rent paid to the contractor which provides as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] The above definition of rent does not provide any item for vehicle hire charges. Therefore, provisions of section 194-I has been wrongly applied in the matter by the AO. Considering the above discussions we are of the view that the authorities below have wrongly applied the provisions of section 194-I of the IT Act in the matter. We accordingly, set aside the orders of the authorities below and delete the demand and the interest thereon for shortfall as noted by the AO on this issue. 13. The ld. Departmental Representative, however, relied upon the order of the Assessing Officer but did not controvert in respect of the facts of the case under consideration and facts of the order of I.T.A.T., Ahmedabad Bench in the case of Ahmedabad Urban Development Authority (supra). Since the facts related to the issue to be decided are identical, by respectfully following the above order of I.T.A.T., Ahmedabad Bench and in the light of the facts, we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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