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2015 (10) TMI 2241 - ITAT PUNE

2015 (10) TMI 2241 - ITAT PUNE - TMI - Non deduction of TDS on the payments made for hiring the cars u/s 194 (C) - disallowance u/s. 40(a)(ia) - Held that:- In the present case, only condition (a) is satisfied, i.e. the assessee is a contractor. So far as the conditions mentioned in (b), (c) and (d) are concerned, none of the conditions apply in the present case. Thus, the provisions of section 194C are not attracted and thus, the assessee is clearly outside its preview.

Whether the p .....

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tax at source on the payments made to the owners/lessor for hiring of cars. It is an admitted fact that the assessee has not deducted any TDS on the payments so made.

As the assessee is liable for not deducting TDS under the provisions of section 194-I on the payments made after 13-07-2006. Since, the assessee has defaulted in not complying the provisions of section 194-I, the disallowance u/s. 40(a)(ia) has to be made for non-deduction of tax at source on the payments made in the ass .....

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peals are against the orders passed u/s. 143(3) r.w.s. 147 of the Act for the assessment years 2006-07, 2007-08, 2008-09 and 2009-10 and three appeals are against the orders passed u/s. 201(1) and 201(1A) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for the assessment years 2006-07, 2007-08 and 2008-09. The assessee, Ascott Translinks India Private Limited was formerly known as Mico Car Services (I) Pvt. Ltd. Thus, all the seven appeals are by the same assessee. ITA Nos. 220 .....

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rs are dated 03-09-2012. The issue involved in all the appeals is arising from same violations and facts in all the impugned assessment years are identical, hence these appeals are taken up together for adjudication. 2. The brief facts of the case are : The assessee is engaged in the business of providing vehicles on hire basis to different industries, call centers, BPO etc. The assessee is providing services to the contracting companies by using its own vehicles as well as by hiring cars from t .....

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at by not deducting Tax at Source (TDS) on the payments made for hiring cars, the assessee has violated TDS provisions in the impugned assessment years. The Assessing Officer, accordingly, raised demand u/s. 201(1) and u/s. 201(1A) of the Act. The details of demand raised under the provisions of aforesaid sections for the impugned assessment years are as under: Assessment Years Expenditure on which tax was deductible but not deducted as per Tax Audit Report TDS Interest u/s. 201(1A) Total 2006-0 .....

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) of the Act. Against the findings of the Commissioner of Income Tax (Appeals), the assessee is in second appeal before the Tribunal. In all the three assessment years, the assessee has raised identical grounds of appeal. For the sake of convenience, the grounds of appeal in assessment year 2006-07 are reproduced as under: 1. The Order passed by Deputy Commissioner of Income Tax TDS II, Pune for Financial Year 2005-06 i.e. Assessment Year 2006-07 is bad in law as it was passed Ex-parte order and .....

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contract/subcontract with parties to carry passengers, the transaction was merely to make available on hire the vehicle to the Appellant with no responsibility of the passengers. 4. The learned DCIT TDS II and The Honorable CIT (appeals)-V Pune, erred in holding that the entire amount qualified by C.A is liable for TDS. The Conditions applicable of TDS needs to be taken into consideration. 5. The learned DCIT TDS II and The Honorable CIT (appeals)-V Pune, erred to held that fixed charges are pa .....

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e (which is more particularly described in the Statement of Facts). 7. The Appellant may be permitted to Raise/ Alter or Amend the grounds of Appeal during the course of hearing. The ld. AR of the assessee has stated at the Bar that he is not pressing ground No. 1 and 4 in the appeals challenging the orders passed u/s. 201(1) and 201(1A) of the Act. 3. Based on the information received from DCIT(TDS) that the assessee has not deducted TDS on certain payments, reassessment proceedings were initia .....

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ividual vehicle owners, therefore, the provisions of section 194C of the Act are not attracted. Hence, no TDS was deducted on such payments. Not convinced, the Assessing Officer made disallowance u/s. 40(a)(ia) of the Act on the payments made without deduction of tax at source in all the impugned assessment years. Aggrieved by the orders of Assessing Officer in the respective assessment years, the assessee filed separate appeals before the Commissioner of Income Tax (Appeals). The Commissioner o .....

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f payments/credits Amount Qualified in Audit Report Amount disallowed by the Assessing Officer 2006-07 Rental/Car hiring charges ₹ 1,54,40,354/- ₹ 22,73,944/- 2007-08 Car Hiring charges ₹ 6,13,57,179/- ₹ 77,30,341/- 2008-09 Rental/Car hiring charges ₹ 3,17,55,554/- ₹ 40,86,220/- 2009-10 Car Hiring charges ₹ 71,73,403/- ₹ 16,62,355/- Aggrieved by the order of Commissioner of Income Tax (Appeals), the assessee is in second appeal before the Tribunal. .....

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erred on merely relying on the auditors remarks in the Tax Audit Report without appreciating the correct legal position. In particular he failed to appreciate that provisions of TDS are inapplicable to Car Hire simpliciter in the relevant assessment year. He also erred in stating that the relevant agreements appear to have been created as an after-thought. He also failed to appreciate the arguments and contentions advance in this behalf. 2. Without prejudice to the above, the learned Commission .....

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tware companies, industrial companies, BPOs etc. The numbers of vehicles required for providing the services keeps on changing. Therefore, the assessee hires vehicles from the third parties, for which the assessee has entered into lease agreement with the individuals for providing vehicles with drivers on hire charges. The assessee is providing vehicles to the companies on the terms and conditions set out by the companies in their contract agreement. The risk and liability to comply with those c .....

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The payments are made by the assessee for hiring vehicles on rental basis and not on kilometer basis. Irrespective of the fact whether the vehicles hired are put to use or not during that period, the payments are made. The ld. AR of the assessee in support of his submissions placed reliance on the decisions rendered in the cases of Rajiv Kishori Lal Patodia Vs. ACIT, 36 CCH 109 (Mum)(Trib) and Nalawade C Maruti Vs. JCIT, 48 SOT 566 (Pune)(Trib). The ld. AR placed on record terms and conditions .....

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Amendment) Act, 2006 w.e.f. 13-07-2006 to include machinery, plant, equipment in the definition of rent for the purpose of section 194-I. Thus, in the case of assessee the provisions of section 194-I will not be applicable in respect of assessment year 2006-07. For assessment year 2007-08, it shall come into force w.e.f. 13-07-2006. 5. On the other hand Shri B.C. Malakar representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals). The ld. DR submitted th .....

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ated. The words plant and machinery were included in definition of rent in section 194-I in the year 2006 w.e.f. 13-07-2006. Whereas, the agreement is dated 03-07-2005. It is highly improbable that the assessee in year 2005 would know that the words plant and machinery would be included in the definition of rent in section 194-I of the Act in times of come. The ld. DR further submitted that even if alternate submission of the assessee is accepted still the assessee was liable to deduct tax on th .....

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controverting the submissions of ld. DR submitted that as far as the words plant and machinery used in lease agreement for hiring cars/vehicles is concerned, section 43(3) defines plant which includes vehicles. Thus, the lease agreement entered into by the assessee cannot be said to be ante-dated or tailor made. The ld. AR reiterated that a perusal of Lease Agreement would clearly show that the assessee has not transferred any risk, liability or responsibility on to the lessor/vehicle owners for .....

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ata Motors filed in the paper book for ITA Nos. 2203-06/PN/2013. A bare perusal of the terms and conditions of the contract shows that the assessee is responsible for providing vehicles and drivers to the companies. The assessee is responsible for ensuring that the vehicles provided are in good condition and comply with the standards set out by the company in the contract agreement. The assessee has to ensure punctuality and maintenance of the vehicles. In case of any default or negligence in co .....

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payment of lease rental are for the fixed period and not on the basis of kilometers. The assessee/lessee has not off loaded or has transferred its liabilities and responsibilities on the lessor of the vehicles. The relevant extract of the lease agreement is reproduced as under: Lease Management Fees: The Lessee shall pay Lease Management Fees of an amount as specified in the Schedule. Ownership of the Vehicle: The Parties hereby confirm that their intent is that the Vehicle shall at all times r .....

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elivered today. The Lessee shall take delivery of the Vehicle from the Supplier's premises. Alternatively, at the Lessee's request, the Vehicle may be delivered to the Lessee's address. Any loss or damage to the Vehicle in transit from the Supplier's premises to the Lessee's address shall be treated as an accident case and the liability shall be covered as per the Insurance Policy. Terms of Maintenance of the Vehicle : In the event the Lessee has elected not to avail the offe .....

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licable laws) (i) Lease Rental / Hiring charges/or (ii) Fleet management Fees, on their respective due dates, as more specifically mentioned in the Schedule, irrespective of whether the Vehicle has been put to use or not or is under repairs maintenance or for replacement for any period whatsoever. Payment of Lease Rental : The Lessee agrees to make payment of each of the Lease Rental on Due Date until the termination of the Lease either on account of Premature Termination or on account of the ex .....

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ng Identity card to every cab driver of MICOCAR. THE LESSEE shall be providing stickers of MICOCAR on every Vehicle. THE LESSEE Shall provide pick-up & drop duty slip and any other stationery as required. THE LESSEE Shall install & maintain GPRS tracking systems in the vehicle at its own cost. THE LESSOR Shall not be responsible for any kind of damages due to any accidents or other natural calamities. THE LESSOR Shall provide its vehicle with no responsibility of passengers. 9. A perusal .....

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can be termed as sub-contract. The assessee has not transferred any of his responsibility, or liability in part or full to the lessor from whom vehicle is hired. 10. The ld. AR of the assessee in support of his submissions has placed reliance on the decision of Mumbai Bench of Tribunal in the case of Rajiv Kishori Lal Patodia Vs. ACIT (supra) wherein the Coordinate Bench of the Tribunal has held that a case of sub-contract, would be where it off loads a part of contract work, i.e., transportatio .....

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in his capacity as a contractor, should enter into a contract with a sub-contractor or carrying out the whole or any part of the work undertaken by the contractor, (c) The sub-contractor should carry out the whole or any part of the work undertaken by the contractor. (d) Payment should be made for carrying out the whole or any part of the work. The Tribunal held that section 194C(2) is attracted if all the above mentioned conditions are satisfied. 11. In the present case, only condition (a) is .....

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extract of the provisions of section 194-I are reproduced as under: 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, [deduct income-tax thereon at the rate of- (a) two per cent for the use of any machinery or .....

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land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;] 13. A bare perusal of the provisions of section 194-I shows that where any payment is made by way of rent, tax is to be deducted @ 2% of the payment/credit of the amount paid/credited as rent for the use of machinery or equipment or plant. Explanation to section 194-I defines rent which in .....

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clude tea bushes or livestock or buildings or furniture and fittings]; 14. Thus, from conjoint reading of provisions of section 194-I and the provisions of section 43(3), we can safely conclude that any payment made under lease agreement for use of vehicles partake the character of rent on which tax has to be deducted under the provisions of section 194-I. In the present case the assessee has furnished lease agreement for hiring cars. The assessee was liable to deduct tax at source on the paymen .....

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