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TMI Blog2013 (6) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals as under: (1) The Learned CIT(A) erred in holding that the provision of Section194C were clearly applicable to the agreement between the assessee and Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola and hence, the A.O. was justified in raising the demand U/s 201/201(1 A) on account of failure of the assessee in not deducting TDS U/s 194 C. (2) The Learned CIT(A) failed to appreciate that the provisions of Section 194C were not applicable to the agreement between the assessee and Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola and therefore, the assessee Corporation was not required to deduct any TDS U/s I94c and consequently, the demand raised U/s 201/201(1A) is not justified. (3) The Learned CIT(A) out to have appreciated that as per the agreement between the assessee and Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola, the assessee was not required to make any payment to the said sanstha and 'therefore, there was no question of deduction and tax U/s 194C. (4) The Learned CIT(A) erred in not appreciating the assessee had awarded the rights to Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola, for running the buses in Auranga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short the 'society'), Akola and assigned the work of plying the city buses. In the opinion of the Assessing Officer, there was a contract between the assessee and the said society. As per the terms of agreement the society was to make the payment on the basis of per kilometer to the assessee Municipal Corporation. The Assessing Officer treated the agreement between the assessee Municipal Corporation and the said society as a contract covered u/s. 194C and hence held that assessee should have deducted the tax at source on the amount retained by the society. The Assessing Officer also referred to the decision of the Hon'ble High Court of Punjab & Haryana in the case of S.S. & Co. Octroi Contractors v. State of Punjab [2004] 268 ITR 398 . The Assessing Officer raised the following demands against the assessee: Sr. No. F.Y. Tax sought to be deducted (including surcharge & cess) Int. u/s. 201(1A) Total 1. 2005-06 1,45,041/- 54,375/- 1,99,416/- 2. 2006-07 12,05,961/- 3,66,308/- 15,72,269/- 3. 2007-08 13,50,142/- 2,51,127/- 16,01,269/- 4. 2008-09 18,94,964/- 1,22,825/- 20,17,789/- Total 45,96,108/- 7,94,635/- 53,90,743/- 7. The assessee challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bank account was jointly operated by the AMC and the Agency. AMC after retaining monthly road usage charges from the said account could have deducted TDS u/s 194C of the IT Act as the remaining amount becomes the payment to be kept by the Agency. Since repayment of the bank loan, taxes, cess etc. is the responsibility of the Agency under the overall monitoring of AMC, it would have made payments on these accounts out of the said remaining balance [collection deposited - monthly road usage charges kept by AMC] kept in the escrow bank account. This situation is totally different from that of Octroi collection which has been discussed in detail in the preceding paras. In case of octroi collection the agency was not depositing collection with the AMC or in a Joint bank account with AMC. The Agency was simply making the payment of the tendered amount in 50 equal weekly installments. Thus there was no control of AMC on the octroi collection made by the Agency. In case of 'bus plying contract', the entire daily collection is first deposited in a bank account which is jointly operated by AMC and the Agency. In my view the decision of Hon'ble Punjab & Haryana High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be liable to deduct income-tax o 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 thirty 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 seventy-five 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. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chased from a person, other than such customer.' 10. The provision of Section 194C contemplates that some work should be assigned to the contractor and pursuance of the contract as specified in the said section and person making the payment or crediting the amount to the account of the contractor should deduct tax at source as specified in the said provision. The core issue which we have to determine is whether as per the agreement between the assessee corporation and the society, it can be said that the assessee was under legal obligation to deduct the tax at source in respect of the amount retained by the society u/s. 194C of the I.T. Act. As per the agreement it is seen that the assessee Municipal Corporation decided that the management of local transport facility should be handed over to private entity on BOT basis in consideration of the "royalty". Accordingly, as per the Resolution No. 81 passed in the Standing Committee of the assessee Municipal Corporation dated 18-10-2005, it was decided that the tender received from the society quoting the rate of payment of "royalty" @ ₹ 0.80 rupees per k.m. in respect of total Kms travelled by all the buse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any employment connection with the Municipal Corporation Office. 4. The concerned society would be required to strictly abide by the rules and regulations of the Government Tourist Department, Traffic Police Department and other departments. Similarly, the responsibility to pay government fees/taxes would be solely that of the society. 5. The Municipal Corporation would not be responsible to make good any loss arising on account of accidents or provide financial help or medical help in the course of conducting the said transport service. 6. The expenditure incurred on repairs and maintenance, diesel, oil etc. of the buses would be borne by the society. The society would be required to start appropriate system for that purpose. The expenditure on insurance and renewal of insurance would have to be borne by the society. 7. Citizens/students would be required to be given concessions and passes in accordance with the rules and regulations framed by the Government. 8. The ticket rates and stops would have to be in accordance with the rates and stops decided by Regional Transport Division and Hon'ble Regional Commissioner (Revenue). An additional amount of 20% may be cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the design approved by the Municipal Corporation. 50% of the said area should be used for information regarding buses whereas the remaining area may be used for advertisement purpose. 17. The busses shall be purchased in accordance with the installments decided by Party No. 1 from the date of the agreement and the same should actually start operating. In case of any difficulty arising thereupon, decision shall be taken after the consent of both the parties. 18. After the loan amount is totally repaid and after the end of term of this agreement, all busses, bus stops, repairing centers, shades etc. will be handed over to party no 1 from the party no 2 without any consideration or delay in good condition. 19. The purpose of Party No. 1 behind framing this scheme is solely to provide safe and sound transport facility to the citizens and hence, it would form the rules and regulations and maintain control in this respect. But since Party No 2 has to operate the service on daily basis, it may choose the staff in accordance with the educational and technical standards prescribed by Party No. 1. The staff appointed by Party No. 2 must be deal politely with the commuters. If any wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d after the consent of Party No. 1 in the name of Commissioner, City Bus Transport Fund and deposit therein the income from the second day onwards. The said account shall be operated by Accounts Officer, Municipal Corporation, Aurangabad and Secretary, AKPMSSL. The amount deposited daily in this account in each month shall be firstly disbursed towards payment of EMI on bank loan before the fifth day of the succeeding month. This mechanism shall continue till the loan is repaid. Thereafter, the society would be eligible to use the balance amount remaining after deduction of monthly road usage charges, RTO Taxes and other taxes etc. to be paid within the fifth day of each month or at the earliest possible for other expenses. The Chief Accounts Officer would maintain complete financial control over the said scheme and regulate the repayment of bank loan. Party No. 2 would be under an obligation to follow the directions given by him from time to time. 27. Party No. 2 would be entitled to collect an amount of 5 times the maximum ticket price from a passenger, in case the passenger is fund to be travelling without ticket. 28. The permits in respect of the buses purchased under the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2 shall have no objection in that respect. 39. In case, any dispute arises at any point of time with regards to any terms and conditions or other aspects in this agreement, the decision of the Commissioner, Party No. 1 shall be final. 11. On the careful examination of the terms the following things are revealed: (i) The assessee has been assigned the right to ply the city bus services on payment of the royalty by the society to the assessee Municipal Corporation @ ₹ 0.80 per KM. (ii) All the expenditure on the running on the buses should be borne by the society. The society is to charge the rates as decided by the Regional Transport Division. The society is given the right to construct shelters at various bus stops in the city as per the designs approved by the assessee Corporation and society is given right to construct small shops adjoining such shelters and the rent derived from such shops could be enjoyed by the society. The society is given right in respect of advertisements on the above stops, tickets and buses to transfer the said right to any other agency or party. (iii) The society is to purchase 100 new buses to run on 25 routes on the city which descript ..... X X X X Extracts X X X X X X X X Extracts X X X X
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