Income Tax Appellate Tribunal - Agra
Regional Manager,Upsrtc,, Agra vs Department Of Income Tax on 11 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA Nos.153, 154, 146 & 147/gr/2012
Assessment Years: 2008-09, 2010-11, 2007-08 & 2009-10 respectively
Asstt./Dy. Commissioner of Income Tax vs. Regional Manager,
TDS, Agra. U.P.S.R.T.C.,
U.P. Roadways,
Transport Corporation,
Etawah.
(PAN: AGRO 10168 E)
(Appellant) (Respondent)
Appellant by : Shri Waseem Arshad, Sr. D.R.
Respondent by : Shri Deependra Mohan, C.A.
Date of Hearing : 11.09.2012
Date of Pronouncement of order : 21.09.2012
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
These are appeals filed by the Revenue against four different orders passed by the Ld. CIT(A)-I, Agra dated 28.11.2011 for A.Ys. 2008-09 & 2010-11 and 13.09.2011 for A.Ys. 2007-08 & 2009-10.
2. Common grounds have been raised in all these four appeals based on identical set of facts. Therefore, for the sake of convenience, these four appeals are 2 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
decided together. To know the exact grounds of appeal of the Revenue, we reproduce the grounds raised in ITA No.153/Agr/2012 as under :-
"1.1 The CIT(A) has erred on facts and in law in cancelling the order dated 29.03.2010 passed by the DCIT(TDS), Agra and in directing that provisions contained in section 194C is applicable on the payment made by U.P. State Transport Corporation for hiring of buses, ignoring the fact of the case that the deductor company is liable to deduct the tax u/s 194-I at the rate of 10% for hiring of buses in view of amendment made u/s 194-I w.e.f. 01.06.2007.
1.2 In directing so, CIT(A) has failed to appreciate the following
i) The payment was made essentially for hiring of buses which were given in exclusive possession and use of the assessee for a fixed tenure.
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 during the tenancy period.
iii) Section 194-I(a) (introduced w.e.f. 01.06.2006) is applicable and the Board circular No. 558 (dated 28.03.1990) is not applicable as it was issued prior to the introduction of Sec.194-I. The case of the assessee is distinguishable in as much as in the instant case the vehicles had been given on hire for exclusive possession and use of the assessee for a tenure period of two years whereas the circular No. 558 speaks of cases where part time possession of buses i.e. 14 hours/day were provided to the transport authorities.
iv) The Hon'ble Apex Court, in the case of M/s Associated Hotels & India Ltd. vs. R.N. Kapoor (AIR 1959 S'. L 262) have laid down certain tests for determination for tenancy. The third test therein states that if under the documents, a party gets exclusive possession of the property, prima facie, he will be considered as tenant. In the instant case, exclusive possession of the buses were given to the 3 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
assessee and hence section 194-I is applicable on the entire payments."
3. The brief facts of the case are that the assessee is A Uttar Pradesh State Government undertaking with its Head Quarter at Lucknow. A survey was conducted under section 133A of the Income Tax Act, 1961 ('the Act' hereinafter) on 14.12.2009. During the course of survey, it was found that the assessee was deducting tax at source under section 194C @ 2% considering the buses taken by it on contract from various parties to be run by it on various routes. The A.O. was of the view that the provisions of section 194-I of the Act is applicable, therefore, the assessee was liable to deduct tax at source as per the provisions of section 194-I of the Act. The A.O. noted that in respect of section 194-I w.e.f. 13.07.2006 to 31.05.2007 tax at source was to be deducted @ 15% in the individual and HUF cases and 20% for others and further with the amendment made w.e.f. 01.06.2007 to 30.09.2009 the tax at source was to be deducted @ 10%. Based on this view, the A.O. calculated short deduction of tax at source and created demand for the period April 2007 to March 2008 of Rs.5,71,153/-. In the consolidated order for all the four years the A.O. created demand in respect of short deduction and interest charged detailed as under :-
4 ITA Nos.153, 154, 146 & 147/Agr/2012A.Ys. 2008-09, 10-11, 07-08 & 09-10.
Financial Short Interest Charged u/s Total
Year Deduction/Collection 201(1A) Demand
u/s 201(1)/206C
2006-07 837454 354591 1192045
2007-08 581923 (571153+10770) 171901 (168871+3030) 753824
2008-09 1026528 175633 1202161
(1022423+3832+273) (174792+801+40)
2009-10 562899 50586 613485
TOTAL 30,08,804 7,52,711 37,61,515
4. The CIT(A) examined the contract between the assessee and the bus owners and noted the salient points of the contract at page nos.5 to 7 of his order. The CIT(A) has also considered C.B.D.T. Circular No.558 dated 28.03.1990. The CIT(A) after considering various decisions on the issue and after considering the remand report of the A.O., a gist of which has been reproduced in paragraph no.5.3 at page nos.11 & 12. The CIT(A) has also provided opportunity of hearing to the assessee after obtaining the remand report from the A.O. After detailed discussion, the CIT(A) held as under :- (Paragraph no.5.7 page nos. 15, 16 & 17) "5.7 I have carefully analysed all the argument taken by the Ld. AR as well as the AO and I find that in case of the appellant, the amount paid to the bus owner is not a fixed charge and it depends on the "Km" run by the buses. Though, there is a cap on running of the "Km" of buses as provided in clauses 13.1 of the agreement, however, the facts remain that the charges paid to the bus owner for each bus are not fixed charges and in fact, the payment what has been agreed upon by UPSRTC to be paid to the bus owners is not charges for taking the bus in their control but it is only for running of all the buses and therefore, the payment is being made on the basis of "km" run and not for taking the bus on hire. If only the buses had been taken on hire and only, the fixed charges had been paid by UPSRTC to bus owner and all the expenses on running of the buses had been borne by 5 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
the UPSRTC (appellant), such arrangement would have certainly been covered under the definition of rent for hiring of vehicle as provided under the provisions of section 194C and accordingly, provisions of this section would have applied for making TDS but the fact is that the appellant is not bearing running charges and after collection of fare from passengers, it is paying to the owner of buses as running charges of buses on the basis of a rate decided "per km wise" and the payment made is after multiplying the rate per km to the total km. run. Such payment made for hiring of buses is not in the nature of taking buses (which has been considered by the AO as plant as per section 43(3)) on a fixed charge but paying to bus owner for use of the vehicle at a variable charge depending on its use, which is nothing but "work contract". Even relying on the definition referred by the AO, the vehicle is considered as a plant and machinery, in my considered opinion, if the fixed charge is paid for taking a plant on hire and then it is used as per the requirement of the hirer and all the running charges of plant are borne by the hirer, such payment can be regarded as rent but if a plant is taken from the owner and owner is being paid on the basis of use of the plant, then in my considered opinion, the payment would be in the nature of work contract because the charges paid is relating to the working of the plant and not taking the plant on hire. In fact, in work contract, the operation of the plant is hired and not the plant itself is hired. Therefore, in Circular no.558 dated 28.3.1990, the CBDT has enumerated the terms and conditions governing the contract for running of buses between the owner of the buses and the State Road Transport Corporation which could be termed as work contract. Under these terms and conditions, it has been provided that the owner shall provide a driver, he shall make available buses for running, the owner shall keep the bus road worthy and the Corporation is only to provide a conductor for the operation of services with necessary equipment for issuing tickets to the passengers as well as luggage. Under these terms and conditions, the overall responsibility for smooth running of buses shall be with the owner of the buses. Therefore, such terms and conditions has been termed as 'work contract' and it is pertinent to note that even after amendment of section 194-I, this circular has not been withdrawn or superseded and this is still in force because hire of equipment and work contract are two different modes of using a plant. The work contract has been specially mentioned in section 194C by way of Explanation III and it should not be confused with word 'hire of plant' 6 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
as provided in section 194-I which I think, the AO has erroneously interpreted by strongly relying on the fact that motor buses comes under the definition of plant and he did not take care to understand the meaning of "work contract". In his opinion, payment for work contract for carriage of passengers should be made on the basis of rate decided on no. of passengers travelled, which is not correct. The rate of the work contract is decided on the basis of work done and for running of a vehicle, work done is decided by way of "km" run by the vehicle. Therefore, the work contract rate for running of vehicle is always decided on number of "km" run and not on number of passengers travelled. Therefore, taking into consideration, all the terms and conditions as provided in the agreement between UPSRTC (appellant) and owner of buses, it is clear that this agreement is in the nature of work contract and for the payment made by the appellant to bus owner on the basis of such work contract, he is liable to make TDS only as per section 194C as it has been clearly provided in Explanation III to section 194C. My view for applying section 194C for making TDS in the case of the appellant is supported by various decisions of Hon'ble ITAT as referred by Ld. AR and also a recent judgment of jurisdictional Agra Bench of ITAT as held in the appeal of DCIT (TDS) Vs. Regional Manager, UPSRTC (Supra). Therefore, I hold that the AO has wrongly applied the provisions of section 194-I for computation of short deduction of TDS of Rs.5,71,153/- on the payment made to the owners of buses and hence, the same is deleted. Accordingly, Ground no.1 is allowed."
5. The ld. Authorised Representative, at the outset, submitted that the CIT(A) followed the order of I.T.A.T., Agra Bench in assessee's own case, DCIT (TDS) vs. Regional Manager, UPSRTC, Agra in ITA Nos.106 & 107/Agr/2010 for Assessment Years 2008-09 & 2007-08, order dated 18.08.2011. The ld.
Authorised Representative further submitted that the issue is also covered in other decision of I.T.A.T., Agra Bench in the case of M/s. Indian Oil Corporation Limited vs. ITO (TDS) in ITA Nos.14 & 15/Agr/2010 & Others, order dated 7 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
25.05.2012 and also by the order of I.T.A.T., Delhi Bench in the case of ITO (TDS) vs. Regional Manager, UPSRTC, Saharanpur in ITA Nos.5235 & 5236/Del/2010, order dated 31.05.2011. The ld. Authorised Representative has also relied upon the decision of I.T.A.T., Ahmedabad Bench in case of Ahmedabad Urban Development Authority vs. ACIT, TDS Circle in ITA No.1637/Ahd/2010, order dated 10.03.2011. Ld. Authorised Representative also relied upon the order of I.T.A.T., Allahabad Bench in the case of ITO (TDS) vs. UPSRTC, Rajapur, Allahabad in ITA Nos.180, 181 & 182/Alld/2010, order dated 18.08.2010.
6. The ld. Departmental Representative relied upon the order of A.O. and submitted that the facts of the case decided by ITAT, Agra Bench in case of M/s.
Indian Oil Corporation Limited vs. ITO (TDS) (supra) is distinguishable on facts as in the said order the arrangement in terms of the agreement was of the nature of transport of petroleum products and not one for hiring of vehicles. The ld.
Departmental Representative submitted that in the case under consideration, the fact is that the assessee has taken buses on hire which were given in exclusive possession of use of the assessee for fixed tenure. Ld. Departmental Representative also relied upon the contention raised in the grounds of appeal.
8 ITA Nos.153, 154, 146 & 147/Agr/2012A.Ys. 2008-09, 10-11, 07-08 & 09-10.
7. We have heard the ld. Representatives of the parties and records perused. A judgement in the case of M/s. Associated Hotels & India Ltd. vs. R.N. Kapoor (AIR 1959 S'. L 262) has been mentioned in the grounds of appeal raised by the Revenue, but it has not been explained to us that how the said judgment is applicable to the facts of the case under consideration. The Revenue has also failed to provide copy of the said judgment. Therefore, the said judgment does not help to the Revenue. We find that the CIT(A) after a detailed examination of agreement and after considering the remand report from the A.O. found that the payment to bus owners is nothing but work contract. The CIT(A) followed the order of I.T.AT., Agra Bench in the case of DCIT (TDS) vs. Regional Manager, UPSRTC, Agra (supra). In addition to the above, we notice that the issue is also covered by the order of I.T.A.T., Agra Bench in the case of M/s. Indian Oil Corporation Limited vs. ITO (TDS) in ITA Nos.14 & 15/Agr/2010 and Others, order dated 25.05.2012. The relevant finding of the I.T.A.T. in case of Indian Oil Corporation Limited is reproduced as below from paragraph no.6, page nos.5 to 11 of the order :-
"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 in 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 9 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
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 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, 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 goods or passengers by any mode of transport other than by railways. On the other provisions of sec. 1941 of the Act falling under the same chapter bear the heading "Rent".
The provisions of the said section stipulate that 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 on account of land, building, furniture or fittings, machinery, plant or equipment, 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 issue of cheque or draft or any other mode, whichever is earlier, deduct income tax thereon at the rate specified thereunder.
5.1 Examining the facts of the instant case in the light of the aforesaid statutory provisions and from the undisputed findings of facts recorded by the Id. CIT (Appeals) it is apparent that the arrangement in terms of the aforesaid agreement is of the nature of transport agreement and not one for hiring of vehicles, the agreement being for transportation of petroleum products including Indane gas.
10 ITA Nos.153, 154, 146 & 147/Agr/2012A.Ys. 2008-09, 10-11, 07-08 & 09-10.
The preamble to the agreement itself says that the assessee company for distribution of petroleum products required tank trucks 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 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 assessee company sustained any loss, the contractor was liable to make good the loss. If, in certain circumstances, the contractor was unable to carry the petroleum and/or petroleum products in a particular 11 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
vehicle, wherein he had undertaken to carry, he could carry the products in 'drums' in 'stake-trucks'. Similarly, the contractor was also liable to make good the loss, which the assessee company might sustain due to short delivery of its products or due to confiscation thereof during the course of carriage. In the light of various terms and conditions of the agreement, the Hon'ble High Court, observed that "54. Thus, when the contract agreement is read clause-by-- clause, it becomes abundantly clear that there is no transfer of the right to use the vehicle involved in the contract agreement and that the contract agreement is merely for carriage of the petroleum and petroleum products and nothing more."
5.2 Thereafter, Hon'ble High Court after considering the decisions in Ahuja Goods Agencies V. State of U.P. reported in (1997) 106 STC 540 and Laxmi Audio Visual V. Asstt. Commissioner of Commercial Taxes, reported in (2001) 124 STC 426 (Kar) concluded as under:
"58. In the case at hand too, the 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:-
12 ITA Nos.153, 154, 146 & 147/Agr/2012A.Ys. 2008-09, 10-11, 07-08 & 09-10.
"5. The Commissioner (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, According to the Commissioner (Appeals), since the assessee had given sub-contracts 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 apply to such contracts. The Commissioner (Appeals) accordingly held that the assessee has rightly deducted TDS under section 194C of the Act; that there was no default no the part of the assessee under the TDS provisions and as such there was no short deduction of tax and set aside the levy of interest under section 201 (1A) of the Act.
..............................................................................
9. Examining the facts of the present case in the light of the aforesaid statutory provisions, from the findings of fact recorded by the Commissioner (Appeals) it is apparent that the assessee has not taken the dumpers on hire rent from the parties in question. The assessee has given contracts to the 13 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
said parties for the transportation of goods and has not taken machineries and equipment on rent. In the circumstances, the Commissioner (Appeals) was justified in holding that the transactions in question being in the nature of contracts 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 sub- contracts 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 of the Act makes provision of 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 14 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
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 of the said expression as contemplated under section 201 of the Act and consequently, the Tribunal was justified in confirming the order passed by the Commissioner (Appeals)."
8. Apart from circular nos. 558 and 681 issued by the CBDT, clause 49.3 of the explanatory notes to Finance (No.2) Act, 2009 points out that tax is required to be deducted at source in terms of provisions of sec. 194C of the Act on payments to transport contractors" engaged in the business of plying, hiring or leasing goods carriages and amended provisions would exempt payments to transport operators if operator furnishes its PAN to the deductor.
9. We also find that the Hon'ble Bombay High Court in their decision dated 29.6.2007 in Indian National Ship Owners' Association and Others Vs. CIT (TDS) in CWP no. 400 of 2007 concluded that the provisions of section 194-I of the Act are applicable only in respect of rent for land or building (including factory building), furniture, fittings or any other machinery attached thereto and not for anything else like ships, transport vehicles (including railways) and freight/charter hire payments thereto. Hon'ble High Court further held that explanation-III of section 194-C, clarifies that the expression "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 15 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
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 consistent view taken in the aforesaid decisions and considering the various clauses in the aforesaid Bulk Petroleum Products Road Transport agreement, we have no hesitation in upholding the findings of Id. CIT(A) in concluding that the arrangement for transportation of petroleum products was essentially a contract for transportation of goods and not an arrangement of hiring of vehicles. In view thereof, tax is required to be deducted at source from the payments to the carrier in terms of provisions of sec. 194C of the Act and not u/s 194-I of the Act. Therefore, ground nos. 1.1 & 1.2 in these six appeals of the Revenue are dismissed. As a corollary, grounds raised in the six COs become academic and do not survive for our adjudication."
8. In the said order, i.e. M/s. Indian Oil Corporation Limited vs. ITO (TDS) (supra), the I.T.A.T. has also considered the order of I.T.A.T., Ahmedabad Bench in the case of Ahmedabad Urban Development Authority vs. ACIT, TDS Circle in ITA No.1637/Ahd/2010, order dated 10.03.2011. The relevant finding reproduced in the order of M/s. Indian Oil Corporation Limited is reproduced from paragraph no.12, page nos.14 to 17 as under:-
"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 deducted at source in respect of payment for tanker Truck etc, we hold that the CIT(A) was not correct in making apportion in between the sections 194-I and 194C of the Act. In respect of these appeals also the ld. Representatives of the parties submitted that the effective facts for deciding the issue are common in the case under consideration and in the case of a decision of I.T.A.T., Ahmedabad Bench in the case of Ahmedabad Urban Development Authority vs. ACIT TDS Circle in ITA No.1637/Ahd/2010 16 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
order dated 10.03.2011. The relevant finding noted from copy of order filed in assessee's Paper Book is reproduced as under :-
"5. We have considered the rival submissions and the material available on record. The facts noted by the AO are not in dispute that the assessee had hired cars on fixed rent payment and TDS was deducted @ 2% treating the same as contract as per section 194C of the IT Act. The AO also noted that the assessee had made vehicle hire charges payment in connection with plying of employees from one place to another. It was also noted by the AO that vehicles are owned and maintained by contractors. The assessee paid fixed payment for use of the hired cars and all the expenses are borne by the contractors. It is also admitted fact that the assessee is a local authority. The provisions of section 194C of the IT Act is applicable to the assessment year under appeal provided (a) any person responsible for paying any sum to any resident (b) any local authority (as the assessee is) referred to as a contractor for carrying out any work in pursuance of the contract between the contractor and the local authorities etc., shall at the time of credit of such sum to the account of the contractor or at any time of payment thereof in cash or issue of a cheque or draft or by any other mode whichever is earlier, deduct an amount equal to, (i) 1% in case of "advertising", (ii) or in any other case 2%, of such sum as income tax or income comprised therein. The definition of "work" has been provided in Explanation
(iii) to Section 194C of the IT Act which provides for the purpose of this section, expression "work" shall also include:
(a) Advertising,
(b) Broadcasting and telecasting including production of programmes for such broadcasting or telecasting,
(c) Carriage of goods and passengers by any mode of transport other than railways,
(d) Catering.
The AO admitted 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 17 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
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 under: (prior to amendment w.e.f. 1-10-2009).
"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) ten per cent for the use of any machinery or plant or equipment; and
(b) fifteen per cent for the use of any land or building (including factory building or land appurtenant to a building (including factory building) or furniture or fittings where the payee is an individual or a Hindu undivided family; and;]]
(c) twenty percent for the use of any land or building (including factory building), or land appurtenant to a building (including factory building) or furniture or fittings where the payee is a person other than an individual or a Hindu undivided family"
Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and twenty thousand rupees :
18 ITA Nos.153, 154, 146 & 147/Agr/2012A.Ys. 2008-09, 10-11, 07-08 & 09-10.
[Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income tax under this section.] Explanation.- For the purposes of this section,-
[(i) "rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,-
(a) land; or
(b) building (including factory building); or
(c) 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;]
(ii) where any income is credited to any account, whether called "Suspense account" 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 19 ITA Nos.153, 154, 146 & 147/Agr/2012 A.Ys. 2008-09, 10-11, 07-08 & 09-10.
the demand and the interest thereon for shortfall as noted by the AO on this issue."
9. In the light of above discussion, we find that on identical set of facts the issue has been decided in favour of the assessee by various orders of I.T.A.T. cited supra and also in assessee's own case vide ITA Nos.106 & 107/Agra/2010, order dated 18.08.2011. We find that the CIT(A) has followed the above order of I.T.A.T., Agra Bench in assessee's own case. In the light of the fact, we do not find any infirmity in the orders of the CIT(A). Orders of the CIT(A) are confirmed.
10. In the result, all the appeals filed by the Revenue are dismissed.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
PBN/*
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File.
By Order
Sr. Private Secretary
Income-tax Appellate Tribunal, Agra
True Copy