Income Tax Appellate Tribunal - Agra
Delhi Public School, Aligarh vs Department Of Income Tax on 6 June, 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.423 & 424/Agr/2011
Assessment Years: 2008-09 & 2009-10 respectively
Income Tax Officer (AO) TDS, vs. Delhi Public School,
Aligarh. Agra Road,
Aligarh.
(PAN: AAATP 0873 E)
(Appellant) (Respondent)
Appellant by : Shri R.K. Jain, Jr. D.R.
Respondent by : Shri Deependra Mohan, C.A.
Date of Hearing : 06.06.2012
Date of Pronouncement of order : 22.06.2012
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
These are appeals filed by the Revenue against two different orders both dated 29.08.2011 passed by the ld. CIT(A), Ghaziabad for the Assessment Year 2008-09 & 2009-10 respectively.
2. The effective common ground raised in both the appeals pertains to deduction of tax at source on hiring of buses, whether section 194C of the Income Tax Act, 1961 ('the Act' hereinafter) Act is applicable or 194-I of the Act.
2 ITA Nos.423 & 424/Agr/2011A.Ys. 2008-09 & 2009-10 .
3. The brief facts of the case are that a survey was conducted to verify proper decoction of tax at source and deposit in to Central Government Account for F.Y. 2007-08 & 2008-09. During the course of inspection of records, it was noticed that the assessee was deducting tax at source @ of 2% under section 194C on the payment of vehicle hire. The Assessing Officer was of the view that the payment to vehicle hire comes under section 194-I of the Act. Therefore, the assessee was liable to deduct tax @ 10%. The Assessing Officer calculated short deduction and charged interest. The details of calculation are as under :-
S.No Name of the Amount TDS TDS Short Interest Transporter should be deducted deduction deducted
1. Ghamandilal 1866628 211489 42299 169190 16919 Agrawal
2. Secular Bus 1354360 153449 30693 122756 12276 Service
3. Sree Radha 1518968 172100 37596 134504 13450 Krishna Travel & Tour
4. Surendra 920690 94831 20688 74143 7414 Singh/Hathras
5. Tilak Raj Bedi 828930 85380 18784 66596 6660
6. Viveka 333725 34374 6876 27498 2750 Chandola
7. Secular 1851010 209719 41944 167775 16778 Travels 3 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
TOTAL 8674311 961342 198880 762462 76247 S.No Name of the Transporter Amount TDS TDS Short . should be deducted deduction deducted
1. Secular Bus Service 1005960 113975 22797 91178
2. Sree Radha Krishna 2375281 269119 53825 215294 Travel & Tour
3. Surendra Singh/Hathras 907020 93423 20555 72868
4. Tilak Raj Bedi 534840 55089 12122 42967
5. Vivekchandola 216390 22288 4460 17828
6. Secular Travels, Aligarh 1698060 192390 38482 153908 Total 6737551 746284 152241 594043
4. The CIT(A) allowed the appeal of the assessee observing that the basic issue involved in the present case is similar to the case of Apeejay School and Kothari School wherein he has decided the issue in favour of the assessee. The CIT(A) following his own order in the case of Apeejay School and Kothari School held that the payment made to bus owner is covered by the provisions of section 194C of the Act and not the provisions of section 194-I of the Act.
4 ITA Nos.423 & 424/Agr/2011A.Ys. 2008-09 & 2009-10 .
5. At the outset, the Ld. Authorised Representative submitted that the issue is covered in favour of the assessee by various orders of I.T.A.T. in the case of Apeejay School in ITA No.5887/Del/2010 & 5888/Del/2010 order date 01.03.2011, Lotus Valley Education Society vs. ACIT (TDS) in ITA No.3254/Del/2010 order dated 14th January, 2011, Govind Singh vs. ITO in ITA No.04/Agr/2011 order dated 07.03.2012 and DCIT (TDS) vs. UPSRTC, Agra in ITA Nos.106 & 107/Agr/2010 order dated 18.08.2011. Ld. Authorised Representative further submitted that the issue is also covered by the order of I.T.A.T., Agra Bench dated 25.05.2012 in case of M/s Indian Oil Corporation Limited vs. ITO (TDS) in ITA No.14/Agr/2010 and Others.
6. Ld. Departmental Representative did not controvert to the facts of the case under consideration and facts of the case cited by the Ld. Authorised Representative.
6 (a) Since the facts are identical, therefore, we follow our own order in the case of M/s Indian Oil Corporation Limited vs. ITO (TDS) in ITA No.14/Agr/2010 and Others wherein the I.T.A.T. has considered the issue as under:-
"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 ITA Nos.1829 to 1834/Del/2011 5 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
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.6 ITA Nos.423 & 424/Agr/2011
A.Ys. 2008-09 & 2009-10 .
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. 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 7 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
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 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:
8 ITA Nos.423 & 424/Agr/2011A.Ys. 2008-09 & 2009-10 .
"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:-
"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 9 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
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 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 10 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
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 11 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
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 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 12 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
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 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."
7. Ld. Departmental Representative, however, relied upon the order of the Assessing Officer but he did not dispute that the facts of 13 ITA Nos.423 & 424/Agr/2011 A.Ys. 2008-09 & 2009-10 .
the case of Delhi Bench and facts of the case under consideration are identical.
8. Since on identical set of facts the issue has been decided by the I.T.A.T., Delhi Bench in assessee's own case vide order dated 16.11.2011, in the light of the facts, we set aside the order of CIT(A) and the order of the Assessing Officer. Under the facts and circumstances of the case which are identical to the facts of the case decided by I.T.A.T., Delhi Bench (supra), we hold that the payments paid or payable to operators of the tanker truck owners by the assessee company is subject to deduction of tax at source under section 194C of the Act @ 2%. The Assessing Officer is directed accordingly. Thus, the appeals of the assessee for A.Ys. 2009-10 & 2008-09 are allowed and the appeals of the Revenue for F.Ys. 2008- 09 & 2007-08 are dismissed."
7. Following the above order of I.T.A.T., Agra Bench, we confirm the order of the CIT(A).
8. In the result, appeals of 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:
Appellant/Respondent/CIT concerned/CIT (Appeals) concerned/ D.R., ITAT, Agra Bench, Agra/Guard File.
By Order Sr. Private Secretary Income-tax Appellate Tribunal, Agra True Copy