Income Tax Appellate Tribunal - Mumbai
Stup Consultant P. Ltd, Mumbai vs Department Of Income Tax on 14 November, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "H",MUMBAI
BEFORE SHRI D.K. AGARWAL (JM) & SHRI R.K. PANDA (AM)
I.T.A. Nos.5773 & 5774/Mum/2010
(A.Ys. 2007-08 & 2008-09)
Income-tax Officer (TDS)-3(3), M/s. Stup Consultants Pvt.Ltd.,
Room No.1006, 10th floor, Smt. 1004-05, 10th floor, Raheja
K.G.Mittal Ayurvedic Hospital Bldg., Chambers, Free Press Journal
Charni Rd. (W), Mumbai-400 002. Vs. Marg, Nariman Point, Mumbai-
400 021.
PAN: AABCS1945E.
Appellant Respondent
Appellant by Shri Alexander Chandy.
Respondent by Shri S.H. Subramanian.
Date of hearing 17-11-2011
Date of pronouncement 25-11-2011
O R D E R
PER D.K. AGARWAL, JM :
These two appeals preferred by the Revenue are directed against the separate orders dated 14-11-2008 passed by the ld. CIT(A) for the assessment years 2007-08 and 2008-09. Since facts are identical and issue involved is common, both these appeals are disposed of by this common order for the sake of convenience.
2. Briefly stated facts of the case extracted from ITA No.5773/Mum/2010 for assessment year 2007-08 are that the assessee company is engaged in the 2 ITA Nos.5773-5774/M/10 Stup Consultants P.Ltd.
business of civil engineering and architecture consultancy. In this case, a survey u/s.133A of the Income-tax Act, 1961 (the Act), was conducted at the assessee's premises on 3-3-2008. It was found that the assessee has not deducted/short deduction of tax at source on professional charges and hiring charges. The AO issued show cause letter to the assessee to explain as to why the assessee should not be treated as an asessee in default and why an order u/s.201(1) should not be passed treating the asessee in default and also why interest u/s.201(1A) should not be levied. In the absence of any compliance by the assessee, the AO raised a demand u/s.201(1) amounting to Rs.9,54,441/- vide order dated 14-10-2008 passed u/s.201(1) read with sec. 192 of the Act. On appeal, the assessee did not dispute on the short deduction of tax on the professional charges paid Rs.17,78,316/- under the head "Computer Software"
(AMC charges). With regard to the payment of hiring charges of Rs.59,05,637/-, it was submitted by the assessee that the said payments were made to various parties towards vehicle hiring. The assessee has deducted TDS as per provisions of sec. 194C, whereas the AO has held that tax should have been deducted as per provisions of sec. 194-I. The ld. CIT(A), after considering the nature of the transactions and the CBDT circular no.713 dated 2-8-1995 and circular no.715 dated 8-8-1995, held that the assessee has rightly deducted tax as per provisions of sec. 194C and there is no case of short deduction and accordingly allowed the claim of the assessee.
3. Being aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us taking the following grounds of appeal :
"(a) On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that vehicle hiring falls under Section 1941 after he amendment of section 194I w.e.f. 13/07/2006.3 ITA Nos.5773-5774/M/10
Stup Consultants P.Ltd.
(b) On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing assessee's appeal on the issue of short deduction of TDS on payment made for hiring of vehicles on Rs.7,71,276/- without considering CBDT's circular no.4/2008 dated 28.04.2008."
4. At the time of hearing, the ld. D.R. supports the order of the AO.
5. On the other hand, the ld. counsel for the assessee submits that the issue stands covered in favour of the asessee by the various decisions of the Tribunal, namely :
1. ACIT (TDS)- 1(1) v. Accenture Services P.Ltd., 44 SOT 290 (Mum);
2010-TIOL-618-ITAT-MUM.
2. Tata AIG General Insurance Co. v. ITO (OSD)-3(2), 43 SOT 215 (Mum) (Mum - Trib, ITA 6282 to 6285 and 6410, 6413/Mum/2009).
3. Mukeshs Travels Co. v. ITO (2011) 39((II) ITCL 583 (Ahd 'B" - Trib, ITA No.2594/AHD/2010).
4. Ahmedabad Urban Development Authority vs. The ACIT (2011) 39(II) ITCL 591 (Ahd "A"-Trib, ITA No.1637/Ahd/2010." The ld. counsel for the assessee, after filing the copy of the above orders of the Tribunal, further submits that even the Income-tax Department, on similar payments, is deducting TDS for the financial years 2006-07 and 2007-08 @ 2% and 2.06% respectively and in support he also placed on record copy of the order dated 29-01-2010 u/s.7(1) of the RTI Act, 2005, appearing at page 106 of the asessee's paper book. He, therefore, submits that the order passed by the ld. CIT(A) be upheld.
6. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the assessee has made payments amounting to Rs.59,05,637/- to various parties towards hiring of vehicles 4 ITA Nos.5773-5774/M/10 Stup Consultants P.Ltd.
provided to staff to visit and supervise various project sites on a daily basis. We further find that before the ld. CIT(A) it has been submitted by the assessee that the transport contractors are selected and the services of their taxis are availed for day to day use. Some of the cars are used continuously on many working days and throughout the month also. These vehicles are just a means of transport. Such vehicles are required on regular basis from transport contractors, rates of tariff are bargained on monthly basis on the presumption of 30 days use like Rs. X per day for Y kilometers and for 8 to 12 hours with additional charges for extra time and/or mileage. The contractors mostly raise periodic monthly bills for convenience sake showing hire charges for number of days used and for overtime/additional km. charges. No separate rate is paid or bargained for driver services. The running of vehicles is looked after by the transport contractors including cleaning and maintenance etc. After duty hours, the driver takes away the car and report back on next day at given time, if required, and for this a log book is also maintained. We further find that the possession of the vehicle is also with the service provider. It is not the case of the Revenue that the vehicle has been transferred to the assessee or the same is not in the possession of the service provider. The ld. CIT(A), after considering the above facts, has held vide para 9.4 of his order as under :
"9.4 In view of the above facts, I find merit in the submission of the appellant that in its case the tax should have been deducted as per provisions of section 194C and not as per section 194 I as the vehicle is not at the disposal of the appellant. It is in the possession of the contractor. The appellant has availed transport services only and came into contract with the contractor for providing vehicles for carrying out its staff. The appellant has not entered into a contract for vehicle only but the entire services like driver, diesel/petrol, maintenance etc. I find considerable force in the argument of the appellant that where the arrangements are predominantly for hire of the vehicles or where the payments for services of drivers are made separately, the payments will be covered by section 194-I. There is a distinction between hiring/leasing a car and engaging a transport contractor to provide vehicles/taxi for transporting 5 ITA Nos.5773-5774/M/10 Stup Consultants P.Ltd.
passengers from one place to other. In hiring/leasing a car, there is a conditional transfer of property rights whereas in case of engaging, the transport contractor to provide the facility of transport by way of suitable vehicle, there is no transfer of property rights. Considering the facts of the case and legal position as well as CBDT Circular No.713 dated 2-8- 1995 & Circular No.715 dated 8-8-1995 in this regard, I am of the view that the appellant has rightly deducted tax as per provisions of section 194C and there is no case of short deduction. Accordingly, this ground of appeal is decided in favour of the appellant".
7. In all the cases relied on by the ld. counsel for the assessee, it has been held that the payment of vehicle hire charges clearly falls within the scope of sec. 194C of the Act. In a recent decision in the case of Ahmedabad Urban Development Authority v. ACIT in ITA No.1637/Ahd/2010 for assessment year 2009-10 dated 10-3-2011, the Tribunal, after considering the provisions of sections 194C and 194-I, relied on the decision in the case of Mukesh Travel Co. v. ITO in ITA No.2594/Ahd/2010 dated 25-2-2011 and observed and held that passengers were transported by the driver and vehicles of the vehicle owner/contractor and in consideration of that the vehicle owner/contractors were paid by the assessee the fixed amount. Therefore, sub-clause (c) to Explanation
(iii) of the provisions of sec.194C of the Act would apply in the case of the assessee. The Tribunal, after considering the provisions of sec. 194-I and the relevant definition, further held that the definition of "rent" does not provide any item for vehicle hire charges. Therefore, the provision of sec. 194-I has been wrongly applied by the AO in the matter. Similar view has been taken by the Tribunal in other cases cited supra.
8. In the absence of any contrary material/decision brought on record by the Revenue against the decisions cited by the ld. counsel for the assessee, we, respectfully following the above decisions, hold that the assessee's case falls under sub-clause (c) to Explanation (iii) of sec. 194C of the Act and the AO has wrongly applied the provision of sec.194-I of the Act and, accordingly, we are 6 ITA Nos.5773-5774/M/10 Stup Consultants P.Ltd.
inclined to uphold the finding of the ld. CIT(A) in holding that the assessee has rightly deducted tax as per provisions of sec. 194C and there is no case of short deduction. The grounds taken by the Revenue are, therefore, rejected. ITA No.5774/Mum/2010 : AY 2008-
2008-09 (Revenue's appeal):
9. At the time of hearing, it has been agreed by both the parties that the facts and issue involved in this appeal are the same as in the appeal for the assessment year 2007-08. Therefore, the plea taken by them in the said appeal may be considered while deciding the present appeal.
10. After hearing the rival parties and perusing the material available on record and in the absence of any distinguishing feature brought on record by the Revenue, we, keeping in view of our finding recorded in the assessee's appeal for assessment year 2007-08 hereinabove, decline to interfere with the order passed by the ld. CIT(A) on this account. The grounds taken by the Revenue are, therefore, rejected.
11. In the result, the Revenue's appeals stand dismissed.
Order pronounced in the open Court on the 25th day of November, 2011.
Sd/- Sd/- (R.K. PANDA) (D.K. AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: 25th November , 2011. NG: Copy to : 1. Department. 2.Assessee. 3 CIT(A)-14,Mumbai. 4 CIT(TDS),Mumbai. 7 ITA Nos.5773-5774/M/10 Stup Consultants P.Ltd. 5.DR,"H" Bench,Mumbai. 6.Master file. (TRUE COPY) BY ORDER, Asst. Registrar, ITAT, Mumbai. 8 ITA Nos.5773-5774/M/10 Stup Consultants P.Ltd. Details Date Initials Designa tion 1. Draft dictated on 17-11-2011 Sr.PS/ 2. Draft Placed before author 18-11-2011 Sr.PS/ 3. Draft proposed & placed before the Second JM/AM Member 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/ 6. Kept for pronouncement on Sr.PS/ 7. File sent to the Bench Clerk Sr.PS/ 8. Date on which the file goes to the Head clerk 9. Date on which file goes to the AR 10. Date of dispatch of order