2011 (8) TMI 1234 - AT - Income Tax

Tribunal clarifies tax deduction rules for hire charges over passenger buses, favors assessee

Deputy Commissioner of Income Tax. (T.D.S.), Agra. Versus Regional Manager, UPSRTC U.P. State Road Transport Corporation,

Deputy Commissioner of Income Tax. (T.D.S.), Agra. Versus Regional Manager, UPSRTC U.P. State Road Transport Corporation, - TMI Issues:Main issue: Whether the assessee, UPSRTC, is obliged to deduct tax at source under section 194C or 194-I of the Income-tax Act, 1961 for payments made to contractors by way of hire chargesRs.Analysis:1. The main issue in this case revolves around determining whether the assessee, UPSRTC, is required to deduct tax at source under section 194C or 194-I of the Income-tax Act, 1961 for payments made to contractors by way of hire charges. The Assessing Officer held that tax should have been deducted under section 194-I, which pertains to rent received in respect of machinery or plant. However, the first appellate authority concluded that half of the payment should be subject to tax deduction under section 194C and the other half under section 194-I. The total sum demanded from the assessee was calculated based on these deductions.2. The Revenue appealed the decision, arguing that the entire amount should be liable for tax deduction under section 194-I, while the assessee filed cross-objections contending that the entire amount should be liable under section 194C. The case was presented before the Appellate Tribunal ITAT Agra for resolution.3. The Tribunal considered the facts of the case and referred to a previous decision involving U.P. State Road Transport Corporation, Rajapur, to support its findings. The Tribunal concurred with the view that under section 194-I, tax is to be deducted for the use of machinery or plant, while section 194C specifically covers tax deduction for the carriage of goods and passengers by any mode of transport other than by Railways. Specific provisions prevail over general provisions, as per the rule of interpretation. The Tribunal also cited relevant judgments and circulars to support the conclusion that hiring of buses for carriage of passengers falls under section 194C, not section 194-I.4. Consequently, the Tribunal dismissed the appeals of the Revenue and allowed the cross-objections of the assessee. It held that the assessee was liable to deduct tax under section 194C only, and section 194-I was deemed inapplicable to the situation. The decision was based on the specific provisions of the Income-tax Act and relevant legal interpretations.5. In conclusion, the Tribunal's judgment clarified the tax deduction obligations of the assessee, emphasizing the distinction between sections 194C and 194-I for payments made to contractors by way of hire charges. The decision provided a clear interpretation of the applicable tax provisions and upheld the assessee's position in this matter.