2014 (1) TMI 1532 - AT - Income Tax

Revenue's Appeal on TDS Deduction Dismissed; Transportation Contract Under Section 194C

The appeals filed by the revenue regarding the deduction of TDS under sections 194I or 194C of the Income-tax Act, 1961 for the Assessment Year 2010-11 ... Deduction of tax at source u/s 194C or 194I - Held that:- Relying upon the decision in ITO (TDS) vs. Indian Oil Corporation (Marketing Division) [2011 (11) TMI 31 - ITAT, DELHI] - 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 section 194C and not under section 194I - Decided against Revenue. Issues:1. Whether the assessee was required to deduct tax under section 194I or 194C of the Income-tax Act, 1961.Analysis:The appeals filed by the revenue were based on the common issue of deduction of TDS under section 194C or 194I of the Income-tax Act, 1961 for the Assessment Year 2010-11. The Assessing Officer concluded that the arrangement between the assessee and the carriers was akin to hiring of vehicles, necessitating tax deduction under section 194-I. However, the assessee argued that the arrangement was a transportation contract, warranting TDS under section 194C. The AO disregarded CBDT circulars and emphasized the specific provisions of the law introduced by the Finance Act, 1994. The CIT (A) ruled in favor of the assessee, citing the decision of the Hon'ble Gauhati High Court in a similar case.The primary issue to be decided was whether the nature of the arrangement between the assessee and the carriers constituted hiring of vehicles (section 194-I) or a transportation contract (section 194C). The AO's interpretation leaned towards section 194-I, emphasizing exclusive possession and use by the assessee. However, the CIT (A) and various ITAT decisions favored section 194C, considering the nature of the agreement and the consistent view in earlier cases.The ITAT, Delhi Bench 'C' and ITAT, Agra Bench, along with other decisions, upheld that the arrangement was a contract for transportation of goods falling under section 194C. The ITAT dismissed the revenue's appeals based on the precedents and the nature of the agreement, which aligned with transportation services rather than mere vehicle hiring.In conclusion, the appeals of the revenue were dismissed, affirming that the tax deduction was required under section 194C for the transportation contract, not under section 194I for hiring of vehicles. The judgment relied on precedents and the specific nature of the agreement between the assessee and the carriers.