TaxTMI 
TaxTMI 
2010 (10) TMI 359
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.... provisions of Chapter XVII-B of the Income-tax Act, 1961 relating to the requirement of tax deduction at source. During the course of survey, it was found that the assessee had entered into an arrangement with Bajaj for facultative reinsurance. As per the said arrangement, the assessee was liable to pay certain percentage of premium ceded as reinsurance inward commission to Bajaj. The assessee was receiving only net premium on reinsurance from Bajaj and as per the arrangement, it was to bear a certain percentage of loss of the premium. The profit commission, if any, was shared between the assessee and Bajaj in certain percentage as agreed in the arrangement. According to the Assessing Officer, if the transaction between the assessee and Bajaj was a business transaction of passing risk, there was no question of paying ceding premium/commission. He held that the assessee, therefore, was liable to deduct tax on reinsurance commission paid to M/s Bajaj under section 194D of the Income-tax Act, 1961. This decision of the Assessing Officer was challenged by the assessee in the appeals filed before the ld. CIT(A) and elaborate submissions were made on its behalf before him in support of ....
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....d be a remuneration or reward for soliciting or procuring the insurance business. The insurance companies do not procure business for the assessee company nor does the assessee company pay commission or other payment for soliciting the business from the insurance companies. The language of section 194D clearly indicates that ordinarily there would be three parties involved in the payment of commission or other payments as remuneration or reward for soliciting or procuring the insurance business. Firstly, there would be an insurance company and the second would be insured. If the insurance company gets business directly from the insured, no payment would be required to be made by the insurance company to the insured by way of commission or otherwise for soliciting or procuring the business for the assessee. If any discount is allowed by the insurance company to the insured that will not fall within the definition of brokerage or commission paid for soliciting for procuring insurance business. That payment, in our view would fall within the category of a discount offered to the insured for giving the business to the insurance company. Even otherwise the payment or deduction would nei....
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....nue's appeal for assessment years 2007-08 and 2008-09. 7. The assessee during the years under consideration had entered into arrangements with various parties for hiring of car. The cars were hired from time to time for transportation of employees and visitors for the purpose of assessee's business and tax at source was deducted by it from the payment of car hire charges as per the provisions of section 194C of the Act. According to the Assessing Officer, the payments made by the assessee to various parties by way of car hire charges were in the nature of rental of plant and machinery or equipment. He held that the assessee therefore was liable to deduct tax at source at higher rate as per the provisions of section 194-I. 8. Before the ld. CIT(A), it was submitted on behalf of the assessee that even as per the definition of rent as extended with effect from 30-7-2006, only the rent of machinery, plant and equipment is covered and not the rent for use of cars. It was submitted that section 194C provides that any person responsible for paying any sum to a resident for carrying out "any work" in pursuance to a contract between the contractor and any company shall at the time of ....
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....ced by Amendment Act of 2006 whereby the definition of rent is extended to cover machinery, plant and equipment within its scope with effect from 13-7-2006, cars are not expressly included in the definition of rent. The appellant also contended that sub-section (3) of section 194C of the Income-tax Act states that the expression 'work' shall also include carriage of goods and passengers by any mode of transport other than by railways. The appellant has also placed reliance on Hon'ble Supreme Court judgment in the case of Associated Cement Co. Ltd. v. CIT 67 Taxman 346. From the details furnished in this regard, I find that the vehicle is not at the disposal of the appellant and the appellant has to run the vehicle as per requirement/routes only. The appellant had not made any payment for use of particular motor car but for the facility of transport from one place to another and the rates are fixed for a particular vehicle and for distance and timings. I see merit in the submission of the appellant that it had entered into an Agreement for hiring of cars which is in the nature of rate contract for providing specified types of cars at predetermined rates. The cars are not at the disp....
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....ore, strongly supported the impugned order of the ld. CIT(A) on this issue. 12.We have considered the rival submissions and also perused the relevant material on record. It is observed that from the details and documentary evidence furnished by the assessee, it was found by the ld. CIT(A) that specific cars were not made available at the disposal of the assessee and the vendors were required to provide any cars belonging to a particular category for transportation of employees and guests of the assessee as per its requirement. As held by the ld. CIT(A), the assessee thus had not made any payment for use of a particular motor cars but the payments were made for transportation of its employees/guests as per the requirement. Based on these findings of facts recorded by him in the impugned order, the ld. CIT(A) held that it was a case of contract for carriage of passengers as envisaged in Explanation (iv)(c) to section 194C and tax at source was rightly deducted by the assessee at the rate prescribed in section 194C. At the time of hearing before us, the ld. D.R. has not been able to controvert/rebut these findings of facts recorded by the ld. CIT(A) on the basis of appreciation of ....
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....suance to a contract between the contractor and any company was required to deduct Income-tax at the rate of 2 per cent at the time of payment or credit of such sums. It was contended that as per the definition of the word "work" given in the section, payment in respect of carriage of goods and passengers by any mode of transport other than by railways was regarded as work. It was contended that the arrangement between the assessee and the various parties for carriage of passengers by hiring of buses thus was a work carried out in pursuance to a contract and tax at source was rightly deducted as per the provisions of section 194C. Reliance in support of this contention was placed by the assessee on the Board Circular No. 558, dated 28-3-1990 and Circular No. 715, dated 8-8-1995. 14.1 The ld. CIT(A) did not find merit in the submissions made on behalf of the assessee on this issue and proceeded to uphold the action of the Assessing Officer in treating the bus hire charges paid by the assessee as rent and in holding that tax at source from the payment thereof was liable to be deducted at higher rate as per the provisions of section 194-I for the following reasons given in para No.....
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....rvices to be rendered by the contractor for carrying the passengers i.e., employees of the assessee by buses which was a mode of transport. He pointed out that as per clause 1 of the said agreement, the contractor had agreed to provide bus services to the commuting staff of the assessee between the office premises and Mulund railway station twice in a day at specific timings. He submitted that even the experience of the contractor in the field of providing such bus services was specifically indicated in the said agreement. He submitted that as per the said agreement, the contractor had undertaken to provide 23 seater bus for this purpose and there is nothing to indicate that a specific bus was made available at the disposal of the assessee. He also pointed out that as per the said agreement, contractor had agreed to provide a first party insurance cover for the employees of the assessee availing the said bus services in case of any accident/damages etc., which is a condition that cannot be there in case of taking bus on rental basis. He contended that the said agreement thus was a contract for carrying out the work of carriage of passengers by buses as a mode of transport and merel....
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....the provisions of section 194C(1) which are extracted below : "194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) 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 a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to- (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) 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 prov....
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....) 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." 19. In order to ascertain whether the payment of bus hire charges made by the assessee is covered by the provisions of section 194C or 194-I, it is necessary to look into the clauses of the relevant agreement so as to ascertain the exact nature of arrangement between the assessee and the concerned parties. A copy of one such sample agreement is placed at page Nos. 68 to 70 of the assessee's paper book and a perusal of the same shows that the concerned party namely M/s Goel & Sons with whom the said agreement was entered into by the assessee was referred to as contractor mentioning further that the contractor was in the business of providing bus services to clients and was agreeable to provide bus services to the assessee ....
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....ses thus were available at his disposal during the period when they were not required for providing services to the assessee as agreed. Even the staff required for providing the bus services such as drivers/cleaners etc., was to be provided by the contractor and even running maintenance expenses such as diesel, repairs etc., were to be borne by the contractor. It was also agreed between the assessee and the contractor that the monthly compensation amount would be increased as a result of any increase in the diesel prices, rates of taxes etc. Having regard to all these terms and conditions of agreement, we are of the view that it was not a case in which it can be said that buses were taken by the assessee on rent so as to attract the provisions of section 194-I. On the other hand, it was a case where payments were made by the assessee for carrying out the work of carriage of its employees as passengers by buses as a mode of transport in pursuance of a contract with the concerned contractors. The said payments thus were clearly covered by the provisions of section 194-C read with Explanation (iv)(c) thereto and the tax at source was rightly deducted by the assessee from the said paym....
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....elevant transactions made by the assessee and keeping in view of the nature of work carried out by the contractors, section 194C was applicable and not section 194J. It was contended that the intention of the assessee and the contractor was to carry out the work as particularly described in the contracts entered into with them and the same being in the nature of work contracts, the provisions of section 194C were attracted so far as deduction of tax was concerned. Relying on the Board Circular No. 720, dated 30-8-1995, it was contended on behalf of the assessee that even if the contracts were composite nature, tax at source was liable to be deducted only under section 194C keeping in view the nature of substantial work done by the contractors. Sample copies of the invoices raised by the contractors were also produced by the assessee to show the description of the service rendered by the contractors to carry out the work involved. It was submitted that fees for professional and technical services, designing etc. was paid separately to the architects and tax at source was deducted from such payments in accordance with law. 22. The ld. CIT(A) did not find the submission made on beh....
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....that the payments made by the assessee against the said bills to the contractors thus were for the various types of work executed by him in terms of works contract and not for any professional services rendered by them. He contended that merely because the said work was done by interior decorators and designers, it cannot be said that the contract was for designing or decoration work. He contended that what is to be seen is the type of work undertaken by the contractor. He contended that if the nature and type of work undertaken by the contractors is seen from the description given in their bills, it becomes abundantly clear that it was a case of works contract executed by the contractors and not rendering of any professional services. He contended that section 194J therefore was not attracted and tax at source was rightly deducted by the assessee from the payments against the said work as per the provisions of section 194C. 24. The ld. D.R., on the other hand, submitted that the payments in question were made by the assessee to interior decorators and designers and even if the nature of work done by them as shown in the relevant bills was repairs and renovation to the premises ....