TaxTMI 
TaxTMI 
2010 (10) TMI 572
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....facts and circumstances of the case and specifically after amendment w.e.f 13th July, 2006 in sect ion 194 -I of the IT Act , 1961" 3. Brief facts of the case are that the assessee is a company engaged in the business of software development, information technology enabled services and consulting. On 13th and 14th January 2009, a survey u/s 133 was carried out at the assessee's company premises to verify the compliance of TDS provisions. In pursuance to the survey, the order dated 19.02.2009 u/s 201(1) and 201(1A) of the Act was passed whereby the respective demands were raised on the assessee. In the said order the AO has held that the assessee has deducted the TDS on payment made for hi ring of vehicles for transportation of its employees under the provisions of sect ion 194C of the Act. Whereas this arrangement falls within the provisions of sect ion 194- I of the Act for rental of motor vehicles. Thus, the AO was of the view that the assessee has short deduct ion of tax and held to be in default regarding payment to transport service provider, as per the provisions of sect ion 201) (1) for the assessment year 2008-09 and interest under sect ion 201(1A) for the al....
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....icated vehicles and remained with the assessee during the duty and are at the disposal of the assessee then i t is not a simple case of hi ring of the vehicle for transportation but the vehicles were taken on lease by the asseseee at assessee's disposal for all time and not for any particular services or for a particular destination. The ld. DR has further contended that when the assessee was having full control over the vehicle then the provisions of section 194-I are applicable for making the payment of the arrangement made by the assessee. The ld. DR has also at tempted to distinguish the decision of the honourable jurisdictional High Court in the case of Indian National Ship Owners' Association and others V/s CIT(TDS) and ors in Writ Pet i t ion no. 400 of 2007, order dated 29.6.2007 which has relied upon by the CIT(A) and submitted that the decision was only in respect of ship and not in respect of motor vehicles... 6. On the other hand, the learned AR has submitted that the assessee has been providing its services to its client at various places. For providing the said services, the assessee has to sent its employees at various placed of its client and th....
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....to sect ion 194C, the expression "work" which include the carriage of goods and passenger by any mode of transportation other than by railways. Thus, the ld. AR has submitted that the service availed by the assessee is even otherwise comes under the wet lease which include vehicle, driver, staff and other service to be provided by the service provider and not dry lease in which only vehicle is hi red and used by using his own staff under his direct control . He has referred the circular no.681 dated 8.03.1994 and submitted that as per the said circular it is clarified that the provisions of sect ion 194C shall apply to all types of contract for carrying out any work including the transport , contract service contract etc. He has also referred the circular no.558 dated 28.03.1990, circular no. 715 dated 08.08.1995 and circular no.713 dated 02.08.1995 and submitted that in circular no.558, the CBDT has examined the matter in consultation with the Ministry of Law, in the case of State Road Corporation regarding contract for hi ring the buses under which the payment were made to the private bus operators from whom the buses were hired for plying on specific routs. After examining....
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....l) CIT v. Deevan Chand (2000) 178 Taxman 173) Del HC ITO v. Manav Grays Exim (P.) Ltd. (2000) ()75 TTJ 115) (Mumbai ITAT) The Addl. Director of Income Tax v. Bobcards Ltd. (2009 TIOL - 31 - ITAT - Mum) 7. We have considered the rival contentions and relevant record. The short controversy in this case is regarding the applicability of the provisions of section 194C or 194-I for the payment made by the assessee to the transport service provider. The assessee has entered into agreements with the various transport service providers. As per the agreement with Janani Tours and Resorts Pvt. Ltd and Mahindra and Mahindra limited, it is to be noted that the terms and conditions of the agreement are identical. As per the clauses (A), (B) and (C) of the agreement, it has been agreed between the parties that the service provider has provided the transport services at a particular locations for transportation of assessee's employees to different destination and at different locations as mentioned in Annexure "D". It is clear from the agreement that the transport service provider has to provide the vehicle along with the requisite staff and relevant f....
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....raph (ii ) of paragraphs 8 of circular, it was further clarified that the transport contract would be in addition to contract for transportation of loading and unloading of goods also cover contracts for plying buses, ferried etc alongwith the staff (eg. Driver, conductors, cleaner etc). The Board has also considered this issue in circular no. 558, dated 28.03.1990 in paragraph 3 as under : "3. The matter has been examined in consultation with the Ministry of Law. The Board have been advised that the applicability of the provisions of sect ion 194C will have to be examined with reference to the terms and conditions of each contract. In a case where the Board had occasion to examine this issue, the terms and conditions governing the contract between the owner of the buses and the State Road Transport Corporation were, inter alia as follows : (i) the owner of the bus shall give his bus on hire to the corporation for plying on notified routes; (ii) the owner shall provide a driver, with a valid licence and PS Badge for the vehicle supplied by him, who shall follow the instructions of the authorized officials of the corporation; (iii) the owner shall make ....
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....ade by an entity mentioned in sect ion 194C (1). The provisions of section 194C shall, however, apply when a plane or a bus or any other mode of transport is chartered by one of the entities mentioned in section 194C of the Act " 9. The main content ion of the revenue is that as per Rule 5 of the IT Rules, 1962, the vehicle on hire is included under plant and machinery and therefore, the same shall be treated as plant and machinery for the purpose of deduction of tax and falls under the provisions under section 194-I. It is to be noted that the classification of the assets for the purpose of depreciation u/s 32, the Motor vehicles used for the business of running them on hire is included in the class of plant and machinery for applying the rate of depreciation as per Appendix-I. These classifications does not per se change the nature of the service provided by the service provider who is running the vehicle on hire. There is no dispute that the service provided by the person who is running the vehicles on hire would claim the depreciation on the vehicle at the rate which is provided under the Appendix for Plant and Machinery. But that classification....
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....t of income payable by way of rent for use of any machinery or plant or equipment. Thus, it is clear that the provisions of section 194-I is confined to the payment for rent on hiring of land or building including factory building, furniture or fittings but not for the transport vehicle and other mode of transportation particularly when the same is in the nature of providing and availing the transport services. In the case of National Panasonic India P Ltd V/s DCIT (Delhi ) Bench of the Tribunal in paragraph 6 has held as under . : "6. We have duly considered the rival contentions and the material on record. Sect ion 194-I of the Act mandates person, other than an individual or an Hindu Undivided family (HUF), paying rent to a resident to deduct tax at source at the time of credit or payment, whichever is earlier clause (i) of the Explanation to Section 194-I gives the meaning of "rent" to be a payment under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building ), together with furniture, fittings and the land appurtenant thereto, whether or no such building is owned by the payee.....
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....ers responsible for the provisions of derivers, running and maintenance of the vehicle (e.g. petrol) insurance licensce, permit). The drivers for vehicles work under the supervision and control of the transport service providers. The appellant is not responsible for the damage/accident of any of the vehicles and the entire responsibility of the vehicles is that of the transport service provider. The transport contract also provides that transport service provider charges are on "per kilometer " basics. 6.1 Based on the above, it is amply clear that the contract entered by the Appellant with the transport service provider is in the nature of service contract only. I agree with the contention of the appellant that since the appellant does not enjoy the control over the vehicles of the transport service providers and also the running and maintenance expenditure is borne by the transport service providers, the nature of contract entered cannot be termed as contract for hiring of the vehicles. I do not agree with the observation of the AO that use of vehicles on a regular basis renders the arrangement as a contract for hiring of the vehicles. I am ....