TaxTMI 
TaxTMI 
2011 (10) TMI 175
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....s. A survey was conducted during which it was found that assessee paid hire charges amounting to Rs.31,54,139/- to various parties under the head 'hire charges" on which TDS at 2% was made under section 194C in A.Y. 2007-08. In A.Y. 2008-09 assessee paid an amount of Rs.40,13,818/-to various parties and deducted tax under section 194C as applicable. It was Assessing Officer's contention that hiring of helicopters/air crafts would come under the definition of 'Rent' under section 194I and tax should have been deducted at 22.44% in A.Y. 2007-08 and 10.3% in A.Y. 2008-09 and accordingly he raised a demand under section 201(1) and 201(1A) in the respective assessment years. Assessee's submission that they have availed the services of various airlines for transportation from place to place and paid the charges as per the flying hours was not accepted as the A.O. held that the payment has been made for hire of aircraft/helicopter/ vehicle which attracts TDS under section 194I as per amendment Act No. 2 of 2006. Assessee relied on the CBDT Circular No.715 dated 08.08.1995 to clarify that the services for utilizing transportation services falls under section 194C. Rejecting the above conte....
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.... provisions of section 191 assessee cannot be held responsible for default for interest under section 201, relying on the principles established by the Hon'ble Supreme Court in the case of Hindustan Coco Cola Beverage Pvt. Ltd. vs. CIT The CIT(A), after considering the submissions have dismissed assessee's contentions as under, while directing the A.O. to examine whether the deductee has paid due tax. The order of the CIT(A) is as under: - "6. I have gone through the above submissions very carefully and facts on record as well as order of the Assessing Officer. In this case, the appellant hired helicopter and aircraft and made payment of Rs.31,54,139/- on which the appellant had deducted TDS as per the provisions of section 194C whereas the Assessing Officer has held that the tax should have been deducted as per provisions of section 194 I. I find that the appellant has hired helicopter/aircrafts/vehicle after the amendment brought in section 194 I of the I.T. Act. As per Amendment Act 2 of 2006 the said expenses are covered u/s. 194 I as the 'vehicle' is also covered under the payment of 'rent'. The vehicle is covered under plant and machinery. It is very clear from the facts o....
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....ft, therefore, hiring of machinery comes within the definition of rent under section 194 I. 8. We have considered the rival submissions and examined the invoices placed on record in the paper book. As far as the factual aspect of the matter is concerned the observation of the CIT(A) that assessee has hired helicopter/air craft/vehicle is not correct. Assessee has never hired helicopter/ aircraft as such either on a periodic basis or on day-to-day basis. What the assessee has hired is the transport services being provided by the reputed airlines for transportation of its Executives from place to place. For example, Executive Airlines P. Ltd. provided KING AIR C 90 TURBO PROPELLER air craft at the rate of Rs.60,000/- per hour on 18.12.2006 for sector Mumbai-Rajkot-Mithapur-Mumbai at a charter cost of Rs. 2,85,000/-. The ultimate invoice was for Rs.3,10,000/- including aviation services rendered and landing charges at Mithapur airport. This invoice indicates that the aircraft was used by Executive Airways to provide aviation services to transport Executive on a 5-seater aircraft for which charter cost was Rs.60,000/- per hour for 4.45 hours and including landing charges at Mithapur....
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....p and dropping of its employees from its offices at different locations to the places of its clients. Though as per the agreement the vehicles provided for the requirements of the assessee were dedicated but it is not a case of hiring of vehicles only without other facilities. In the case in hand all the facilities alongwith the vehicles were to be provided by the transport service provider and he was under the obligation to replace the vehicles as well as the driver and other staff after running certain hours. We further note that each vehicle was provided appropriate number of drivers to comply with the working time directives and enable the vehicle to be operated 24 hours day and 7 days per week. The service provider was responsible for ensuring all legal and operational obligations. Thus, it was a kind of wet lease, wherein the assessee was utilizing the transport services provided by the service provider without making any arrangement of its own but all the arrangements were the responsibility and obligation of service provider. The CBDT has clarified in Circular No. 681, dated 8-3-1994 as under: "7 ..... (i) the provisions of section 194 shall apply to all types of cont....
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....rom time to time by carrying out necessary maintenance and repairs; (v) the corporation shall provide a conductor for the operation of services with necessary equipment for issuing tickets to the passengers as well as luggage; (vi) the owner shall submit his claim twice in a month, once for the period from 1st to 15th and the other for the remaining part of the month, accompanied by a certificate issued by the Traffic Supervisor of the Depot with regard to the distance operated during the respective period; (vii) the corporation shall pay the owner at the rate of Rs.. .. as fixed cost per day in addition to Rs. Per km operated as variable cost, etc. On the basis of the these terms and conditions, the Board have been advised that although the contract may appear to be a simple hire contract, it is actually a service contract (for carrying out any work) entered into between the State Road Transport Corporation and the owner of the bus for plying certain buses on certain routes and subject to certain conditions. In such cases, the provisions of section 194C are applicable and tax will have to be deducted at source from the payment made to the private bus owner. It may, the....
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....of plant under Rule 5 of the Income-tax Rules appears to be only for the purpose of sections 28 to 41 of the Act. The observations of the Hon'ble High Court in paragraphs 13, 14 and 15 are as under: "13. Having heard rival parties, prima facie, it appears that section 194 I is attracted only in respect of rent for land or building (including factory building), furniture, fittings or any other machinery attached thereto and not for anything else like ships, transport vehicles (including railways) and freight/charter hire payments thereto. The definition of "plant" appears to be only for the purpose of sections 28 to 41 of the Act. Therefore, the fact that the said definition has been found necessary means that in normal parlance "plant" does not include "ship" even sections 32A and 33 of the Act clearly differentiate ships, machinery and plant. 14. having examined clause(c ) Explanation-Ill of section 194-C, it, prima facie, clarifies that the expression "work" means carriage of goods and passengers by any mode of transport other than by railways and freight payments have to be deducted under this section and not under section 194I. 15. Apart from the above, respondents the....
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....ere the agreement is not predominantly for the use of land or building, but for something else, then payment under that agreement will not constitute rent even if that "something else" involves the use of land or building as an integral part of or incidental to the predominant objective of the agreement. Let us consider the facts of the case before us in the light of the basic concept of rent" 11. Even if the amendment in the provisions of section 194 I has included the plant and machinery the expression plant and machinery used in the explanation to section 194 I refers to only the plant and machinery used by the assessee in its business by hiring them but not the hiring of transport service. We also find force in the alternative contention of the ld. AR that the Assessing Officer cannot demand under section 201(1) when the entire tax has been paid by the recipient of the amount by way of advance tax and TDS to the revenue. In view of the various decisions as referred by the learned AR it is clear that once the revenue has collected the tax on the payment then no demand can be raised under section 201(1) otherwise it will amount to double taxation. The CIT(A) has decided the is....
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....ered by the appellant for transportation of its employees between residence to office is similar to the arrangement mentioned in the circular No. 558, dated 28th March 1990, issued by the CBDT regarding the applicability of the provisions of section l94C of the Act to the hire charges paid to bus owners. Apartment from this, other circulars (i.e., circular number 681 dated March, 8, 1994, circular No. 713 dated August 2, 1995 and circular number 715 dated August 8, 1995) have specifically provided that the provisions of section 194C of the Act shall apply in case where bus or any other mode of transport is chartered. Based on the reading of the circulars, I am of the opinion that payments made by the appellant are of similar nature and hence tax should be deductible under section 194C of the Act; 6.4 I have also gone through the judgment in case of Indian National Ship owners Association relied on by the appellant and I am of the view that the same is applicable to the appellant's case in which it has been held that the provisions of section 194 I of the Act are not applicable in case of hire payments made for the hiring of transport vehicle. 6.5 The carriage of goods and pas....