Regional Manager, Agra V. Dy. C.I.T. (TDS), Agra

CO 42/AGR/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6288 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A K SHARMA
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NOS. 106 & 107/AGRA/2010 ASSTT. YEAR : 2008-09 & 2007-08 D.C.I.T. (T.D.S.), VS. REGIONAL MANAGER, UPSRTC, AGRA. U.P. STATE ROAD TRANSPORT CORPORATION, 36, GWALIOR ROAD, AGRA. (TAN : AGRR 10057 F) C.O. NOS. 41 & 42/AGRA/2010 (IN ITA NO. 106 & 107/AGRA/2010) ASSTT. YEAR : 2008-09 & 2007-08 D.C.I.T. (T.D.S.), VS. REGIONAL MANAGER, UPSRTC, AGRA. U.P. STATE ROAD TRANSPORT CORPORATION, 36, GWALIOR ROAD, AGRA. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI A.K. SHARMA, JR. D.R. FOR RESPONDENT : SHRI DEEPENDRA MOHAN, C.A. DATE OF HEARING : 16.08.2011 DATE OF PRONOUNCEMENT : 18.08.2011 ORDER PER BENCH: THESE APPEALS OF THE REVENUE AND CROSS-OBJECTIONS OF THE ASSESSEE ARISE OUT OF THE CONSOLIDATED ORDER PASSED BY THE CIT(A)-I, AGRA, ON 27.01.2010 IN APPEAL NOS. 19 TO 21/AGRA/2009-10. THE MAIN ISSUE IS WHETHER THE ASSE SSEE, UPSRTC IS OBLIGED TO DEDUCT TAX AT SOURCE UNDER THE PROVISION CONTAINED IN SECTION 194 C OR 194-I OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT) , FOR PAYMENTS MADE TO THE CONTRACT ORS BY WAY OF HIRE CHARGES ? 2. THE FACTS, AS MENTIONED IN THE ASSESSMENT ORDER, ARE THAT THE ASSESSEE ENTERED INTO CONTRACTS REGARDING PROVIDING AND PLYING BUSES WITH VARIOUS PARTIES. THE CASE OF THE ASSESSEE IS 2 THAT IT ENTERED INTO WORKS CONTRACT WITH VARIOUS CO NTRACTORS, WHO PROVIDED THE BUSES FOR RUNNING IN THE COURSE OF BUSINESS OF THE ASSESSEE. THESE CO NTRACTORS ARE BEING PAID ON PER KILOMETER BASIS. THE CONTRACT IS WORKS CONTRACT, AS UNDERSTOOD UNDER EXPLANATION III TO SECTION 194C. THEREFORE, THE TAX HAS TO BE DEDUCTED @ 2% OF THE AMOUNT INVOL VED IN THE PAYMENTS. HOWEVER, THE FINDINGS OF THE ASSESSING OFFICER ARE THAT THE TAX OUGHT TO HAVE BEEN DEDUCTED U/S. 194-I, IN WHICH THE WORD RENT HAS BEEN DEFINED TO MEAN, INTER ALIA, T HE RENT RECEIVED IN RESPECT OF MACHINERY OR PLANT UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OT HER ARRANGEMENT. REFERENCE HAS BEEN MADE TO THE PROVISION CONTAINED IN SECTION 43(3) ALSO, IN W HICH THE WORD PLANT HAS BEEN DEFINED TO INCLUDE IN ITS AMBIT ANY SHIP, VEHICLE, BOOK, SCIEN TIFIC APPARATUS ETC. THEREFORE, IT HAS BEEN HELD THAT AFTER AMENDMENT IN THE SECTION W.E.F. 01.06.20 07, THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE @ 10% OF THE AMOUNT PAID AS HIRE CHARGES. ON THIS BASIS, THE AMOUNT OF SHORT DEDUCTION OF TAX FOR THE PERIOD JUNE, 2007 TO MARCH, 2008 HAS BEEN WORKED OUT TO RS.23,70,760/-. THE ASSESSEE HAS BEEN TREATED AS AN ASSESSEE IN DEFAULT IN RESPECT OF THIS AMOUNT AND, THEREFORE, HE HAS BEEN DIRECTED TO DEPOSIT THIS AMOUNT TO THE CREDIT OF CENTRAL GOVERNMENT. INTEREST AMOUNTING TO RS.3,97,669/- HAS BEEN COMPUTED ON ACCOUNT OF NON-P AYMENT OF AFORESAID AMOUNT OF RS.23,70,760/-. THUS, THE ASSESSEE HAS BEEN ASKED T O PAY A TOTAL SUM OF RS.27,68,429/-. SIMILAR OBSERVATION HAS BEEN MADE FOR THE FINANCIAL YEAR 20 08-09, TILL DECEMBER, 2008, DETERMINING TAX AND INTEREST AT RS.24,19,495/-. THE MATTER HAS BEEN AGITATED BEFORE THE FIRST APPELLATE AUTHORITY, WHO HAS COME TO THE CONCLUSION THAT HALF OF THE AMO UNT IS SUBJECT TO TAX DEDUCTION AT SOURCE U/S. 194C AND OTHER HALF U/S. 194-I. THEREFORE, THE ASSE SSEE HAS BEEN GRANTED PART RELIEF IN THE MATTER. 2.1 AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPE ALS BEFORE US AND THE MAIN GROUND TAKEN IS THAT THE LD. CIT(A) ERRED IN APPLYING THE PROVISION S OF SECTIONS 194C AND 194-I IN DIRECTING THE ASSESSING OFFICER TO RE-COMPUTE TAX AND INTEREST U/ S. 201(1) AND SECTION 201(1A) RESPECTIVELY 3 INSTEAD OF THE CORRECT POSITION THAT WHOLE OF THE A MOUNT WAS LIABLE FOR TAX DEDUCTION AT SOURCE U/S. 194-I. THE ASSESSEE HAS ALSO FILED CROSS-OBJECTIONS AND THE MAIN GROUND IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT HALF OF THE PAYMENT WAS LIABL E FOR TAX DEDUCTION AT SOURCE U/S. 194-I WHILE THE CORRECT POSITION OF LAW IS THAT THE WHOLE AMOUN T WAS SO LIABLE U/S. 194C. 3. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE MENT IONED AT THE OUTSET THAT THE ISSUE STANDS SQUARELY COVERED BY THE DECISION OF INCOME-TAX APPE LLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD IN THE CASE OF U.P. STATE ROAD TRANSPORT CORPORATIO N, RAJAPUR, ALLAHABAD IN ITA NO. 180 TO 182(ALLD.)/2010 FOR ASSESSMENT YEARS 2006-07 TO 200 8-09, A COPY OF WHICH HAS BEEN PLACED BEFORE US. THE CASE OF THE LD. COUNSEL IS THAT UPSR TC, AGRA AND UPSRTC, RAJAPUR ARE PART OF THE STATE GOVERNMENT CORPORATION, U.P. STATE ROAD T RANSPORT CORPORATION. THESE AND OTHER UNITS HAVE ENTERED INTO SIMILAR AGREEMENTS FOR HIRING BUS ES FOR USE BY THE CORPORATION, WHICH IS WHOLLY OWNED GOVERNMENT CORPORATION. THEREFORE, THE FACTS ARE IDENTICAL AND THE DECISION IS APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. ACCORDING LY, IT IS URGED THAT THE DECISION MAY BE FOLLOWED AND THE MATTER MAY BE DECIDED IN FAVOUR OF THE ASSE SSEE. 3.1 IN REPLY, THE LD. DR TOOK US THROUGH THE ORDER OF THE ASSESSING OFFICER AND THE LEARNED CIT(A). IT HAS BEEN VEHEMENTLY ARGUED THAT AFTER AM ENDMENT, UNDER SECTION 194-I W.E.F. 01.06.2007, THE WHOLE OF THE RENTAL IS COVERED FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE AT THE RATE OF 10%. HOWEVER, IT IS FAIRLY SUBMITTED THAT T HE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF THE CASE OF U.P. STATE ROAD TRANSPORT CORPORATION, RAJAPUR, ALLAHABAD. 4 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BEFORE US. THE FINDINGS OF THE TRIBUNAL IN THE CASE OF U.P. STATE ROAD TRAN SPORT CORPORATION, RAJAPUR (SUPRA) ARE CONTAINED IN VARIOUS SUB-PARAGRAPHS OF PARAGRAPH NO . 5, WHICH IS REPRODUCED BELOW : 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AT THE OUTSET, WE CONCUR WITH THE VIEWS OF THE LD. CIT(A). UNDER S ECTION 194-I, THE INCOME-TAX IS REQUIRED TO BE DEDUCTED AT SOURCE AT THE TIME OF PA YMENT OF AN INCOME BY WAY OF RENT AT THE RATE OF 10% FOR THE USE OF ANY MACHINERY OR PLA NT OR EQUIPMENT, WHEREAS UNDER SECTION 194C OF THE ACT, TAX IS REQUIRED TO BE DEDU CTED AT THE RATE OF 2% FOR CARRYING OUT ANY WORK WHICH, INTER ALIA, INCLUDES CARRIAGE OF GO ODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS. THOUGH ALL TYPES OF MACHINERY, PLANT AND EQUIPMENT GIVEN ON HIRE ARE COVERED UNDER SECTION 194-I, BUT HIRING OF TRANSPORT VEHICLES GETS SPECIFICALLY COVERED UNDER SECTION 194C FOR THE PUR POSE OF TAX DEDUCTION AT SOURCE. THE TRANSPORT VEHICLES USED FOR CARRIAGE OF GOODS AND P ASSENGERS ARE SUBJECTED TO TDS AS PER CLAUSE (C) OF EXPLANATION III OF SUB-SECTION (2) OF SECTION 194C OF THE ACT, WHICH IS REPRODUCED BELOW : EXPLANATION III : FOR THE PURPOSES OF THIS SECTION , THE EXPRESS WORK SHALL ALSO INCLUDE (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION P ROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRA NSPORT OTHER THAN BY RAILWAYS; (D) CATERING. 5.1 THE CARRIAGE OF GOODS AND PASSENGERS BY ANY MOD E OF TRANSPORT FINDS PLACE IN SECTION 194C ONLY AND NOT IN SECTION 194I OF THE AC T. THERE IS NOTHING IN SECTION 194- I WITH REGARD TO DEDUCTION OF TAX ON TRANSPORT CONT RACTS. THEREFORE, PROVISIONS SPECIFICALLY PROVIDING FOR DEDUCTION OF TAX AT SOUR CE ON CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT FIND PLACE IN S ECTION 194C AND NOT IN SECTION 194-I OF THE ACT. UNDER THE RULE OF INTERPRETATION , SPECIFIC PROVISIONS PREVAIL OVER GENERAL PROVISIONS. THE RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUDGMENTS IN SUPPORT OF THE CONTENTION OF THE ASSESSEE : (I). CIT VS. RAJASTHAN SPINNING AND WEAVING MILLS L TD (2004) 271 ITR 460 (RAJ.) (II). CIT VS. PRASAR BHARTI (BROADCASTING CORPN. OF INDIA) (2007) 292 ITR 580 (DEL.) 5.2. FURTHER RELIANCE WAS PLACED IN SUPPORT OF THE ASSESSEES CONTENTION ON VARIOUS CIRCULARS ISSUED BY THE C.B.D.T. AS UNDER : (I). CIRCULAR NO. 681 DATED 6.8.1994, (II). CIRCULAR NO. 715 DATED 8.8.1994, (III). CIRCULAR NO. 1/2008 DATED 10.1.2008, (IV). CIRCULAR NO. 713 DATED 2.8.1995, (V). CIRCULAR NO.717 DATED 14.8.1995, 5 (VI). CIRCULAR NO.558 DATED 28.3.1990 5.3 IT WAS ALSO PLEADED BEFORE THE LD. CIT(A) THAT THE AFORESAID CIRCULARS AND INSTRUCTIONS HAVE NEITHER BEEN SUPERSEDED NOR WITHD RAWN AND THEY ARE STILL IN FORCE AND HAVE TO BE FOLLOWED BY THE INCOME-TAX AUTHORITIES. IN VIEW OF THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE THE LD. CIT(A) AND THE FINDINGS OF THE LD. CIT(A) ON THE BASIS OF THE PROVISIONS CONTAINED IN SECTION 194C A ND 194-I AND THE CIRCULARS AND THE DECISIONS RELIED HEREINBEFORE, HIRING OF BUSES FROM VARIOUS PERSONS FOR CARRIAGE OF PASSENGERS BY THE ASSESSEE IS COVERED UNDER SECTION 194C OF THE ACT AND NOT UNDER SECTION 194-I. THE ASSESSEE HAS NOT COMMITTED ANY E RROR IN DEDUCTING THE TAX AT SOURCE UNDER SECTION 194C OF THE ACT FOR HIRING THE VEHICL ES AND THE ITO, TDS IS NOT JUSTIFIED TO INCLUDE THE SAID CONTRACT UNDER SECTION 194-I OF TH E ACT AND THEREFORE, THE ASSESSEE CANNOT BE HELD IN DEFAULT UNDER SECTION 201(1)/201( 1A)/206C(7) OF THE ACT AND ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF TH E LD. CIT(A), WHO HAS CORRECTLY CANCELLED THE ORDER OF THE ITO, TDS DATED 3.9.2009. THUS, GROUNDS NO. 1 TO 8 OF THE REVENUE ARE DISMISSED. 5. A CO-ORDINATE BENCH HAS ALREADY TAKEN A DECISION IN THE MATTER AND, THEREFORE, JUDICIAL DISCIPLINE DEMANDS THAT WE FOLLOW THE DECISION. THE REFORE, RESPECTFULLY FOLLOWING THE DECISION, IT IS HELD THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON THE PAYMENTS MADE TO VARIOUS CONTRACTORS U/S. 194C ONLY, AND THAT THE PROVISION CONTAINED IN SECT ION 194-I IS NOT APPLICABLE. 6. IN RESULT, THE APPEALS OF THE REVENUE ARE DISMIS SED AND CROSS-OBJECTIONS OF THE ASSESSEE ARE ALLOWED. SD/- SD/- (H.S. SIDHU) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH AUGUST, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY