Ahmedabad Urban Development Authority, Ahmedabad V. The ACIT.,TDS Circle, Ahmedabad

ITA 1637/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1965 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-03-2011
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANISTA
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.1637/AHD/2010 A. Y.: 2009-10 AHMEDABAD URBAN DEVELOPMENT AUTHORITY, SARDAR VALLABHBHAI PATEL SANKUL USMANPURA, ASHRAM ROAD, AHMEDABAD VS THE A. C. I. T., TDS CIRCLE, AMRUT JAYANTI BHAVAN, NAVJIVAN TRUST BUILDING, OFF ASHRAM ROAD, AHMEDABAD PA NO. AAALA 0233 B (APPELLANT) (RESPONDENT) APPELLANT BY SMT. URVASHI SHODHAN, AR RESPONDENT BY SHRI R.K. DHANISTA, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-VI, AH MEDABAD DATED 23-02-2010 FOR ASSESSMENT YEAR 2009-2010, CHALLENGI NG THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DEMAND FOR SHO RT DEDUCTION OF TAX U/S 201 (1) OF THE IT ACT AND CONFIRMING THE DE MAND OF INTEREST CHARGED U/S 201 (1A) OF THE IT ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A LOCAL AUTHORITY AND IS ENGAGED IN DEVELOPMENT OF AREAS IN AND AROUND AHMEDABAD OUTSIDE MUNICIPAL LIMITS. IT WAS SEEN TH AT THE ASSESSEE HAD HIRED CARS ON FIXED RENT PAYMENTS BUT TDS WAS D EDUCTED @ 2% TREATING THE SAME AS CONTRACT. SINCE THE CARS ARE O NE TYPE OF MACHINERY, AND RENT IS PAID AT FIXED MONTHLY RATE, ACCORDING TO THE AO, TDS IS APPLICABLE AT THE RATE PRESCRIBED U/S 19 4 -I OF THE IT ACT. ITA NO.1637/AHD/2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS ACIT, TDS CIR, AHMEDABAD 2 EXPLANATION OF THE ASSESSEE WAS CALLED FOR. IT WAS EXPLAINED THAT FOR HIRING OF CARS THE PROVISIONS OF SECTION 194-I OF T HE IT ACT ARE NOT APPLICABLE. THE PAYMENT IS MADE TOWARDS THE WORK CO NTRACT EXECUTED AND NOT TOWARDS HIRING OF VEHICLES. AS PER THE EXPL ANATION TO SECTION 194-I OF THE IT ACT, THE RENT DOES NOT INCLUDE MOTO R CARS. MOREOVER, AS PER SECTION 194C OF THE IT ACT, THE WORK INCLUDES C ARRIAGE OF PASSENGERS. ACCORDINGLY, TAX HAS BEEN CORRECTLY COL LECTED U/S 194 C OF THE IT ACT. THE AO ON CONSIDERATION OF THE REPLY OF THE ASSESSEE NOTED THAT THE ASSESSEE HAD MADE PAYMENT FOR VEHICL E HIRE CHARGES IN CONNECTION WITH PLYING OF EMPLOYEES FROM ONE PLA CE TO ANOTHER. THE VEHICLES ARE OWNED AND MAINTAINED BY THE CONTRA CTOR. THE ASSESSEE IS MAKING FIXED PAYMENT OF AN AMOUNT. ALL OTHER EXPENSES OF DIESEL, REPAIR AND INSURANCE ETC. ARE PAID BY TH E CONTRACTOR. AFTER CONSIDERING THE PROVISIONS OF SECTION 194-I OF THE IT ACT WHICH PROVIDES FOR RENT, THE AO NOTED THAT IT INCLUDED PA YMENT OF USE OF MACHINERY, LAND AND RENT FOR HIRE OF ANY VEHICLE WH ICH IS FORMING PART OF MACHINERY FOR THE PERIOD IN USE. THE AO NOTED TH AT IN THE PRESENT CASE VEHICLES ARE OWNED AND OPERATED BY CONTRACTOR WHICH ARE USED FOR CARRYING EMPLOYEES FROM ONE PLACE TO ANOTHER OR SUCH SERVICES WOULD FALL WITHIN THE SCOPE OF SECTION 194-I OF THE IT ACT AND NOT U/S 194C OF THE IT ACT. THE AO RELIED UPON BOARD CIRCUL AR NO.715 DATED 8-8-1995 WHICH CLARIFY DEDUCTION OF THE TAX AND SEC TION 194C OF THE IT ACT IS APPLICABLE WHEN A PLANE OR BUS OR ANY OTHER MODE OF TRANSPORT IS CHARTERED BY ONE OF THE ENTITIES MENTIONED IN SE CTION 194C OF THE IT ACT AND WORK IN SECTION 194C OF THE IT ACT CONTINUO USLY REMAIN IN THE STATUTE BOOK AND SUCH INTERPRETATION OF THE PROVISI ON WOULD NOT CONTROVERT OR THE GENERAL PROVISIONS CONTAINED IN T HE SECTION. THE AO, ITA NO.1637/AHD/2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS ACIT, TDS CIR, AHMEDABAD 3 THEREFORE, NOTED THAT IF THE ASSESSEE PAID THE RENT FOR HIRING OUT ANY MACHINERY THEN HE HAS TO DEDUCT TAX AT SOURCES U/S 194-I OF THE ACT. IN THE CASE OF THE ASSESSEE IT PAID RENT AND VEHICL ES HAD TO PLY FOR TRANSPORTING EMPLOYEES FROM ONE PLACE TO ANOTHER, T HEREFORE, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX @ 10%, HOWEVER, THE ASSESSEE HAD DEDUCTED TDS @ 2% U/S 194C OF THE IT ACT. THERE FORE, THE DIFFERENCE WAS CALCULATED @ 8% AND THE ASSESSEE WAS HELD TO BE IN DEFAULT OF PAYMENT OF TDS IN A SUM OF RS.1,75,506/- AND INTEREST U/S 201 (1A) IN A SUM OF RS.26,537/-. ORDER WAS ACCORDI NGLY PASSED, RAISING THE DEMAND AGAINST THE ASSESSEE. SAME SUBMI SSIONS WERE REITERATED BEFORE THE LEARNED CIT(A). THE LEARNED C IT(A) HOWEVER, DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT T HE ASSESSEE HAD HIRED CARS ON FIXED RENT PAYMENT AND DEDUCTED TAX @ 2% OF THE CONTRACT BUT IN FACT CARS ARE ONE TYPE OF MACHINERY AND RENT FOR THE SAME IS PAID. THEREFORE, PROVISIONS OF SECTION 194- I OF THE IT ACT HAVE BEEN RIGHTLY INVOKED. THE APPEAL OF THE ASSESSEE WA S ACCORDINGLY DISMISSED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THE ASSESSEE CORRECTLY DEDUCTED TDS AS PER PROVISION OF SECTION 194C OF THE IT ACT. THE AO WRONGLY APPLIED THE PROVISIONS O F SECTION 194-I OF THE IT ACT IN WHICH VEHICLE HIRE CHARGES HAVE NOT B EEN MENTIONED. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON TH E ORDER OF ITAT AHMEDABAD B BENCH IN THE CASE OF M/S. MUKESH TRAV ELS CO. VS ITO IN ITA NO.2594/AHD/2010 DATED 25-2-2011 IN WHIC H THE TRIBUNAL CONSIDERING EXPLANATION (III) TO SECTION 194C OF TH E IT ACT ON THE ITA NO.1637/AHD/2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS ACIT, TDS CIR, AHMEDABAD 4 IDENTICAL FACTS HELD THAT THE PAYMENT OF THE SAME N ATURE CLEARLY FALLS WITHIN THE SCOPE OF SECTION 194C OF THE IT ACT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RAISED ADDITIONAL GROUND OF A PPEAL STATING THEREIN THAT THE ENTIRE AMOUNT OF TAX HAS BEEN PAID BY THE PAYEE; THEREFORE, THERE IS NO LOSS TO THE REVENUE. COPY OF THE RETURN OF THE PAYEE IS FILED ON RECORD. 4. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE FACTS NOTED BY THE AO ARE NOT IN DISPUTE THAT THE ASSESSEE HAD HIRED CARS ON FIXED RENT PAYMENT A ND TDS WAS DEDUCTED @ 2% TREATING THE SAME AS CONTRACT AS PER SECTION 194C OF THE IT ACT. THE AO ALSO NOTED THAT THE ASSESSEE HA D MADE VEHICLE HIRE CHARGES PAYMENT IN CONNECTION WITH PLYING OF E MPLOYEES FROM ONE PLACE TO ANOTHER. IT WAS ALSO NOTED BY THE AO T HAT VEHICLES ARE OWNED AND MAINTAINED BY CONTRACTORS. THE ASSESSEE P AID FIXED PAYMENT FOR USE OF THE HIRED CARS AND ALL THE EXPEN SES ARE BORNE BY THE CONTRACTORS. IT IS ALSO ADMITTED FACT THAT THE ASSESSEE IS A LOCAL AUTHORITY. THE PROVISIONS OF SECTION 194C OF THE IT ACT IS APPLICABLE TO THE ASSESSMENT YEAR UNDER APPEAL PROVIDED (A) ANY P ERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT ((B) ANY LOCAL AUTHORITY (AS THE ASSESSEE IS) REFERRED TO AS A CONTRACTOR FO R CARRYING OUT ANY WORK IN PURSUANCE OF THE CONTRACT BETWEEN THE CONTR ACTOR AND THE LOCAL AUTHORITIES ETC., SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT ANY TIME OF PAYMENT THEREOF IN CASH OR ITA NO.1637/AHD/2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS ACIT, TDS CIR, AHMEDABAD 5 ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHI CHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO, (I) 1% IN CASE OF ADVER TISING, (II) OR IN ANY OTHER CASE 2%, OF SUCH SUM AS INCOME TAX OR INC OME COMPRISED THEREIN. THE DEFINITION OF WORK HAS BEEN PROVIDED IN EXPLANATION (III) TO SECTION 194C OF THE IT ACT WHICH PROVIDES FOR TH E PURPOSE OF THIS SECTION, EXPRESSION WORK SHALL ALSO INCLUDE: (A) ADVERTISING, (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTI ON OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING, (C) CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN RAILWAYS, (D) CATERING. THE AO ADMITTED THAT THE ASSESSEE HAD HIRED THE CAR S ON FIXED RENT PAYMENT OWNED AND MAINTAINED BY CONTRACTOR. THE ASS ESSEE PAID VEHICLE HIRE CHARGES AND ALL THE EXPENDITURE ARE BO RNE BY THE CONTRACTOR. IT IS ALSO ADMITTED FACT THAT VEHICLE C HARGES WERE PAID IN CONNECTION WITH PLYING OF EMPLOYEES FROM ONE PLACE TO ANOTHER. THUS, IT IMPLIES THAT THE PASSENGERS WERE TRANSPORTED BY THE DRIVERS AND VEHICLES OF THE VEHICLE OWNER/CONTRACTOR AND IN CON SIDERATION OF THAT THE VEHICLE OWNERS/CONTRACTORS WERE PAID BY THE ASS ESSEE THE FIXED AMOUNT. THEREFORE, SUB-CLAUSE (C) TO EXPLANATION (I II) OF THE PROVISIONS OF SECTION 194C OF THE IT ACT WOULD APPLY IN THE CA SE OF THE ASSESSEE. IN OUR OPINION THE ABOVE PAYMENT OF VEHIC LE HIRE CHARGES CLEARLY FALLS WITHIN THE SCOPE OF SECTION 194C OF T HE IT ACT. THE ASSESSEE, THEREFORE, CORRECTLY DEDUCTED TAX THEREOF AS PER THE PROVISIONS OF SECTION 194C (EXPLANATION (III) (C)) OF THE IT ACT. SAME ITA NO.1637/AHD/2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS ACIT, TDS CIR, AHMEDABAD 6 VIEW IS TAKEN BY ITAT AHMEDABAD B BENCH IN THE CA SE OF M/S. MUKESH TRAVELS CO. (SUPRA) COPY OF WHICH IS PLACED ON RECORD. THE AO HOWEVER, NOTED THAT THE PROVISIONS OF SECTION 19 4-I OF THE IT ACT WOULD APPLY IN THE MATTER BEING RENT PAID TO THE CO NTRACTOR WHICH PROVIDES AS UNDER: (PRIOR TO AMENDMENT W. E. F. 1-1 0-2009) 194-I ANY PERSON, NOT BEING AN INDIVIDUAL OR A HI NDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO [A RESIDEN T] ANY INCOME BY WAY OF RENT, SHALL, AT THE TIME OF CREDIT OF SUCH I NCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THER EOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE , WHICHEVER IS EARLIER, [DEDUCT INCOME-TAX THEREON AT THE RATE OF [ (A) TEN PER CENT FOR THE USE OF ANY MACHINERY OR PL ANT OR EQUIPMENT; AND (B) FIFTEEN PER CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) OR FURNITURE OR FITTINGS WHERE THE PAYEE IS AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; AND: ] ] (C ) TWENTY PERCENT FOR THE USE OF ANY LAND OR B UILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUDING FACTORY BUILDING) 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, T HE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR L IKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE A FORESAID PERSON TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED O NE HUNDRED AND TWENTY THOUSAND RUPEES : [ PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WH ICH SUCH INCOME BY WAY OF RENT IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME- TAX UNDER THIS SECTION.] ITA NO.1637/AHD/2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS ACIT, TDS CIR, AHMEDABAD 7 EXPLANATION.FOR THE PURPOSES OF THIS SECTION, [(I) RENT MEANS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF (EITHER SEP ARATELY OR TOGETHER) ANY, (A) LAND; OR (B) BUILDING (INCLUDING FACTORY BUILDING); OR (C) LAND APPURTENANT TO A BUILDING (INCLUDING FA CTORY BUILDING); OR (D) MACHINERY; OR (E) PLANT; OR (F) EQUIPMENT; OR (G) FURNITURE; OR (H) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE;] (II) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT , WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER N AME, 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 PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. ] THE ABOVE DEFINITION OF RENT DOES NOT PROVIDE ANY I TEM FOR VEHICLE HIRE CHARGES. THEREFORE, PROVISIONS OF SECTION 194-I HAS BEEN WRONGLY APPLIED IN THE MATTER BY THE AO. CONSIDERING THE AB OVE DISCUSSIONS WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW HAVE WRONGLY APPLIED THE PROVISIONS OF SECTION 194-I OF THE IT ACT IN THE MA TTER. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND D ELETE THE DEMAND AND THE INTEREST THEREON FOR SHORTFALL AS NOTED BY THE AO ON THIS ISSUE. ITA NO.1637/AHD/2010 AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS ACIT, TDS CIR, AHMEDABAD 8 IN VIEW OF THE ABOVE FINDING, THERE IS NO NEED TO A DMIT THE ADDITIONAL GROUND OF APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED ORDER PRONOUNCED IN THE OPEN COURT ON 10-03-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 10-03-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD