ACIT (TDS), Noida V. Apeejay School, Noida

ITA 5887/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0319 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-03-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KISHOR
• Keywords: TDS
• Section: 194C; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH A BENCH A BENCH A BENCH A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI BEFORE SHRI R.P.TOLANI, JM AND SHRI BEFORE SHRI R.P.TOLANI, JM AND SHRI BEFORE SHRI R.P.TOLANI, JM AND SHRI A.K.GARODIA A.K.GARODIA A.K.GARODIA A.K.GARODIA, AM , AM , AM , AM ITA NO ITA NO ITA NO ITA NO S SS S . .. . 5887/DEL/2010 & 5888/DEL/2010 5887/DEL/2010 & 5888/DEL/2010 5887/DEL/2010 & 5888/DEL/2010 5887/DEL/2010 & 5888/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR S SS S : :: : 2008 2008 2008 2008 - -- - 09 & 2009 09 & 2009 09 & 2009 09 & 2009 - -- - 10 1010 10 ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF ASSTT.COMMISSIONER OF INCOME TAX (TDS), INCOME TAX (TDS), INCOME TAX (TDS), INCOME TAX (TDS), NOIDA. NOIDA. NOIDA. NOIDA. VS. VS. VS. VS. M/S AP M/S AP M/S AP M/S AP EEJAY SCHOOL, EEJAY SCHOOL, EEJAY SCHOOL, EEJAY SCHOOL, APEEJAY SCHOOL CAMPUS, APEEJAY SCHOOL CAMPUS, APEEJAY SCHOOL CAMPUS, APEEJAY SCHOOL CAMPUS, FILM CITY, FILM CITY, FILM CITY, FILM CITY, SECTOR SECTOR SECTOR SECTOR- -- -16A, 16A, 16A, 16A, NOIDA NOIDA NOIDA NOIDA 201 301. 201 301. 201 301. 201 301. TAN NO.MRTA01274A. TAN NO.MRTA01274A. TAN NO.MRTA01274A. TAN NO.MRTA01274A. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.KISHOR, SR.DR. RESPONDENT BY : SHRI K.SAMPATH, ADVOCATE. ORDER ORDER ORDER ORDER PER R.P.TOLANI, J PER R.P.TOLANI, J PER R.P.TOLANI, J PER R.P.TOLANI, JM : M : M : M : THESE ARE TWO REVENUES APPEALS. SOLE COMMON GROU ND RAISED IS AS UNDER:- 1.1 THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN CA NCELLING THE ORDER DATED 27.1.2010 PASSED BY THE ACIT (TDS), NOIDA AND IN DIRECTING THAT PROVISIONS CONTAINED IN SECTION 194C IS APPLIC ABLE ON THE PAYMENT MADE BY M/S APEEJAY SCHOOL FOR HIRING OF BU SES, IGNORING THE FACT OF THE CASE THAT THE DEDUCTOR COMPANY IS L IABLE TO DEDUCT THE TAX U/S 194I AT THE RATE OF 10% FOR HIRING OF BUSES IN VIEW OF AMENDMENT MADE U/S 194I W.E.F. 01.06.2007. 1.2 IN DIRECTING SO, CIT(A) HAS FAILED TO APPRECIAT E THE FOLLOWING:- I) THE PAYMENT WAS MADE ESSENTIALLY FOR HIRING OF B USES WHICH WERE GIVEN IN EXCLUSIVE POSSESSION AND USE OF THE A SSESSEE FOR A FIXED TENURE. THE NAME OF THE ASSESSEE AND ROUTE PRINTED ON BUSES, CLEARLY ESTABLISH ABOVE FACT. II) THE ASSESSEE, BEING THE HIRER WAS NOT ONLY IN E XCLUSIVE POSSESSION OF THE VEHICLE, BUT COULD ALSO USE THEM IN THE MANNER IT ITA-5887 & 5888/DEL/2010 2 WANTED AND NO OTHER PERSON COULD USE THEM DURING TH E TENANCY PERIOD. III) SECTION 194I(A) (INTRODUCED W.E.F. 01.06.2007) IS APPLICABLE AND THE BOARD CIRCULAR NO.558 (DATED 28.3.1990) IS NOT APPLICABLE AS IT WAS ISSUED PRIOR TO THE INTRODUCTION OF SEC. 194.1. THE CASE OF THE ASSESSEE IS DISTINGUISHABLE IN AS MUCH AS IN THE IN STANT CASE THE VEHICLES HAD BEEN GIVEN ON HIRE FOR EXCLUSIVE POSSE SSION AND USE OF THE ASSESSEE FOR A TENURE PERIOD OF TWO YEARS WHERE AS THE CIRCULAR NO.558 SPEAKS OF CASES WHERE PART TIME POSSESSION O F BUSSES I.E. 14 HOUR/DAY WERE PROVIDED TO THE TRANSPORT AUTHORITIES . IV) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN HOLDING THAT THE A.O ACTION IN COVERING SUCH HIRING OF BUSE S U/S.194-1 HAS INDIRECTLY WITH THE HELP OF SECTION 43 AND THERE IS NO SPECIFIC MENTION IN THE AMENDED CLAUSE OF SECTION 194-1, WHEREAS PRO VISIONS (A) OF SECTION 194-1 CLEARLY MENTION TEN PERCENT FOR THE USE OF ANY MACHINERY OR PLANT OR EQUIPMENT/ AND SECTION 43(3) PROVIDES INCLUSION OF VEHICLE UNDER PLANT. THUS, THE A.O. HA S APPLIED THE PROVISIONS OF SEC. 194-1 READ WITH SECTION 43(3) OF THE INCOME-TAX ACT. V ) THE HONBLE APEX COURT IN THE CASE OF M/S. ASSO CIATED HOTELS & INDIA LTD. VS. R.N. KAPOOR (AIR 1959 S, L.262) H AVE LAID DOWN CERTAIN TESTS FOR DETERMINATION FOR TENANCY. THE TH IRD TEST THEREIN STATES THAT IF UNDER THE DOCUMENTS, A PARTY GETS EXCLUSIVE POSSESSION OF THE PROPERTY, PRIMA FACIE HE WILL BE CONSIDERED AS TENA NT. IN THE INSTANT CASE, EXCLUSIVE POSSESSION OF THE BUSES WERE GIVEN TO THE ASSESSEE AND HENCE SECTION 194-I IS APPLICABLE ON THE ENTIRE PAYMENTS. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS AN EDUCATIO NAL INSTITUTION AND FOR THE PURPOSE OF COMMUTATION OF ITS STUDENTS, IT HIRED SE RVICES OF BUS OPERATORS. THE SERVICES INCLUDE MANPOWER AND WEAR AND TEAR INVOLVE D. THE ASSESSEE A SCHOOL FOR THE PURPOSE OF TDS CONSIDERED SINCE PAYMENTS TOWARD S A CONTRACT AND DEDUCTED TAX AT THE RATE PRESCRIBED U/S 194C. THE AO, HOWEV ER, HELD THAT THE NATURE OF TRANSACTION AMOUNTED TO PAYMENT OF RENT AND THEREFO RE, TDS SHOULD HAVE BEEN DEDUCTED AT THE RATE PRESCRIBED U/S 194I AND ACCORD INGLY RAISED THE DEMAND (FOR SHORT TDS) AND INTEREST U/S 201(1)/201(1A). ITA-5887 & 5888/DEL/2010 3 3. IN FIRST APPEAL, CIT(A) ACCEPTED THE ASSESSEES CONTENTION AND HELD THAT THE RELATIONSHIP AMOUNTED TO A CONTRACT WHICH WAS COVER ED U/S 194C BY FOLLOWING OBSERVATIONS:- 5.2 FROM THE MATERIAL BROUGHT ON RECORD BY THE LEA RNED AR, IT IS SEEN THAT IN CASE OF THE REGIONAL MANAGER, UPSRTC, MEERUT, WHEREIN IDENTICAL ISSUE WAS INVOLVED, THE LD.CIT(APPEALS), MEERUT, VIDE HIS ORDER IN APPEAL NO.467 & 468/08-09 DATED 2.3.2010, HAS DECIDED THE ISSUE IN FAVOUR OF THAT ASSESSEE. 5.3 IT IS ALSO PERTINENT TO NOTE HERE THAT AS PER T HE CLARIFICATIONS OBTAINED BY THE ASSESSEE FROM THE INCOME TAX DEPART MENT UNDER RTI ACT, TDS IS BEING DEDUCTED BY THE INCOME TAX DEPART MENT ON PAYMENTS MADE TO THE CONTRACTORS FROM WHOM CARS HAV E BEEN TAKEN ON RENT/CONTRACT BASIS, @ 2%, AS PER PROVISIONS OF SECTION 194C. 5.4 THE ISSUE INVOLVED IN THE CASE OF THE APPELLANT IS SIMILAR TO THE CASES DISCUSSED IN PRECEDING PARAS. IN VIEW OF THE ABOVE AND ALSO FOLLOWING THE ORDER OF THE UNDER SIGNED IN CASE OF KOTHARI INTERNATIONAL SCHOOL, NOIDA, REFERRED TO ABOVE, IT IS HELD THAT IN APPELLANTS CASE THE PAYMENT MADE TO THE BUS OWNERS IS HIT BY THE PROVISION OF SECTION 194-C OF I.T.ACT. ACCORDINGLY , THE GROUNDS TAKEN BY THE APPELLANT ON THIS SCORE SUCCEED. 4. AGGRIEVED, REVENUE IS IN APPEAL. LEARNED DR REL IED ON THE ORDER OF THE AO AND CONTENDS THAT IN RESPECT OF BUSES, THE ASSESSEE PAID THE AMOUNTS WHICH ARE IN THE NATURE OF RENT BECAUSE :- (I) THE EXCLUSIVE POSSESSION AND USE OF THE ASSESSEE FO R A FIXED TENURE. (II) THE USER WAS IN THE HANDS OF THE ASSESSEE. (III) SECTION 194I(A) (INTRODUCED W.E.F. 01.06.2007) IS A PPLICABLE AND THE BOARD CIRCULAR NO.558 (DATED 28.3.1990) IS NOT APPL ICABLE AS IT WAS ISSUED PRIOR TO THE INTRODUCTION OF SECTION 194I. ITA-5887 & 5888/DEL/2010 4 (IV) HON'BLE SUPREME COURT IN THE CASE OF ASSOCIATED HOT ELS & INDIA LIMITED VS. R.N.KAPOOR AIR 1959 S.L 262 HAS PRES CRIBED THE TEST FOR DETERMINATION OF TENANCY AND THE ASSESSEES CAS E FALLS THEREIN. 5. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, VEHEMENTLY ARGUES THAT THE PAYMENT IN QUESTION WAS CONSIDERATION FOR A CON TRACT EXECUTED BETWEEN THE ASSESSEE AND BUS OPERATORS FOR TRANSPORTATION OF IT S STUDENTS AND THE AMOUNT PAYABLE CANNOT BE CONSIDERED AS PAYMENT OF RENT U/S 194I(II). THE ASSESSEE MADE RTI APPLICATION WHICH CLEARLY REVEALS THAT INCOME-T AX DEPARTMENT ITSELF WAS DEDUCTING TAX U/S 194C AT THE RATE OF 2% FROM THE T AXI OPERATORS WHOSE TAXIES WERE USED BY THE DEPARTMENT FOR TRANSPORTATION OF ITS OF FICERS. BESIDES IN OTHER CASES OF REGIONAL MANAGER, UPSRTC AND KOTHARI INTERNATIONAL SCHOOL, DEPARTMENT HELD TDS TO BE DEDUCTIBLE U/S 194C. CIT(A) HAS DWELLED ON T HE ISSUES IN GREAT LENGTH WHILE COMING TO THIS CONCLUSION. THE ORDER OF CIT(A) WAS RELIED UPON. RELIANCE IS PLACED ON ITAT JUDGMENT IN THE CASE OF TATA AIG GENERAL IN SURANCE CO.LTD. VS. ITO 43 SOT 215 (MUM.). IN THIS CASE, ON A SIMILAR CONTROV ERSY, IT HAS BEEN HELD THAT PROVISIONS OF SECTION 194C ARE APPLICABLE TO HIRING OF SUCH PASSENGER VEHICLES AND CONSIDERATION CANNOT BE HELD AS RENT TO BE SUBJECT TO TDS U/S 194I. FURTHER RELIANCE IS PLACED UPON ACCENTURE SERVICES (P) LTD. (2010) TIOL 618 ITAT-MUM. WHEREIN IT WAS HELD THAT THE PAYMENT MADE BY THE ASSESSEE FOR HIRING VEHICLES FOR TRANSPORTATION OF ITS EMPLOYEES QUALIFIES FOR TDS U /S 194C AND NOT U/S 194I. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. FROM THE ABOVE FACTS, THE FOLLOWING FACTS EMERGE:- (I) COORDINATE BENCH OF MUMBAI ITAT IN THE CASE OF TATA AIG GENERAL INSURANCE CO.LTD. AND ACCENTURE SERVICES (P) LTD. ( SUPRA) HAS HELD THAT THE HIRING OF CARS, TAXIES, BUSES I.E. PASSENGER TR ANSPORT VEHICLES ITA-5887 & 5888/DEL/2010 5 AMOUNT TO A CONTRACT AND THE AMOUNT PAID TOWARDS HI RING OF SUCH VEHICLES IS LIABLE FOR TDS U/S 194C. FACTS AND CIR CUMSTANCES OF THE ASSESSEES CASE ARE SAME. (II) WHEN THE INCOME-TAX DEPARTMENT ITSELF ON HIRING OF CARS AND TAXIES IS DEDUCTING TDS AT THE RATE OF 2% U/S 194C, IT IS STR ANGE THAT THE DEPARTMENT IS ASKING THE OTHER ASSESSEES TO DEDUCT TDS U/S 194I. 7. IN VIEW OF THESE OBSERVATIONS, FOLLOWING THE ORD ERS OF COORDINATE BENCHES, WE SEE NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) WHICH IS UPHELD. 8. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH, 2011. SD/- SD/- (A.K.GARODIA (A.K.GARODIA (A.K.GARODIA (A.K.GARODIA ) )) ) (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI ) )) ) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 01.03.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR ITA-5887 & 5888/DEL/2010 6