TDS – Is payment for hiring of vehicles a contractual payment or Rent?

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ACIT (TDS) vs Accenture Services P Ltd.(2010-TIOL-618-ITAT-MUM)

Facts:

AO held that the assessee has deducted the TDS on payment made for hiring of vehicles for transportation of its employees under the provisions of section 194C, whereas this arrangement falls within the provisions of section 194I for rental of motor vehicles

Ø On appeal, the CIT(A) held that the assessee should not be treated the assessee is in default u/s 201(1) as well also not liable for any levy of interest under section 201(1A)

Issue: Is payment for hiring of vehicles for transportation of employees liable to TDS under section 194C or 194I of the ITA?

Decision:

Ø The provisions of section 194C shall apply to all types of contracts for carrying out work including transport contract, service contract etc. Transport contract would also include contract for loading and unloading of goods and also cover contracts for plying buses along with the staff

Ø The CBDT has, after examining the terms and conditions of the agreement between State Road Transport Corporation and the owners of the private buses only, clarified that in such cases the provisions of section 1 94C are applicable

Ø Provisions of section 194C do not apply to the payments made to the airline or the travel agents for purchase of tickets for air travel of individual. The provisions shall, however, apply when the payments 15 are made for chartering an aircraft for carriage of passengers or goods

Ø Provisions of section 194I is confined to the payment for rent on hiring of land or building, furniture but not for the transport vehicle particularly when the same is in the nature of providing and availing the transport services

Ø The expression plant and machinery used in the explanation to section 194I refers to only the plant and machinery used by the assessee in its business by hiring them but not the hiring of transport service

Ø The Tribunal also held that there was a force in the alternative contention of the assessee that the AO cannot demand u/s 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 (number of decisions relied on)