Acit (Tds) 1(1) vs Accenture services P ltd

Vijay Pal Rao, Member (J)

These appeals by the rev enue are di rected agai nst the three different orders of the CIT(A ) dated 18. 08. 2009 arising from the orders pass ed under section 201(1) and 201(1A ) of the Income Tax Act, 1961 . Thes e appeal s pertain to the assessment years 2007- 08, 2008 - 09 and 2009 - 10 . In al l thes e appeals issue inv olved is applicability of section 194 - I or 194 -C . Therefore, for t he sake of conveni ence, these appeals were heard together and are being deci ded by this c omposite order .

Solitary common ground raised by the revenue in these appeals is as under :

“On the facts a nd circ umst an ces of the case an din law, t h e ld. CI T(A) has erred in law is not c onsi deri n g whet her secti on 194 - I of the IT A ct, 19 61 is att ract e d in t h e f acts a nd ci rcumst a nce s of the case an d sp ecifically aft er ame ndment w . e. f 13 t h J uly, 2006 in se ctio n 19 4 –I o f t he I T Act, 1961 ”

Brief facts of the cas e are that the ass essee is a company engaged in the business of software dev el opment, information tec hnol ogyenabl ed services and c ons ulting. On 13th and 14th January 2009, a s urvey u/s 133 was c arri ed out at the ass ess ee’ s company premis es to verif y the com pli anc e of TDS provisi ons . In purs uance to the survey, the order dated 19. 02. 2009 u/s 201(1) and 201(1A ) of the A ct was passed whereby the respecti ve demands were rais ed on the as sessee. In the said order the A O has hel d that the as sessee has deduc ted the TDS on paym ent m ade for hiri ng of v ehi cles for transportati on of its employees under the provisi ons of section 194C of the Act . W hereas this arrangement fall s withi n the provisions of section 194 - I of the Act for rental of motor vehicles . Thus, the A O was of the view that the as sessee has short deduction of tax and hel d to be i n default regarding payment to transport s ervi ce provi der, as per the provisions of s ecti on 201)(1) for the assessm ent year 2008 -09 and i nterest under section 201(1A ) for the all the assessment years ..

On appeal, the CIT(A ) hel d that the contract entered by the ass ess ee wi th the transport service provi der for transportation of its empl oyees shoul d be c overed b y Expl anation (3) to secti on 194C of t he Act and therefore the paym ent made to the transport service provider falls wi thin th e am bit of provisi ons of section 194C of the Ac t .. Cons equentl y, the ass essee should not be treated the ass ess ee i s in default u/s 201(1) as wel l als o not l iabl e for any l ev y of interest under section 201(1A) .

Before us, the learned DR has submitted that th e paym ent made for hiring of the v ehi cle for trans portati on of the empl oyees falls under the provisi ons of section 194 - I of the Act which has been amended with ef fect from 13. 07 . 2006 to incl ude rental paym ent m ade for the use of the pl ant and machinery . Thus, the assess ee was required to deduct the tax under section 194 - I and not under section 194 - C . The l d. DR has ref erred the provisions of sec tion 194 - I and submitted that this provi si ons cover the rental payment made for the us e of the machinery, plant or equipment . Sinc e as per the Rule 5 of the Incom e Tax Rul es, 1962 the motor v ehi cl e us ed in the busi ness of runni ng them on hire falls withi n the ambit of pl ant and m ac hi nery, therefore, the payment made towards rental of motor vehicles woul d attract the TDS under the provisions of secti on 194 - I of the Ac t . The ld . DR has furt her contended that af ter the am endment of secti on 194 -I the ci rcular no . N681 dated 8 . 03 . 1994 is not appli cable . The learned DR has referred sub - para (3) of paragraph 7 of the sai d circul ar and s ubmitted that ev en as per the s aid ci rcular, the payment m ade for hiri ng or renting the equipm ent woul d not fal l under the provisi ons of secti on 194 - C .. The ld . DR submitted that the circ ular rel ied upon by the as sessee as well as by the learned CIT(A) are not applicabl e when the v ehi cles is treated as pl ant and mac hi nery for the purpose of depreciati on under section 32 . The sam e cannot be treate d di fferentl y f or the purpos e of deduction under TDS . The l d. DR has referred the agreem ent and particularl y the Annex ure –A of the agreem ent for providi ng the transportati on services by the s ervic e prov ider between the assessee and the servic e provider . Thus, the l d. DR has submitted that when all the vehicl es provi ded to the assess ee are dedic ated vehicl es and remai ned with the ass ess ee during the duty and are at the di sposal of the asses see then it is not a simple cas e of hiri ng of the vehicle for transportation but the v ehicles were tak en on lease by the ases eee at ass ess ee’ s dispos al for all time and not for any parti cular s ervic es or for a parti cul ar desti nati on. The l d. DR has further contended that when the ass ess ee was havi ng ful l control ov er the v ehicle then the provisions of section 194 - I are appli cabl e for making the paym ent of the arrangem ent made by the assess ee. The ld . DR has also attempted to disti ngui sh the decis ion of the honourabl e juri sdi cti onal Hi gh Court i n the c ase of Indian National Ship Owners’ Associ ation and others V/ s CIT(TDS) and ors i n Writ Petition no. 400 of 2007, order dated 29. 6 . 2007 whic h has reli ed upon by the CIT(A ) and submitted that the decisi on was onl y i n res pect of shi p and not i n res pect of motor vehicl es . Therefore, the l earned DR has emphasi zed that the s aid decision is not appl icabl e on the facts of the present case . He has relied upon the order of the A O .

On the other hand, the learned A R has s ubmitted that the ass ess ee has been providi ng its servic es to its client at various pl ac es . For provi di ng the s aid s ervic es, the aseseee has to sent its employees at v ari ous plac ed of its client and therefore for the trans portation to i ts 14000 em plo yees the as sessee hired the transportati on servic es from Janani Tours and Resorts P vt ltd and Mahijndra and Mahindra limited an d other servic e provi ders vi de their res pective agreements . It i s a transport services provi ded by the trans port provi der for the movement of the employees of the assessee at v ari ous clients to their fixed destinati on . The s ervi ce provider is providi ng the vehicl es al ong wi th the staff of v ehicles . Therefore it i s not a case of hiring onl y the v ehicle and using the same by the as es eee by empl oyi ng its own staff but all the faciliti es are provided by the s ervi ce provider . The assessee is making the paym ent on the basis of per kilometer of mileages wi th minimum billing. He has referred the annexure “C” to the agreem ent whi ch contai ns the rates agreed between the parties for providi ng the transport s ervice . Under thes e agreem ents the assessee avail ed trans portati on services for pi cki ng up and drop of em pl oyees . The vehicl es operated b y the s ervic e provider run on pre - determined routs as agreed by the ass ess ee and the service provider . The servic e provider is res ponsible for m aintenance and the up - keeping of the v ehi cles and transporting the assess ee’s employees . The ke y ex penses suc h as fuel c ost, repair and maintenanc e charges, rem uneration of the vehicle staff and other ex penses of the em pl oyees of the s ervice provi der are born by the servic e provider . He has further pointed out that the servic e provider is als o responsi bl e for the attendi ng the necessar y probl ems, l icence for running the vehicles and transport of the worki ng em ployees of the assessee. The drivers and other staff of the vehicl es of the v ehi cles were under the supervision and c ontrol of the service provi der . The s ervice provi der i s al so res ponsi bl e to supervis e each mov ement of the vehicle transporting the assess ee em plo yees and self pass age of the em ployees of the aseseee. The vehicles operated by the transport s ervic e provider were under the c ontrol of the servic e provi der and cannot be s ai d to be at the dis posal or under the control of the assess ee. Thus, the paym ent m ade to the transport servi ce provi der are i n the nature of Payments for av aili ng the trans porti ng service and not rent for hiri ng vehicl es . He has submitted that as per the Ex pl anation III to section 194C, the expression “work ” which incl ude the c arri age of goods and passenger by any m ode of transportation other than b y railways . Thus, the ld . AR has submitted that the servic e avail ed by the ass ess ee is even otherwise comes under the wet lease whi ch include vehicle, dri ver, staff an d other s ervice to be provi ded by the servic e provi der and not\ dry lease i n which onl y v ehi cle is hired and us ed by using his own staff under hi s di rect control . He has referred the circular no. 681 dated 8. 03. 1994 and submitted that as per the sai d ci rcul ar i t is clari fied that the provisi ons of section 194C shall appl y to all types of contract for carryi ng out any work includi ng the trans port, contract s ervi ce c ontract etc . He has also referred the circular no. 558 dated 28. 03. 1990, circular no . 715 dated 08.08.1995 and circul ar no. 713 dated 02.08.1995 and submitted that i n ci rcul ar no . 558, the CBDT has examined the matter i n consultation wi th the Ministry of Law, in the cas e of State Road Corporation regardi ng c ontract for hi ri ng the buses under whi ch the paym ent were m ade to the private bus operators from whom the buses were hired for plyi ng on speci fic routs . After ex ami ni ng the terms and condi tions of the agreem ent between State Road Transport Corporation and the owners of the private bus es onl y, it has been cl ari fied that in suc h c as es the provisions of secti on 194C are applic able . A s per the circul ar 715 i n answer to questi on no. 6 B oard has clarified that the paym ent made t o the travel agent or an airline for the purchases of tickets for trav el woul d not be s ubj ected to tax deducti on at source. The provisions of secti on 194 shall, howe ver, appl y when a plane or a bus or any other mode of transport is chartered by oneo f the entities mentioned i n s ecti on 194C of the Act . A s per the ci rc ular no. 713, the B oard has cl arified that the provi sions of section 194C do not appl y to the payments made to the ai rl ine or the trav el agents for purc hase of ti ckets for air travel of individual . T he provisi ons s hal l , howev er, appl y when the paym ents are made for charteri ng an ai rcraft for carriage of passengers or goods . Thus, the l d. AR has s ubmitted that the Board has repeatedl y cl arified that the provi si ons of secti on 194C wi ll be appli cable when t he transport s ervi ces is availed and the bus es, ai rline, or an y other mode of trans port i s chartered . In the case of the ass ess ee, the ass essee has av ailed the servic es of the transporter vehi cl es and all the servic es provi ded which i s similar to the nature of charting the vehicl es .The learned A R has relied upon the decisi on of in the case of Indian Nati on al S hip Owners As soci ation and others V/s CIT (TDS) and others (writ petiti on num ber 400 of 2007). He has al so relied upon the decision i n the case of 3S OT 16(Del ). The l d. AR alternativel y submitted that when the trans port service provi der has pai d tax on inc ome by way of advance tax and TDS i n respect of the paym ent m ade by the as sess ee then the A O cannot again rais ed the demand under s ecti on 201(1) of the Act . He has relied upon th e various decisions in s upport of his c ontenti ons :

Hindustan Coca Cola Beverage ( P) Ltd V/ s CIT

( 2007) 293 ( SC)

ITR

226

M/ s Mahindra and Mahindra V/ s The DCIT( TDS) range

1( 1 )( MUM) 2009-

TIOL- 255 ITAT- Mum- SB)

M/ s Larsen and Tourbro John Deere Pvt Astt

2008 - TIOL- 449 - ITAT-

Pune

M S Chahal V/ s ITO

( 2004) 82 841) Ars

TTJ

ACIT V/ s British Airways

( 2005)( 95

980)( Del)

TTJ

CIT V/ s Deevan Chand

( 2000) 178 Taxman

173) Del HC

ITO V/ s Manav Grays Exim ( P) l td

( 2000)( 75 TTJ

115)( Mumbai ITAT)

The Addl director of income Tax V/ s Bobcards ltd

( 2009 TIOL- 31 - ITAT-

Mum)

W e have consi dered the riv al contenti ons and rel evant rec ord . The short controv ers y in thi s c ase is regardi ng the applicabi lity of the provisions of s ecti on 194C or 194 - I for the paym ent made by the assessee to the trans port servic e provider . The ass ess ee has entered into agreements with the vari ous trans port s ervic e providers . As per the agreement with Janani Tours and Res orts Pvt ltd and Mahijndra an d Mahindra limited, it is to be noted that the terms and condi tions of the agreem ent are identical . As per the clauses (A), (B) and (C) of the agreement, it has been agreed between the parties that the s ervic e provider has provided the transport services at a parti cular loc ati ons for transportation of asses see’s empl oyees to di fferent desti nation and at di fferent l ocations as menti oned in Annexure “D” . It is clear from the agreement that the transport service provider has to provi de the v ehicle along with the requisite staff and rel evant facilities, ful l maintenanc e and repairs of the vehicl es etc . Thus, the aseseee was not requi red to provi de anythi ng but was availing the serv ices of the trans port for pi cking up and dropping of i ts em pl oyee s from its offices at different l oc ati ons to t he plac es of its clients . Though as per the agreem ent the vehicl es provi ded for the requi rements of the ass essee were dedic ated but it is not a case of hiri ng of vehicles onl y wi thout ot her faci lities . In the case in hand all the facilities alongwi th the v ehi cl es were to be provided by the transport servic e provider and he was under the obli gation to replace the vehicles as well as the driver and other staff after running certain hours . W e furt her note that eac h v ehi cle was provi ded appropri ate number of drivers to c ompl y with the working time directives and enable the v ehi cle to be operated 24 hours day and 7 days per week . The s ervice provider was responsi ble for ens uri ng all legal and operati onal obligati ons . Thus, it was a kind of wet lease, wherei n the ases eee was utilizing t he transport services provided by the servic e provi der without m aki ng any arrangem ent of its own but all the arrangem ent were the res ponsi bi lity and obligati on of service provider .

The CBDT has clarified i n circul ar no . 681 dated 8. 03. 1994 as under :

“7….

(i) the provi sio ns of s ecti on 19 4 shall apply t o all types of c ont ract s fo r c arryi ng out a ny work includi n g transpo rt cont ract , s ervi ce c ont ract s , adv ertis eme nt co nt ract s, bro adcasti ng c ont ract s, t elecasti n g co nt ract s, l ab our cont r4acts, mat eri als c ont racts an d work s co nt ract;

(ii) ….

(iii) …

(iv) ….

(v) …. S e rvic e c ont racts woul d be cov ered by t h e provisions of t his se ctio n sinc e servi ce mean s doin g any work aas explained above ”

It was further cl arifiedin sub - para (i i) of paragraph 8 of ci rcular no. 681

“(ii) the t e rm “t rans port co nt ract s ” would , in ad ditio n t oco ntract s f ortrans port ation an d loadi n g/ unloadi ng of goods, also c ov er c ont racts f or pl ying of buses, f erri es, et c, al o ng with st aff (e g. Drive r, c on duct ors, clean er et c) Refe renc e i n t hi s regard is als o i nvited t o B oard ’s circ ular n o . 55 8, dat ed 2 8. 03 . 1990 ”

Thus, it i s made cl ear by the B oard that the provisi ons of section 194-C s hal l appl y to all types of contracts for carryi ng out any work i ncl uding trans port c ontract, servic e contract etc . Under sub - paragraph (ii) of paragraphs 8 of ci rcular, it was further cl arif ied that the trans port c ontract woul d be in addition to contract for transportation of loadin g and unloadi ng of goods also cov er contracts for pl yi ng buses, ferri ed etc alongwith the staff (eg . Driver, conductors, cleaner etc ) . T he B oard has also consi dered this issue in ci rc ular no. 558, dated 28. 03. 1990 in paragraph 3 as under :

“3. The matt er h as b een exami ne d in co nsult atio n with t he Mini st ry of Law. Th e B o ard hav e bee n advis ed t hat t he ap plicabi lity of t he pro visions of se ctio n 194 C wi ll hav e t o be exa mi n ed wit h ref erenc e to t he t erms an d co ndi tions of eac h c ontract . I n a ca se whe re t he Board ha d occ asi on to ex ami ne t hi s issue, t he t erms and con ditio ns g ove rning t he c ont ract bet ween th e owner of t he b us es an d the St at e Road Transpo rt Corporat i on were, inte r alia as foll ows :

(i) the owner of t h e bus shall gi ve hi s bus on hire to t h e corporat ion f o r plyi ng o n notified ro ut es;

(ii) the own er s hal l provi d e a driver, with a val id licenc e an d PS B ad ge f or t h e ve hicle su ppl ied by hi m, who sh all f ollow t he inst ructio ns of the aut h ori ze d offi ci als of t he c orporation;

(iiI) the owner shall make avail abl e t h e bus f or 1 4 ho urs a d ay an d co mpl et e t he sch edules give n t o hi m for t h e day;

(iv) the own er s hall ke ep t he bus roa d wort h y in terms of c hapt er V of the M ot or V e hicles Act, 193 9, an d rul es ma de t he re un der, from t ime t o ti me b y ca rrying out n ecessary main t ena nce and re pai rs;

(v) the co rporati on shall p rovi de a c onduct o r f or the op erati o n of se rvic es wi t h n ecessary e qui pme nt for issui ng ticket s t o t he passe nge rs as well as luggag e;

(vi ) the owne r shall submit hi s clai m t wice i n a mont h, once f or t he p eri od f rom 1s t t o 15 t h and t h e other for the remai ning p art of t he mont h, ac compa ni ed by a certificat e i ssu ed by t h e Traffi c Sup ervis or of t he Depo rt wit h reg ard to the dist anc e op erat ed duri n g t he resp ecti ve p eriod ;

(vi i) the corpo ration shall pay t he own er at the rat e of Rs … as fix ed cost per d ay in a ddi ti on t o Rs . P er km op erat ed as variabl e cost, etc .

On t he basis of t he t hese t erms and condi tions , th e Boa rd h ave be en advise d t hat alt ho ugh th e c ont ract may ap pea r t o be a si mple hi re con tract , it i s act uall y a service cont rac t (for carryi ng out any wo rk) _ ent ered int o betwee n t he Stat e Road Tra ns port Corpo ration a nd t he owner of t he b us f o r plyi n g ce rt ai n b uses on c ert ai n rout es and subject t o cert ain co ndi tions . In su ch cases , the pro visions of section 19 4C are applicabl e a nd t ax will ha ve to b e ded uct e d at so urce f rom t he pay me nt ma de t o the priv at e bus owne r . I t ma y, theref ore, b e k ept in mi n d t h at th e ap plicabi lity of t he pro visions of s ect ion 19 4 i n suc h ca ses ma y be c ons ide re d on merits in t he l ight of t h e af o resaid observ ations, an d t o t his ext ent th e cl arific ati on giv en in q uestion no . 5 in Boa rd’s ci rcular no . 98, d at ed S ept 2 6 197 2 st ands mo dified ”

Further in circul ar no. 715 dated 8. 8. 1982 the B oard has again clarified in answer to in question no. 6 as under :

“Q . No . 6 whet her pay me nt un der a c ont ract for ca rriage of goo ds o r pas sen gers by any mode of transpo rt wo ul d i ncl ude pay men t ma de t o a t rav el ag ent f or pu rchase of a tick ets or p ayment made t o a cl eari n g an d f orwardi ng a gent f or carri a ge of goo ds?

A . The payments ma de t o a t rav el a gent or a n ai rl ines f or purc hase of a tic ket s f or travel should not be subj ect ed t o t a x de ducti on at sou rce as t he privi ty of t he cont ract is bet ween t he i ndivi du al p ass en ger an d t he ai rlines/travel age nt, not wi thsta ndin g t he f act that t h e p ayment i s made by an enti ty menti one d in se ctio n 19 4C (1) . The provi sions of s ecti on 1 94C sh all, howe ver, ap ply when a pl ane or a bus or any ot h er mode of t rans port i s chart ered b y one of th e entities me nti o ned i n secti o n 19 4C of t he Act ”

The main c ontenti on of the revenue i s that as per Rule 5 of the IT Rul es, 1962, the vehicl e on hi re is included under pl ant and mac hinery and therefore, the same s hal l be treated as plant and m ac hinery f or the purpose of deducti on of tax and falls under the provisions under section 194 - I . It is to be noted that the cl assification of the ass ets for the purpos e of depreciati on u/s 32, the Motor vehicl es used for the business of runni ng them on hire is i ncluded in the class of plant and machinery f or appl yi ng the rate of depreci ation as per Appendix - I . These classifi cati ons does not per se change the nature of the s ervi ce provi ded by the servi ce provi der who i s runni ng the vehicle on hire. There is no dispute that the servic e provided by the person who is runni ng the vehicles on hi re woul d clai m the depreci ati on on the vehi cl e at the rate whic h is provided under the A ppendix for Plant and Mac hinery.

But that cl assification cannot be stretched to determi ne the nature of servic es provided which is otherwi se cl ear from the agreem ent between the parti es . The Hon. J urisdicti onal High Court i n the case of . Indi an Nati onal S hi p Owners’ Ass oci ation and others V/s CIT(TDS) has hel d that the definiti on of pl ant under Rul e 5 of the IT Rules appears to be onl y for the purpose of sections 28 to 41 of the Act . The observ ati ons of the Hon’ bl e High Court in paragraph 13, 14 and 15 are as under :

“13 . Having he ard ri val pa rties, pri ma facie, it ap pears t hat s ect i on 19 4- I is att ract e d onl y in re spect of rent f or l and or b uildi ng (i ncl udi ng fact o ry buildin g), f urnit ure, fi ttings or a ny ot her mac hi nery att ache d theret o and n ot f or anyt hi ng else l ike s hips, transpo rt v ehi cles (includi n g railways) an d freig ht/ c hart er hi re p aymen ts t he ret o. The definiti on of “pl ant ” ap pears to be o nly f o r t he purp ose of se ctio ns 2 8 t o 41 of th e Act . The ref ore, t h e f act t h at the sai d defi nitio n has been f ou nd nec ess ary mean s that in no rmal p arl ance “plant ” d oes not in clud e “ship ” ev en secti o n 3 2A and 33 of t he Act cl earl y di ff erenti at e s hi ps, machinery and pl an t

14 . havi n g exa min ed claus e (c ) ex pla nat ion - III of se ctio n 1 94- C, it, pri ma f acie, cl a rifies t h at t h e ex pres sio n “work ” means c arriag e of go ods an d passenge rs by any mode of trans port ot he r tha n by rail wa ys and f righ t p ayment s h av e t o be ded uct e d un der t hi s s ecti on an d not und er secti o n 194 - I .

15 . Apart from the above, res pon dent s t hemselves in cons ona nce with t h e abov e int e rp ret ati on or view have issu ed c ertificat e un der s ecti on 197 - I of t he Act in relati o n to t h e de ducti on o 9f t ax i n favou r of one of the me mb ers of t h e fi rst petiti on er . Associ ati on, ie . M/s Va run S hippi ng Compan y Lt d acc eptin g t h e co nt enti ons whi ch the petiti oner have adv anc ed i n thi s c as e, Nee dles s t o men tion t hat the dep art me nt ca nnot makedi scri mi n ation bet wee n t he si milarl y ci rcumst a nces s hipping c ompanies ””

10 .The expl anator y note on provisi ons rel ating to Fi nanc e Act, 2007 vi de paragraphs 56 . 2 and 56 . 3 of Circul ar no . 3 of 2008 dated 12 . 03 . 2008 has ex pl ained that as amended by the Tax Laws, the Amendment A ct, 2006 w. e . from 13. 07 . 2006, the definition of rent on three new items plant, mac hi nery and equipm ent has been ins erted Subsequentl y, as per the Financ ed A ct 2007 the rate of deduction of tax at source was reduced 15% to 10% in respect of incom e payabl e by way of rent for use of any m achinery or plant or equi pm ent . Thus, it is clear that the provisi ons of secti on 194- I is c onfi ned to the paym ent for rent on hiri ng of land or bui ldi ng includin g factory buildi ng, furniture or fi ttings but not for the transport vehicl e and other mode of transportation particul arl y when the same i s i n the nature of provi ding and avai ling the trans port servic es . In the case of Nati onal Panasonic India P Ltd V/s DCIT (Delhi ) Benc h of the Tri bunal i n paragraph 6 has held as under . :

“6. W e hav e dul y co nsi dered t he riv al cont enti ons an d t he ma t erial on rec ord. S ec tion 19 4- I of t h e Act manda t es p erso n, ot her t ha n an in dividual or a n Hind u Un divided family (HUF), paying rent t o a resident t o d educt tax at s ourc e at t he ti me of credit or p ayment , which eve r i s ea rlier c laus e (i) of t h e Expl an ation t o S ecti on 194 - I gi ves the meaning of “rent ” t o be a pay me nt und er a ny leas e, sub - leas e, ten anc y or an y ot her agre eme nt o r arran gement f or the use of an y lan d or any b uilding ( i ncl u ding f act ory buildin g ), t og et he r with f urnit ure, fitti n gs a nd t h e l an d ap purt en ant t hereto, whet her or no suc h bui ldin g i s owne d by t h e pay ee. Thus, “rent ” f or the pu rpos e of s . 194 - I, is essentiall y a p ayment f or the use of any land or b uil ding. In ot her words, the agreement or arran gement whi ch gi ven ris e t o t he p aymen t of re nt , must nec ess arily b e an ag reement or arrang eme nt predomi nantly for the use of l and or buildin g. Howev er, wh ere t he agree me nt i s not predo min antl y for t he use of l a nd or b uildi ng, b ut for some t hin g els e, the n pay me nt un der t hat agree me nt will not con stit ut e rent eve n if that “somet hing else ” involves t he use of land or bui ldin g as a n int eg ral pa rt of or i nci d ent al to the predomi na nt obj ecti ve of t he ag reement . Let u s co nsider t he f act s of t he cas e bef ore us i n t h e light of the basic c onc ept of rent ”

11 . Even if the amendment i n the provi si ons of s ecti on 194 – I has i ncl uded the plant and machi nery the expressi on plant and machi ner y us ed in the ex planati on to section 194 - I refers to onl y the plant and machi nery used by the assessee in i ts busi ness by hiring them but not the hiring of trans port servic e. We also find force in the alternativ e contenti on of the ld. AR that the A O cannot demand under section 201(1) when the entire tax has been pai d by the recipient of the amount b y way of advance tax and TDS to the rev enue. In view of the various decisions as referred by the learned A R it is clear that once the revenue has col lected the tax on the paym ent then no demand c an be raised u/s 201(1) otherwis e it will amount to doubl e t axati on . The CIT(A) has deci ded the issue i n paragraph 6. to 6 . 7 as under :

“6. I h ave gon e through t he f acts, of t he case, materi alon record, submissions mad e by th e ap pell ant a nd al so th e order of t he assessing offic er . I have also analyzed t h e sa mp l e co pi es of t h e ag reement ent ered by t he app ella nt with its t rans port se rvic e provide rs . As per t he terms of the agre eme nt, the c ontract e nt ered by t h e a ppe llant wi t h i ts transpo rt se rvic e p rovi ders . As per the t erms of th e ag reement, t he cont ract e nt ered by t he app ellan t with the tra nsp ort s ervice pro vid er i s pri marily in t h e nat ure of transpo rt c ontra ct f or t he t ra nsp ort atio n of its empl oy ees . Th e t e rms of the t ransp ort c ont ract cl early provi de t hat as su ch vehicl e is not at t h e di sposal o f t he a ppellant and t h e ap pell ant h as t o ru n the v ehi cle s on pred et ermi ne d routes only . Th e ag reementalso makes t he trans port servic e provide rs re spo nsi ble f or t h e provi sions of d erivers, runni ng an d mai nt ena nc e of t h e v ehi cle (e. g . pet rol) insuran ce licensce, permit) The dri vers f or v ehicl es work und er the su pervisi o n an d cont rol of t h e transpo rt s ervi ce pro vid ers . Th e app ella nt is n ot res ponsi bl e f or t h e da mag e/acci d ent of any of t h e ve hicl es a nd t he e ntire res pon sibility of t h e v ehicle s is that of t he t rans port service provide r . Th e transpo rt c ont ract als o pro vid es tha t trans port se rvic e provide r cha rges are on “per kilometer” b asi cs .

1 Bas ed on t h e abo ve, it is amply clear that t h e co nt ract ent ered by t h e A p pell ant wi th t he tra ns port se rvic e provi der is in t h e n at ure of service contract only . I a gree wi t h the con t enti on of t he ap pel lant t h at si nce t he ap pell ant does n ot e nj oy t h e c ontrol ov er the ve hicles of t h e t ranspo rt service provi ders an d al so t he run ni ng and mai nt e nance ex pen dit u re i s bo rne by t he t ra nsp ort service provi de rs, t he nat ure of co nt ract e nt ered c an not be t ermed as contract f or hi ri ng of t he veh icles . I do no t a gree with t h e observ ati on of t he AO that us e of vehicl es on a regul ar basis rend ers t he arran gement as a c ont ract for hirin g of t h e vehicle s . I am of the opi nio n t h at mere f act t hat vehicle s are u sed reg ularly by t h e ap pell ant c an not take away t he pri mary n at ure of ag reement ent ered by t he appellant as th e agreeme nt has t o be c onsi dere d i n i ts entirely;

2 furt h er, I hav e gon e t hrou gh the circulars an d the j udgmen ts whi ch hav e bee n broug ht t o my n otic e by the appellan t;

3 The nat ure of arrange me nt ent ered by t he ap pell ant f or trans port ation of i ts employ ees betwee n residen ce t o office i s si mila r t o th e arrang eme nt mentio ned i n t he circ ular no. 5 58, dat e d 2 8 t h Marc h 19 90, issue d by the CB DT rega rding th e applica bili ty of t h e provisions of secti on 19 4C of t h e Act t o t he hire ch arges paid t o b us o wners . Apart ment from t hi s, ot h er ci rc ula rs (i . e. circul ar numbe r 6 81 d at ed Marc h, 8, 199 4, circular no. 713 dat ed A ugu st 2, 1 995 an d ci rcula r number 7 15 d at ed A ugust 8, 1995) hav e sp ecifically provi ded t hat t h e provisi ons of se ctio n 19 4C of t he Act shall apply in c as e where bu s or an y ot h er mode of t rans port is cha rt ered. B ase d o n t h e readi ng of t h e circul ars . I am of t h e opi nio n t h at payments mad e by th e app ella nt are of si milar nat ure an d h enc e ta x s hould b e ded ucti bl e und er secti o n 19 4C of t he Act;

4 I ha ve al so g one t h rough t he ju dgme nt i n cas e of I ndian Natio nal Shi p o wners Assoc iatio n reli ed o n by t he a ppel lant a nd I a m of t h e vi ew that th e sa me i s ap plicabl e t o t he app ella nt ’s case i n whi ch it ha s be en hel d t h at t h e provisi o ns of sect ion 19 4I of t h e Act are not ap plicabl e in c ase of hire payments mad e for4 t he hiri ng of t rans port v ehi cl e.

5 The carriag e of goo ds an d passe ngers by an y mode of t rans port ot h er t han railwa y are spe cificall y co vere d by t he e xp ressi on “work ” a s d efi ned i n t h e ex pl a natio n III t o secti on 194C of t he Act . Th e co nt ract s ent e red by t h e a ppellant with t h e tra ns port se rvic e provi ders a re f or t h e transpo rt atio n of i t s empl oyee s . Hence th e sa me s hould be covered by t h e Expl an ation III t o s ecti on 1 94C of t h e Act ;

6 Thu s, i n vi ew of t he above f act s, I agree wit h the cont entio n of th e app ella nt an d hol d t hat t h e payments mad e t o the t rans port s ervice provide r f all withi n t he ambit of the pro visions of section 1 94C of the A ct;

7 As held above , since the appellant has rightly de ducted taxed as per the provisions of section 194C of t he Act, t he ass essee sh all not b e treat ed a s “assesse e in def aul t ” und er secti o n 20 1(1) of t h e Act ”

12 . In view of the above disc ussi on, we do not find any error or ill egal ity i n the order of the l earned CIT(A ) who has di scuss ed the i ssue i n detailed and the findings are based o n the deci sion of the Hon. J urisdicti onal High Court as well as on the basis of Board ci rc ulars . Therefore, the appeal s of the rev enue are devoi d of any merit and deserve to be dismissed. Acc ordi ngl y we di smi ss the appeals fi led by the revenue

13 . In the result, the appeal of the revenue are dismissed.

Pronounced in the Open Court on 20.10.2010