TDS on hired vehicles u/s 194I and not under 194C : High Court

By | April 17, 2018
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(Last Updated On: April 17, 2018)


Commissioner of Income-tax-1, Cochin


Pioneer Peresonalised Holidays (P.) Ltd


IT APPEAL NOS. 138 & 176 OF 2013

FEBRUARY  26, 2018

P.K.R. Menon, Sr. Counsel and Jose Joseph, Adv. for the Appellant. Joseph MarkoseV. Abraham Markos, Sr. Adv., Binu MathewTom Thomas (Kakkuzhiyil)Abraham Joseph Markos and Abraham Varghese Tharakan, Advs. for the Respondent.



K. Vinod Chandran, J. – Both the Income Tax Appeals are with respect to the very same issue the slight difference on facts in so far as the assessee in ITA No.176 of 2013 hiring vehicles for carriage of goods and the assessee in ITA No.138 of 2013 hiring vehicles for carriage of passengers. The assessee in ITA No.176 of 2013 is a transporting contractor and the assessee in ITA No.138 of 2013 is a tour operator. The order of the Tribunal in ITA No.176 of 2013 was followed in ITA No.138 of 2013. Hence we deal with the facts as available in ITA No.176 of 2013.

2. The questions of law as framed by this Court on 04.12.2013 at the time of admission are as follows:

“1. (a) Whether on the facts and circumstances of the case and as noted in the letter (Annexure E)

i. is not reliance by the assessing officer on S.194C and dis-allowance under S.40(a)(ia) in accordance with law?

(b) Did the ITAT have materials and evidence to interfere with the facts found by the assessing officer based on the letter of the assessee and is not the finding and conclusion of the ITAT to the contrary perverse?

2. (a) Whether on the facts and in the circumstances of the case and the Assessment order being confined to the submissions and the letter noted in paragraph 3 of the order, the Commissioner of Income Tax [Appeals] and the Tribunal are right in law in considering altogether different contentions raised for the first time and taking a decision?”

3. The addition made by the Assessing Officer was on account of the Tax Deduction at Source (TDS) not having been done for the vehicles hired by the respective assessees. The assessee in ITA No.176 of 2013 had been transporting goods for one M/s.Logos Logistics (P) Ltd. The assessee had its own vehicles and had been supplying them for such transport. Whenever the assessee’s vehicles are not sufficient, the assessee used to hire vehicles from individual owners. The batta of the driver and the diesel for the transport was expended by the assessee. Hire charges were paid to the individual owners, which were reimbursed by the principal M/s.Logos Logistics. Likewise in ITA No.138 of 2013, the assessee carried out tour operations by its own vehicles and when the assessee required another vehicle, then it was hired and again the driver was paid by the assessee and so was the diesel expenditure met by the assessee.

4. The Appellate Authority and the Tribunal in the same voice reversed the order of the Assessing Officer. The Tribunal also noticed Section 194-I of the Income Tax Act, 1961 [for brevity, the Act], which inter alia made mandatory deduction of TDS in respect of any income obtained by way of rent being 2% for the use of any machinery, plant or equipment; with effect from 01.06.2007. The Tribunal hence found that the dis-allowance made by the Assessing Officer was not proper.

5. We are of the opinion that the Tribunal was perfectly correct in so deciding the issue. Section 194C of the Act speaks of any payment made to any resident, referred to as a contractor, for carrying out any work including supply of labour, in pursuance of a contract between the contractor and a specified person. Here, the contract if at all, is between the assessee and the principal being M/s.Logos Logistics (P) Ltd. In the case of ITA No.176 of 2013 between the assessee and the individual persons, who had subscribed to the tour programme. The dis-allowance was with respect to the expenses claimed, in so far as the hiring of vehicles carried out by the respective assessees. The expenses claimed by the assessee were disallowed as a consequence of the non-deduction of TDS and an addition was made, to the extent provided for in Section 40(a)(ia).

6. The hiring of vehicles, on the conditions above noticed, does not fall within the ambit of Section 194C of the Act. We also notice that from 01.06.2007 definitely deduction would have to be made at source even for hiring of vehicles as Section 194-I of the Act stands amended to bring in such transactions also. The questions of law for the subject assessment years is answered against the revenue and in favour of the assessee.

Both the Income Tax Appeals would stand rejected.

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