2011 (3) TMI 1620 - AT - Income Tax

Summary

Issues involved: Determination of applicable section for TDS on payments made for hiring buses by an educational institution.

Summary:

Issue 1: Applicability of section for TDS on hiring of buses
The Revenue contended that TDS should have been deducted u/s 194I for hiring of buses by the educational institution, as the nature of the transaction amounted to payment of rent. The CIT(A) held that the relationship between the parties was a contract covered u/s 194C, based on similar cases and clarifications obtained from the Income Tax Department under RTI Act.

Issue 2: Arguments of the parties
The Revenue argued that the exclusive possession and use of the buses by the educational institution indicated a tenancy arrangement, making section 194I applicable. The assessee maintained that the payment was consideration for a contract with bus operators for student transportation, qualifying for TDS u/s 194C. The assessee cited precedents and ITAT judgments supporting their stance.

Judgment:
The ITAT upheld the CIT(A)'s decision, noting that hiring of buses falls under a contract covered by section 194C, as held in similar cases by Coordinate Benches. The discrepancy in TDS deduction by the Income-tax Department itself on similar transactions was highlighted, supporting the decision that TDS u/s 194C was appropriate. The appeals of the Revenue were dismissed based on these observations.

This judgment clarifies the distinction between TDS provisions u/s 194I and 194C in the context of payments made for hiring buses, emphasizing the contractual nature of such transactions for TDS determination.