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2010 (10) TMI 359 - AT - Income TaxTDS on reinsurance commission - Survey - Assessee in default - there was no agency relationship between the assessee and Bajaj and the arrangement between the parties was to share the premium risk etc. on principal-to-principal basis - assessee company has provided reinsurance to the insurance company and if the reinsurance companies have reduced the premium directly from the premium payable by the insured such a deduction will not attract provisions of section 194D - Decided in the favour of the assessee The next issue relating to the liability of the assessee to deduct tax at source from the payment of car hire charges - It is observed that from the details and documentary evidence furnished by the assessee it was found by the ld. CIT(A) that specific cars were not made available at the disposal of the assessee and the vendors were required to provide any cars belonging to a particular category for transportation of employees and guests of the assessee as per its requirement - the relevant contracts entered into by the assessee with the concerned vendors for hiring of cars which clearly establish that there being no specific cars identified and earmarked for the assessee and it was only the arrangement for providing cars of a particular category to facilitate transportation of the employees and guests of the assessee from one place to another the tax at source from the payment of car hire charges was required to be made by the assessee as per the provisions of section 194C read with Explanation (iv)(c) thereto - Decided in the favour of the assessee what is to be seen in order to ascertain whether section 194C is applicable or section 194J is the exact nature of work against which payment is made and not to whom the said payment is made and even the ld. D.R. has not disputed this position - The work involved was mainly for interior work done at the call centres of the assessee and it involved making of partitions doors carpeting and flooring painting electrification etc - the designing charges were paid separately by the assessee and tax at source was deducted from the said payment as per the relevant provisions - Decided in the favour of the assessee
Issues Involved:
1. Liability of the assessee to deduct tax at source from reinsurance commission. 2. Liability of the assessee to deduct tax at source from car hire charges. 3. Liability of the assessee to deduct tax at source from bus hire charges. 4. Liability of the assessee to deduct tax at source from leasehold charges. Detailed Analysis: 1. Liability of the Assessee to Deduct Tax at Source from Reinsurance Commission: The first common issue in the revenue's appeal for all four years is the liability of the assessee to deduct tax at source from reinsurance commission. A survey under section 133A revealed that the assessee had entered into an arrangement with Bajaj for facultative reinsurance, involving the payment of reinsurance inward commission. The Assessing Officer held that the assessee was liable to deduct tax under section 194D of the Income-tax Act, 1961. However, the CIT(A) found that the arrangement was on a principal-to-principal basis and not an agency relationship, and thus, section 194D was not applicable. This decision was supported by a similar ruling in the case of General Insurance Corpn. of India v. Asstt. CIT [2009] 28 SOT 453. The Tribunal upheld the CIT(A)'s decision, stating that reinsurance commission does not attract section 194D as it is not a remuneration or reward for soliciting or procuring insurance business. 2. Liability of the Assessee to Deduct Tax at Source from Car Hire Charges: The next issue in the revenue's appeal for assessment years 2007-08 and 2008-09 concerns the deduction of tax at source from car hire charges. The assessee had deducted tax under section 194C, treating the arrangement as a service contract for transportation. The Assessing Officer contended that the payments were in the nature of rental and should be taxed under section 194-I. The CIT(A) ruled in favor of the assessee, stating that the cars were not at the disposal of the assessee and the arrangement was for the facility of transport, not rental. The Tribunal upheld this view, confirming that the arrangement was a service contract under section 194C and not a rental agreement under section 194-I. 3. Liability of the Assessee to Deduct Tax at Source from Bus Hire Charges: The assessee's appeal for assessment years 2007-08 and 2008-09 involves the liability to deduct tax from bus hire charges. The assessee had deducted tax under section 194C, treating the payments as contracts for carriage of passengers. The Assessing Officer argued that the payments were rentals under section 194-I. The CIT(A) upheld the Assessing Officer's view. However, the Tribunal found that the buses were not at the disposal of the assessee and the arrangement was for transportation services. Therefore, the payments were covered under section 194C, and the tax was rightly deducted by the assessee. 4. Liability of the Assessee to Deduct Tax at Source from Leasehold Charges: The final issue in the assessee's appeals for assessment years 2005-06, 2006-07, 2007-08, and 2008-09 is the deduction of tax from payments for leasehold charges. The Assessing Officer held that these payments were for professional and technical services and should be taxed under section 194J. The CIT(A) agreed, stating that the payments to interior decorators and designers were for professional services. The Tribunal, however, found that the payments were for works contracts involving repairs and renovation, not professional services. The tax was rightly deducted under section 194C, not section 194J. Conclusion: The Tribunal dismissed the revenue's appeals and allowed the assessee's appeals, confirming that the tax was correctly deducted under the relevant sections as per the nature of the payments involved.
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