2012 (11) TMI 806 - AT - Income Tax

TDS on payment made for hiring of buses - Section 194-C OR Section 194-I - Held that - The expression carriage of goods and passengers by any mode of transport finds place only in section 194 C and not in section 194-I. There is no direction that TDS on transport contracts will be made u/s 194-I instead of u/s 194C there is even no omission of clause of Explanation III of subsection (2) of section 194C, after the aforesaid amendment in section 194-I in Explanatory Notes (Circular No. 1/2007 dated 17.04.2007). Thus according to well established rules of interpretation, specific provisions prevail over general provisions. Section 194C contains specific provisions for deduction of tax in the cases of transport contracts whereas Sec. 1941 contains general provisions for deduction of tax from rent in respect of hiring of machineries, plants etc. Therefore deduction was rightly made u/s 194C in this case As in this case the Transporters have not given the buses for exclusive use by the appellant the use is only for point to point transportation to students/staff to and from only for convenience sake & after the specified period of use, the buses are kept under the control of the operators and not of the appellant organization, thus it implies that the main object is transportation of passengers and not complete hiring of the particular vehicle, thus the payment made to the traveling agencies for vehicle hiring is covered by the provisions of section 194-C and not by the provision of section 194-I - in favour of assessee.

Summary

Issues:
1. Interpretation of provisions under section 194C and section 194-I of the Income Tax Act for tax deduction on payments made for hiring buses.
2. Application of tax deduction at source under section 201(1) & 201(1A) by the Assessing Officer.
3. Comparison of judgments by the Ld. Commissioner of Income Tax (A) in similar cases.

Issue 1: Interpretation of provisions under section 194C and section 194-I:
The appeal revolved around the correct application of tax deduction provisions under sections 194C and 194-I of the Income Tax Act concerning payments made for hiring buses. The Revenue contended that tax under section 194-I should be deducted at a rate of 10% for hiring buses, while the Ld. Commissioner of Income Tax (A) held that the payments were covered under section 194-C at a rate of 2%. The Ld. Commissioner cited previous judgments and circulars to support the view that specific provisions under section 194C for transport contracts prevail over the general provisions of section 194-I for rent of machinery or plant. The Ld. Commissioner emphasized that the hiring of transport vehicles falls under section 194-C, as per the explanation provided in the Act. The judgment highlighted the importance of specific provisions over general ones and the need to avoid rendering any part of the statute redundant. The decision favored the assessee, concluding that TDS should be made under section 194-C and not section 194-I.

Issue 2: Application of tax deduction under section 201(1) & 201(1A):
The Assessing Officer had applied tax deduction at source under section 201(1) & 201(1A) of the Income Tax Act, holding that tax had been wrongly deducted under section 194C instead of section 194-I for the financial year 2007-08. The dispute arose from the differing interpretations of the appropriate section for tax deduction on payments made to traveling agencies for hiring vehicles. The Ld. Commissioner of Income Tax (A) considered the submissions and judgments in similar cases to conclude that the payments were correctly covered under section 194-C. The issue highlighted the importance of accurate application of tax deduction provisions as per the nature of the transaction to avoid discrepancies in TDS.

Issue 3: Comparison of judgments by the Ld. Commissioner of Income Tax (A) in similar cases:
The Ld. Commissioner of Income Tax (A) referenced previous decisions in cases like M/s APJ School and Kothari International School, where similar issues regarding tax deduction on payments made to bus owners were addressed. The judgments in these cases favored the assessee, emphasizing the application of section 194-C over section 194-I for hiring buses. The Ld. Commissioner's order in these cases influenced the decision in the present appeal, highlighting the consistency in interpreting tax deduction provisions across similar scenarios. The comparison of judgments underscored the importance of uniformity and precedent in determining the appropriate tax treatment for specific types of transactions.

In conclusion, the appellate tribunal upheld the decision of the Ld. Commissioner of Income Tax (A) that tax deduction at source for payments made for hiring buses should be made under section 194-C and not section 194-I. The judgment emphasized the significance of specific provisions, previous judgments, and consistency in interpreting tax laws to ensure accurate and fair application of tax deduction provisions.