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TMI Blog2014 (1) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... lief to the assessee. For the sake of convenience the grounds of appeal as appearing in assessment year 2008-09 are reproduced below:- "1.1 The CIT (A) has erred on facts and in law in canceling the order dated 14.06.2012 passed by the ACIT (TDS), Noida and in directing that provisions contained in section 194 C is applicable on the payment made by M/s Delhi Public School, Sector-30, Noida for hiring of buses, ignoring the fact of the case that the deductor company is liable to deduct the tax u/s 194-I w.e.f. 01.06.2007. 1.2 In directing so, Ld. CIT (A) has failed to appreciate the following:- i) Section 194-I (a) (introduced w.e.f. 01.06.2006) is applicable and the Board circular No.558(dated 28.03.1990) is not applicable as it was issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that name of the school was written on the buses and buses were in exclusive possession of school and transporter can, in no case play buses other than for school purposes. Thus, it was a clear case of payments which were essentially made for hiring of buses. In view of the above, the AO calculated the difference in the amount of tax as was required to be deducted u/s 194(i) and as per provisions of section 194(c). 3. Aggrieved with the order, the assessee filed appeal before CIT (A) and reiterated its submissions before the CIT (A). Complete provisions of section 194(i) were explained and on the basis of provisions it was argued that assessee was required to deduct the tax u/s 194 (c) which it had deducted correctly and deposited withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement. 3. After carefully considering various clauses of the sample contract agreement it becomes abundantly clear that the arrangement in terms of the aforesaid agreement is of the nature of transport agreement and not one for hiring of vehicles, the agreement being for transportation of students to/ from school. 4. In view of the above I am of the considered view that given the facts of the present case, the provisions of section 1941 of the Income Tax Act are not applicable since the expression plant and machinery used in explanation to section 1941 refers to plant and machinery used by the assesee in its business by hiring them but not hiring of transport services. 5. It is also noteworthy that clause (iv) of the explanation to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or transportation of school children. In the case of Ahmedabad Urban Development India vs. ACIT TDS Circle Ahmedabad (ITA No. 1637/AHD/2010) similar issue concerning rate of TDS to be deducted on hiring of cars was decided. The contention of the revenue was that provisions of sec 1941 are applicable whereas the assessee argued that it was the contract for hiring of vehicles and therefore TDS was to be deducted u/s 194C @ 2%. The dispute was decided by the ITAT in favour of the assessee. In the case of ACIT vs. Accenture Service Pvt. Ltd. (ITA No. 5920,5921 & 5922/ Mumbai/2009) the dispute involved pertained to applicability or otherwise of the provisions of sec 1941 on hiring of vehicles for transportation of its employees. The contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and machinery under I. T Rules for the purpose of depreciation u/s 32 does not per se change the nature of services provided by the service provider who is running the vehicle on hire. The expression plant and machinery used in explanation of sec 1941 refers to only plant and machinery used by the assessee in its business by hiring them but not the hiring of transport service. In addition to the above citations, the Delhi ITAT in the case of ITO vs. Indian Oil Corporation 15 Taxmann. Com 210 has also taken the same view in as much as that arrangement for transportation of petroleum products was essentially a contract for transportation of goods and not an arrangement of hiring of vehicles, tax was required to be deducted at source from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of tax at source under the provisions of sec. 1941 of the Act has mainly rested his case on the ground that is the "rent" as defined in explanation u/s 1941 and the assessee has paid rent in respect of buses utilized by him being in the nature of plant. In our opinion, simply for the reason that "rent" being explained under explanation given u/s 1941 in respect of a plant will not make the relevant payments liable for deduction u/s 1941. The sum and substance of the transaction has to be seen and it has to be decided that under which section the case of the assessee would fall. If one goes by the logic adopted by the AO, then the same will also be equally applicable in respect of Sec. 194 C where also under explanation-III to sub sec (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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