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TMI Blog2014 (2) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate agency and made payment of Rs. 42.84 lakhs [rounded off] for such hiring charges. The Assessing Officer contended that under section 194C of the Incometax Act, 1961 {"Act" for short}, the assessee was required to deduct tax at source, while making such payment. The assessee admittedly not having done so, such payment would be hit by the provisions of Section 40(a)(ia) of the Act and the expenditure should be disallowed. The assessee contended that the assessee had only rented the vehicles and the said agency had not provided any service of carriage of passengers. The charges were therefore paid for renting or hiring of the vehicles. The Assessing Officer was unmoved. He disallowed the expenditure, making following observations : " 3.2 Submissions of the assessee have been considered carefully. The assessee's submission that assessee is not liable to deduct tax at source under section 194C of the I.T Act as it is not coming within the purview of that section is not acceptable. Provisions of Section 194C lay down that tax is to be deducted at source where any sum is paid for carrying out "any work" in pursuance of a contract between the contractor and subPage contractor. Most ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end that no part of the assessee's responsibility arising out of the said agreement was further contracted out with a private agency. The CIT [A], however, basing reliance on the terms of the agreement negated the contention. The assessee thereupon approached the Tribunal. Tribunal, by the impugned judgment, allowed the assessee's appeal and reversed the deduction. The Tribunal referred to various terms of the agreement and observed as under : " 9. From the above,it is apparent that the assessee is providing its vehicles alongwith other vehicles obtained on hire to M/s. IPR and performs the work of transportation. The risk of performing the work of transportation is with the assessee and not with the owners of the vehicles from whom the assessee had obtained the vehicles on hire. The assessee is paid transportation charges by IPR for the vehicles provided by it being either its own vehicles or vehicles obtained by it on hire from other parties. The revenue has not brought out any material on record to establish that the owners of the vehicles had performed the work of transportation. Further, from the facts before us, it is apparent that the assessee had presented the above mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 hours per day to transport the staff/official visitors from various destinations to the campus and back on the routes and timings, as decided by the Institute from time to time. Clause (3) pertains to "termination of the contract" and authorizes the IPR or the contractor to terminate the same by following certain procedure. Clause (4) envisages the contractor to deposit a sum towards security deposit. Clause (5) pertains to duties of the contractor, which includes the following : "( e) The contractor shall provide and run 6 buses having 52 or more seats capacity and 2 minibuses of 25 seats capacity to the IPR for transportation of staff and other authorized persons of IPR at the time mentioned in the service schedule or as decided from time to time. Contractor shall have to deploy required number of vehicles, which are in excellent working condition and models later than 2002. (g) The vehicles mentioned above are meant for transportation of IPR Staff/visitors. Maintaining of proper time schedule for each and every trip is the essence of this contract. If the normal coordination is not found satisfactory, the contractor shall deploy his representative on all working days for ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contractor shall not without prior consent in writing of the IPR assign or sublet contract or any part thereof. If he assigns or grants subcontract to any person without obtaining prior consent of IPR, he shall be doing so at his own risk and that shall not relieve the contractor of any obligation, duty or responsibility under the contract." 6. From the above, it could be seen that the entire task was assigned to the respondentassessee by the IPR for transportation of its employees and the guests; for which the assessee had to maintain certain number of vehicles in good working condition and to deploy necessary staff and for such purpose, IPR agreed to pay rent. The entire task was to be performed by the contractor and could not be assigned to a subcontractor without prior permission of the IPR. 7. As held and observed by the Tribunal, the Revenue did not bring out any material to establish that the owner of the vehicles performed the work of transportation. The assessee had merely hired the vehicles for performing its part of the contract with IPR. That being the position, the Revenue's stand that the work of transportation or part thereof was assigned to a subcontractor was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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