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TMI Blog2015 (10) TMI 2241X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 2006-07, 2007-08, 2008-09 and 2009-10. ITA Nos. 2313 to 2315/PN/2012 are directed against the orders of Commissioner of Income Tax (Appeals)-V, Pune for assessment years 2006-07, 2007-08 and 2008-09 respectively, passed u/s. 201(1) and 201(1A) of the Act. All the impugned orders for the respective assessment years are dated 03-09-2012. The issue involved in all the appeals is arising from same violations and facts in all the impugned assessment years are identical, hence these appeals are taken up together for adjudication. 2. The brief facts of the case are : The assessee is engaged in the business of providing vehicles on hire basis to different industries, call centers, BPO etc. The assessee is providing services to the contracting companies by using its own vehicles as well as by hiring cars from third parties. The assessee is hiring about 350 cars along with the drivers on fixed charges from third parties/individual vehicle owners. The assessee makes the payment on monthly basis irrespective of the fact whether the vehicles are used or not. The Assessing Officer on the basis of remarks made by the Auditor in the audit report that no TDS has been deducted on the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the entire amount qualified by C.A is liable for TDS. The Conditions applicable of TDS needs to be taken into consideration. 5. The learned DCIT TDS II and The Honorable CIT (appeals)-V Pune, erred to held that fixed charges are payable for use of Cars irrespective of its use. The payment is not consequent and did not fall within the scope under Section 194 (C) (which is more particularly described in the Statement of Facts). Hence I deny the entire addition for A.Y. 2006 - 07 of Rs. 5,81,823=00. 6. The Honorable CIT (appeals)-V Pune, has erred in holding that Agreements for hiring of vehicles were not produced before the A.O. during the time of assessment proceedings and wrongly treated the same as additional evidence (which is more particularly described in the Statement of Facts). 7. The Appellant may be permitted to Raise/ Alter or Amend the grounds of Appeal during the course of hearing." The ld. AR of the assessee has stated at the Bar that he is not pressing ground No. 1 and 4 in the appeals challenging the orders passed u/s. 201(1) and 201(1A) of the Act. 3. Based on the information received from DCIT(TDS) that the assessee has not deducted TDS on cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- u/s 40(a)(ia) Being Car Hire Charges on the grounds that the assessee has failed to deduct tax thereon u/s 194C of the Act. He erred on merely relying on the auditors remarks in the Tax Audit Report without appreciating the correct legal position. In particular he failed to appreciate that provisions of TDS are inapplicable to Car Hire simpliciter in the relevant assessment year. He also erred in stating that the relevant agreements "appear to have been created as an after-thought." He also failed to appreciate the arguments and contentions advance in this behalf. 2. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals)-I erred on facts and in law in not appreciating that the assessee has already been burdened with consequences u/s 201(1)/(1A) for the said alleged failure to deduct the tax and he cannot be burdened twice for same alleged default. 3. The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal. 4. Shri C.H. Naniwadekar appearing on behalf of the assessee submitted that the assessee is providing vehicles on hire to various software companies, industrial companies, BPOs etc. The numbers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax (Appeals). The ld. DR submitted that the assessee had made stereo type agreement with the third party for providing vehicles. A perusal of the agreement would show that they are tailor made to escape the provisions of section 194C. The ld. DR referred to one of the draft lease agreements entered into by the assessee with the individual vehicle owners/third parties. The ld. DR pointed out that the title of the lease agreement i.e. Agreement to Hire Plant and Machinery (Vehicles) executed in 2005 shows that the agreement is ante-dated. The words 'plant' and 'machinery' were included in definition of 'rent' in section 194-I in the year 2006 w.e.f. 13-07-2006. Whereas, the agreement is dated 03-07-2005. It is highly improbable that the assessee in year 2005 would know that the words 'plant' and 'machinery' would be included in the definition of 'rent' in section 194-I of the Act in times of come. The ld. DR further submitted that even if alternate submission of the assessee is accepted still the assessee was liable to deduct tax on the payment of rent, which the assessee has failed to do. Thus, the Assessing Officer has rightly made disallowance under the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed period and not on the basis of kilometers. The assessee/lessee has not off loaded or has transferred its liabilities and responsibilities on the lessor of the vehicles. The relevant extract of the lease agreement is reproduced as under: "Lease Management Fees: The Lessee shall pay Lease Management Fees of an amount as specified in the Schedule. Ownership of the Vehicle: The Parties hereby confirm that their intent is that the Vehicle shall at all times remain the property of the Lessor and shall be registered in the name of Lessor i.e Mehboob Shaikh. Subject to the compliance with the obligations under' these presents, the Lessee shall have the right to have exclusive peaceful possession, operation and use of the Vehicle during the Lease Term unless there is a Premature Termination of Lease. Delivery of Vehicle : The Lessor shall arrange with the respective Supplier to have the Vehicle ready for delivery. The Vehicle shall be deemed to be delivered today. The Lessee shall take delivery of the Vehicle from the Supplier's premises. Alternatively, at the Lessee's request, the Vehicle may be delivered to the Lessee's address. Any loss or damage t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r providing fuel, all vehicles hired on lease will be under control and responsibility of the assessee. The lessor is not responsible in any manner whatsoever for damage caused either due to accident or natural calamities during hire period. Even the identity of the drivers will be verified by the assessee. Thus, in our considered view by no stretch of imagination the hiring of the vehicles by the assessee can be termed as sub-contract. The assessee has not transferred any of his responsibility, or liability in part or full to the lessor from whom vehicle is hired. 10. The ld. AR of the assessee in support of his submissions has placed reliance on the decision of Mumbai Bench of Tribunal in the case of Rajiv Kishori Lal Patodia Vs. ACIT (supra) wherein the Coordinate Bench of the Tribunal has held that a case of sub-contract, would be where it off loads a part of contract work, i.e., transportation of passengers by car, to other vendors. The Tribunal while holding so also placed reliance on the decision in the case of Mythri Transport Corporation Vs. ACIT, 1 ITR (Trib) 290 (Vishak.) In the said case the Tribunal has laid down the conditions which are essential to attract the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (h) fittings, whether or not any or all of the above are owned by the payee;] 13. A bare perusal of the provisions of section 194-I shows that where any payment is made by way of rent, tax is to be deducted @ 2% of the payment/credit of the amount paid/credited as rent for the use of machinery or equipment or plant. Explanation to section 194-I defines 'rent' which includes payments made under any lease, sublease, tenancy or any other agreement or arrangement for use of machinery or plant, which inter alia includes machinery or plant. The assessee has admitted that as per the provisions of sub-section (3) of section 43 the term plant includes vehicles. The relevant extract of section 43(3) reads as under: 43(3) "Plant includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purpose of the business or profession but does not include tea bushes or livestock or buildings or furniture and fittings];" 14. Thus, from conjoint reading of provisions of section 194-I and the provisions of section 43(3), we can safely conclude that any payment made under lease agreement for use of vehicles partake the character of rent on which tax has to be deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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