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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 ..... d fact that the assessee has not deducted any TDS on the payments so made. As the assessee is liable for not deducting TDS under the provisions of section 194-I on the payments made after 13-07-2006. Since, the assessee has defaulted in not complying the provisions of section 194-I, the disallowance u/s. 40(a)(ia) has to be made for non-deduction of tax at source on the payments made in the assessment years 2008-09 and 2009-10. Similarly, the assessee is also liable for the demand raised u/s. 201(1) and 201(1A) for not complying with the TDS provisions. - Decided against assessee. - ITA Nos. 2203 to 2206/PN/2013, ITA Nos. 2313 to 2315/PN/2012 - - - Dated:- 23-9-2015 - Shri R. K. Panda, AM And Shri Vikas Awasthy, JM For the Petitioner : Shri C.H. Naniwadekar For the Respondent : Shri B. C. Malakar ORDER Per Vikas Awasthy, JM : These are set of seven appeals filed by the assessee. Four appeals are against the orders passed u/s. 143(3) r.w.s. 147 of the Act for the assessment years 2006-07, 2007-08, 2008-09 and 2009-10 and three appeals are against the orders passed u/s. 201(1) and 201(1A) of the Income Tax Act, 1961 (hereinafter referred to as the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,95,824 13,98,847 7,55,377 21,54,224 2008-09 3,17,80,554 7,22,175 3,03,313 10,25,488 Total Demand 37,61,535 Aggrieved by the orders passed u/s. 201(1) and 201(1A) of the Act for the three respective assessment years, the assessee preferred appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned orders rejected the appeals of the assessee and upheld the demand raised u/s. 201(1) and 201(1A) of the Act. Against the findings of the Commissioner of Income Tax (Appeals), the assessee is in second appeal before the Tribunal. In all the three assessment years, the assessee has raised identical grounds of appeal. For the sake of convenience, the grounds of appeal in assessment year 2006-07 are reproduced as under: 1. The Order passed by Deputy Commissioner of Income Tax TDS II, Pune for Financial Year 2005-06 i.e. Assessment Year 2006-07 is bad in law as it was passed Ex-parte order and without giving reasonable opportunity to the Appellant. 2. The Ld. CIT(A)-V, Pune has erred in law and on facts in upholding the demand of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehicle owners, therefore, the provisions of section 194C of the Act are not attracted. Hence, no TDS was deducted on such payments. Not convinced, the Assessing Officer made disallowance u/s. 40(a)(ia) of the Act on the payments made without deduction of tax at source in all the impugned assessment years. Aggrieved by the orders of Assessing Officer in the respective assessment years, the assessee filed separate appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) after analyzing the agreements entered into with various companies for providing vehicles and agreements entered by assessee with individual vehicle owners rejected the contentions of the assessee. The Commissioner of Income Tax (Appeals) confirmed the disallowance made by the Assessing Officer u/s. 40(a)(ia). The amount disallowed in the impugned assessment years u/s. 40(a)(ia) for non-deduction of TDS on payment of car rental charges is as under: Assessment Year Nature of payments/credits Amount Qualified in Audit Report Amount disallowed by the Assessing Officer 2006-07 Rental/Car hiring charges S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions set out by the companies in their contract agreement. The risk and liability to comply with those conditions always remain with the assessee. The assessee does not pass on or off load the conditions set out in the contract agreement to the third parties/individuals from whom the vehicles are hired. There is no written or oral contract or sub-contract with the third parties. In the absence of any contract or sub-contract with the third parties provisions of section 194C would not come into play. Thus, the assessee is not liable to deduct any tax on the payments made for hiring of the vehicles. The payments are made by the assessee for hiring vehicles on rental basis and not on kilometer basis. Irrespective of the fact whether the vehicles hired are put to use or not during that period, the payments are made. The ld. AR of the assessee in support of his submissions placed reliance on the decisions rendered in the cases of Rajiv Kishori Lal Patodia Vs. ACIT, 36 CCH 109 (Mum)(Trib) and Nalawade C Maruti Vs. JCIT, 48 SOT 566 (Pune)(Trib). The ld. AR placed on record terms and conditions of the agreement entered with companies for providing vehicles and also the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 6. The ld. AR of the assessee controverting the submissions of ld. DR submitted that as far as the words plant and machinery used in lease agreement for hiring cars/vehicles is concerned, section 43(3) defines plant which includes vehicles. Thus, the lease agreement entered into by the assessee cannot be said to be ante-dated or tailor made. The ld. AR reiterated that a perusal of Lease Agreement would clearly show that the assessee has not transferred any risk, liability or responsibility on to the lessor/vehicle owners form whom vehicles are hired. 7. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. We have also examined the documents placed on record by the assessee in the form of paper book which includes the sample agreement entered into with the companies as well as lease agreement entered into with the individual vehicle owners/third parties for hiring of vehicles. For the sake of convenience we are referring to agreement with Tata Motors filed in the paper book for ITA Nos. 2203-06/PN/2013. A bare perusal of the terms and conditions of the contract shows that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffer of the Lessor as specified written hereunder, then in that event the Lessee at his cost shall provide for on-going maintenance of the Vehicle to keep it in good condition, normal wear and tear excepted. Rentals : In consideration of the Lease of the Vehicle and / or availing of Fleet Management Services from the Lessor, the Lessee agrees to pay to the Lessor regularly and punctually without any atements or deductions (except statutory deductions which the Lessee is required to deduct under applicable laws) (i) Lease Rental / Hiring charges/or (ii) Fleet management Fees, on their respective due dates, as more specifically mentioned in the Schedule, irrespective of whether the Vehicle has been put to use or not or is under repairs maintenance or for replacement for any period whatsoever. Payment of Lease Rental : The Lessee agrees to make payment of each of the Lease Rental on Due Date until the termination of the Lease either on account of Premature Termination or on account of the expiration of the Lease Term. For each Rental, the Lessor shall raise an invoice / debit note in the name of the Lessee. The Lessor shall raise invoice / debit not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor, should enter into a contract with a sub-contractor or carrying out the whole or any part of the work undertaken by the contractor, (c) The sub-contractor should carry out the whole or any part of the work undertaken by the contractor. (d) Payment should be made for carrying out the whole or any part of the work. The Tribunal held that section 194C(2) is attracted if all the above mentioned conditions are satisfied. 11. In the present case, only condition (a) is satisfied, i.e. the assessee is a contractor. So far as the conditions mentioned in (b), (c) and (d) are concerned, none of the conditions apply in the present case. Thus, the provisions of section 194C are not attracted and thus, the assessee is clearly outside its preview. 12. Now we proceed on to the alternate submissions of the assessee, that the payments made by the assessee are in the nature of rent under the provisions of section 194-I of the Act. For the sake of convenience the relevant extract of the provisions of section 194-I are reproduced as under: 194-I. Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made to the owners/lessor for hiring of cars. It is an admitted fact that the assessee has not deducted any TDS on the payments so made. 15. The ld. Counsel has pointed out that the definition of rent as defined in Explanation to section 194-I has been amended by the Taxation Laws (Amendment) Act, 2006 w.e.f. 13-07-2006 to inter alia include payment/credit made for the use of machinery and plant under agreement or arrangement. Thus, provisions of section 194-I cannot be invoked prior to 13-07-2006 for any payment/credit made for use of plant and machinery. The present set of appeals relate to assessment years 2006-07 to 2009-10. Since, the amended provisions of section 194-I were not applicable in the financial year 2005-06 relevant to the assessment year 2006-07, the assessee was not liable to deduct tax at source on the payments in the assessment year 2006-07. Accordingly, no disallowance u/s. 40(a)(ia) or any demand u/s. 201(1) and u/s. 201(1A) can be made. With respect to assessment year 2007-08, since, the amendment is effective from 13-07-2006 the payments made by the assessee from 01-04-2006 to 12-07-2006 shall not be considered either for making disallowance u/s. 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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