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TMI Blog2013 (6) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned CIT(A) erred in holding that the provision of Section194C were clearly applicable to the agreement between the assessee and Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola and hence, the A.O. was justified in raising the demand U/s 201/201(1 A) on account of failure of the assessee in not deducting TDS U/s 194 C. (2) The Learned CIT(A) failed to appreciate that the provisions of Section 194C were not applicable to the agreement between the assessee and Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola and therefore, the assessee Corporation was not required to deduct any TDS U/s I94c and consequently, the demand raised U/s 201/201(1A) is not justified. (3) The Learned CIT(A) out to have appreciated that as per the agreement between the assessee and Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola, the assessee was not required to make any payment to the said sanstha and 'therefore, there was no question of deduction and tax U/s 194C. (4) The Learned CIT(A) erred in not appreciating the assessee had awarded the rights to Akola Pravasi Malvahatuk Sahakari Sanstha Maryadit, Akola, for running the buses in Aurangabad City bus in lieu of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;society'), Akola and assigned the work of plying the city buses. In the opinion of the Assessing Officer, there was a contract between the assessee and the said society. As per the terms of agreement the society was to make the payment on the basis of per kilometer to the assessee Municipal Corporation. The Assessing Officer treated the agreement between the assessee Municipal Corporation and the said society as a contract covered u/s. 194C and hence held that assessee should have deducted the tax at source on the amount retained by the society. The Assessing Officer also referred to the decision of the Hon'ble High Court of Punjab Haryana in the case of S.S. Co. Octroi Contractors v. State of Punjab [2004] 268 ITR 398 . The Assessing Officer raised the following demands against the assessee: Sr. No. F.Y. Tax sought to be deducted (including surcharge cess) Int. u/s. 201(1A) Total 1. 2005-06 1,45,041/- 54,375/- 1,99,416/- 2. 2006-07 12,05,961/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilized by the Agency for regular expenses, the, powers of maintaining economical administration and repayment of bank loan lies with Chief Officer made on behalf of AMC. This will be binding on party no. 2 i.e. APMSSM. (vii) Liability of repayment of the bank loan in sixty installments will be the responsibility of the Agency only. 13. A perusal of (vi) above suggests that the entire daily collection was required to be deposited in the bank account first.. The bank account was jointly operated by the AMC and the Agency. AMC after retaining monthly road usage charges from the said account could have deducted TDS u/s 194C of the IT Act as the remaining amount becomes the payment to be kept by the Agency. Since repayment of the bank loan, taxes, cess etc. is the responsibility of the Agency under the overall monitoring of AMC, it would have made payments on these accounts out of the said remaining balance [collection deposited - monthly road usage charges kept by AMC] kept in the escrow bank account. This situation is totally different from that of Octroi collection which has been discussed in detail in the preceding paras. In case of octroi collection the agency was not deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the voice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax o the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor if such sum does not exceed thirty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds seventy-five thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting and telecasting including production of programs for such broadcasting or telecasting; (c) Carriage of goods or passengers by any mode of transport other than by railways; (d) Catering; (e) Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.' 10. The provision of Section 194C contemplates that some work should be assigned to the contractor and pursuance of the contract as specified in the said section and person making the payment or crediting the amount to the account of the contractor should deduct tax at source as specified in the said provision. The core issue which we have to determine is whether as per the agreement between the assessee corporation and the society, it can be said that the assessee was under legal obligation to deduct the tax at source in respect of the amount retained by the society u/s. 194C of the I.T. Act. As per the agreement it is seen that the assessee M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id plying of buses. The Society would be required to bear all the expenses in respect to the bus service, appointment of employees, staff salary, allowances, dress etc. The employees of the local bus transport service would in no way be related to the Municipal Corporation. Because they would be the employees of the concerned society and would not be eligible to claim any rights connected with the service with Municipal Corporation. Similarly, they would be able to any employment connection with the Municipal Corporation Office. 4. The concerned society would be required to strictly abide by the rules and regulations of the Government Tourist Department, Traffic Police Department and other departments. Similarly, the responsibility to pay government fees/taxes would be solely that of the society. 5. The Municipal Corporation would not be responsible to make good any loss arising on account of accidents or provide financial help or medical help in the course of conducting the said transport service. 6. The expenditure incurred on repairs and maintenance, diesel, oil etc. of the buses would be borne by the society. The society would be required to start appropriate system fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y would have the right to handover all the rights in respect of advertisements on above stops, tickets and buses to any other agency. The responsibility of cleaning and maintenance would be that of the society. The small shops would be used for tea stall, STD, PCO book stall and other stalls. One side of the bus would be reserved for the Municipal Corporation. The society would not get any income in that respect. Permission would be granted to place billboard in accordance with the design approved by the Municipal Corporation. 50% of the said area should be used for information regarding buses whereas the remaining area may be used for advertisement purpose. 17. The busses shall be purchased in accordance with the installments decided by Party No. 1 from the date of the agreement and the same should actually start operating. In case of any difficulty arising thereupon, decision shall be taken after the consent of both the parties. 18. After the loan amount is totally repaid and after the end of term of this agreement, all busses, bus stops, repairing centers, shades etc. will be handed over to party no 1 from the party no 2 without any consideration or delay in good condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. But the society would be required to give a written notice in that respect to Party No. 1. The distance fixed by Party No. 1 to be covered by Party No. 2 and the amount fixed by Party No. 1 at the rate of royalty per km shall be deposited within the first week of each month with Party No. 1 and Party No. 1 shall be informed in writing in this respect. 26. Party No. 2 shall, from the day on which the bus service becomes operative, open an escrow account in a bank which is selected after the consent of Party No. 1 in the name of Commissioner, City Bus Transport Fund and deposit therein the income from the second day onwards. The said account shall be operated by Accounts Officer, Municipal Corporation, Aurangabad and Secretary, AKPMSSL. The amount deposited daily in this account in each month shall be firstly disbursed towards payment of EMI on bank loan before the fifth day of the succeeding month. This mechanism shall continue till the loan is repaid. Thereafter, the society would be eligible to use the balance amount remaining after deduction of monthly road usage charges, RTO Taxes and other taxes etc. to be paid within the fifth day of each month or at the earliest possib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation no. to the staff and the same is mandatory. 38. Before a period of eighteen months from the end of the term of this ten year agreement, Party No. 2 will inform in writing to Party No. l as to whether Party No. 2 intends to continue the local business service and would also include the new terms and conditions in the same. If Party No. 2 is not willing to accept the new terms and conditions laid down by Party No. l, Party No. 1 would be free to proceed further as per its wish and Party No. 2 shall have no objection in that respect. 39. In case, any dispute arises at any point of time with regards to any terms and conditions or other aspects in this agreement, the decision of the Commissioner, Party No. 1 shall be final. 11. On the careful examination of the terms the following things are revealed: (i) The assessee has been assigned the right to ply the city bus services on payment of the royalty by the society to the assessee Municipal Corporation @ ₹ 0.80 per KM. (ii) All the expenditure on the running on the buses should be borne by the society. The society is to charge the rates as decided by the Regional Transport Division. The society is given the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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