- (1.) The appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 arises from a decision of the Income Tax Appellate Tribunal dated 1 March 2011 for Assessment Year 2008-09. The appeal has been admitted on 3 January 2012 on the following substantial questions of law : "1. Whether the ITAT was correct in upholding the order of the CIT(A) regarding application of Board circular no. 558 dated 28 March 1990 when the Board Circular was issued prior to the introduction of Section 194(A); and 2. Whether the ITAT was correct in applying the circular no. 558 which speaks of cases where part time possession of buses was given (14hr./day), whereas in the present case the buses were given to the Assessee for exclusive possession for a period of 2 years."
(2.) The assessee conducts a school at NOIDA. As an incident of providing a facility for the transportation of students from their homes to the school and return, the assessee entered into a contract with a transporter. The contract envisaged the following salient conditions : (i) the contractor would provide a stipulated number of buses for transportation of students and staff of the assessee from such starting points and routes and in accordance with such timings as would be specified by the assessee; (ii) the buses would exhibit the route number and the name of the school; (iii) the school timings being from 8:00 a.m. to 1:50 p.m. for classes II and above and from 8:40 a.m. to 12:45 p.m. for classes upto class I, it would be the duty of the contractor to ensure that regular, punctual and efficient service was provided. The buses were required to arrive at the bus stop within fifteen minutes of the scheduled time in the morning and twenty minutes of the scheduled departure time in the afternoon, failing which the bus users would be at liberty to travel by taxi or any other mode of transport at the cost of the transporter; (iv) for classes upto class I, the reporting time for the buses in the morning would be at 8:45 a.m. and in the afternoon at 12:45 p.m. For class II and above, the reporting time would be at 7:50 a.m. and 1:45 p.m. respectively; (v) the contractor was to provide a bus as approved by the assessee together with a conductor with a valid cover for insurance and any liability arising out of an accident would be borne by the contractor; (vi) the monthly hire charges for the services to be provided by the contractor were prescribed per student for a distance upto a specified point and beyond; (vii) the contract provided for specified deductions for a default on the part of the contractor in complying with the requirements, as specified, for the services to be provided; (viii) no bus would be allowed to be driven by a driver with less than stipulated experience or who has been challaned on more than the stipulated occasions; and (ix) the driver would be required to possess an identity card with an attested photograph, issued by the employer.
(3.) The Assessing Officer passed an order under section 201(1)/201(1-A) of the Act on 27 January 2010 and held that the assessee had erred in deducting tax at source under section 194C whereas its obligation was to deduct tax at source under section 194I on the payments made to the contractor. The Assessing Officer held as follows:- "I don't agree with the submissions of the assessee that provisions of section 194I are not applicable in assessee's case. Here the nature and terms of the agreement does not make any difference while application (sic) of provisions of the section 194I of the I.T. Act. However, transporters have given the buses for exclusive use of the school with name and route of the buses painted on it. Moreover, now the dispute about hiring and contract is a settled issue by amendment in provision of section 194I of the I.T. Act as tax is now deductible @ ten percent for the use of any machinery or plant or equipment.";