- (1.) THESE appeals by the Revenue under Section 260 of the Income Tax Act, 1961 arise from a decision of the Income Tax Appellate Tribunal dated 4 November 2011. The assessment years to which the appeals relate are Assessment Years 2008 -09 and 2009 -10. The appeals have been admitted on the following substantial questions of law: - "1. Whether on the facts and circumstances of the case, was the ITAT legally correct in holding that the assessee was liable to deduct TDS at 2% U/s 194 -C and not U/s 194 -I of the I.T. Act, 1961, without considering the Explanation to S.194 -1. 2.Whether on the facts and circumstance of the case, was the ITAT legally correct in its view that the assessee's case is covered by S.194C and not by S.194I without keeping in mind the Explanation to S.194 I to the Act which defines 'rent' to mean any payment under any lease, sub -lease, tenancy or any other arrangement for the use of inter alia (d) machinery, (e) plant, or (f) equipment. 3.Whether the ITAT has rightly relied upon the cases of NTPC Ltd. and Accenture Services (P) Ltd. without considering the fact that this issue may have been agitated before the Hon'ble High Court in those cases and in any view of the matter, the deduction of tax under Section 194C or Under Section 194 I is a matter of interpretation and has to be examined keeping in mind the meaning and definition of "work" and "service" in the context of TDS from payments to transport contractors for hiring of buses."
(2.) THESE appeals are part of a batch of appeals, which have been heard together, since a common question relating to the applicability of Section 194C, or as the case may be, Section 194I of the Income Tax Act, 1961 has been in issue. The main appeal, being Income Tax Appeal No.314 of 2011 (Commissioner of Income Tax Vs. M/s Apeejay School Apeejay School Campus) has been disposed by a judgment delivered today. All the learned counsel appearing on behalf of the parties have been heard on the common issue of law when the main appeal was heard.
(3.) IN the present case, the provisions of the contract between the assessee and the contractor have been adverted to in the order of the CIT (A). The salient aspects are as follows: - "a) Control and possession of the buses used for pick -up and drop facilities always remains with the transport contractors. Drivers driving the buses along with the helper are under the employment of the contractor and all statutory liability under Labour Laws and other related laws with regard to driver and helper vests on the contractor. (b) Vehicles employed by the contractor are required to pick -up/drop the employees at the time, pick -up points and route as prescribed by the company. In case of deviation as regards to adherence of time, pick -up points or missing trip without prior approval, transport operator is liable to pay penalty as prescribed in the Agreement. Thus main essence of the contracts is providing pick up and drop facilities to the employees of the assessee company and not hiring the buses on rent. c) All the expenses towards Fuel i.e. CNG/Diesel, maintenance like tyres, spares, engine oil etc., insurance charges for vehicle, driver and passengers, permit fees, salaries of drivers and other staff are borne by the Transport operator. d) In case of any accident of the vehicles while on company's duty, transport operator is solely responsible to all legal proceedings. Further in the event of an accident or injury to the BEL employees i.e. employees of assessee company, contractor is responsible for all the payments towards their medical treatment and accident compensation. Thus they act as a carrier. e) Name of the assessee company are not painted on the buses employed by the Transport operators for providing the services of pick -up and drop facilities to its employees. Vehicles only display route number boards while carrying employees of the company. This board cannot be displayed during the timings of the day when the vehicle is not plied for the company duties. f) Buses employed by Transport operator for carrying out the work of pick -up and drop of employees of the company are free between 6 AM to 11 AM and 2 PM to 7 PM and accordingly these are used by the transport operators for their other business activities like school duties etc. On Sunday and other holidays buses so employed are used by the transport contractor for other earnings by way of employing for picnic and tourist purposes. This fact is evident from the letters of transport operators where it is specifically stated that buses are not exclusively reserved for the company but during off -hours/days these are being employed for other activities to earn income." The CIT (A) dismissed the appeals filed by the assessee against the order of the Assessing Officer under Section 201 (1A) of the Act. The Tribunal has allowed the appeals of the assessee. The Tribunal has held that the contract would indicate that the assessee has not taken possession of the buses. The buses remained with the transporters. The transporters are contractually obliged to maintain the buses in proper condition. The drivers and the conductors were to be provided by the transporters. The buses were to run for a fixed number of hours and were to be utilised for providing pick -up and drop facilities to the employees of the assessee from point to point. The assessee had deducted the tax at source under Section 194C of the Act, but the contention of the Revenue was that the deduction at source ought to have been made under Section 194 I of the Act.;