By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Bhadresh Doshi, Chartered Accountants
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S/s. 194C, 194I–Payments made by school to bus
owners/contractors for transportation of students from their home to
school and back qualify for deduction of tax at source u/s. 194C and not
u/s. 194I.
Facts:
The assessee, a school, had
taken on hire vehicles which were used for carrying students from their
homes to school and back. In view of the contracts entered into by the
assessee with the bus owners, the assessee deducted tax u/s. 194C.
Before the Assessing Officer (AO) the assessee submitted that
considering the fact that the contract provided for transportation of
children, drivers and conductors were appointed by the contractor, after
school trips were over the contractor was free to utilise the vehicle
for any manner and purpose, tax was deductible u/s. 194C. However, the
AO held that since the name of the school was written on the buses and
also that the buses were in exclusive possession of the school, the
transporter cannot ply buses for any purpose other than for the school.
He, accordingly, held that the payments made qualify for deduction of
tax u/s. 194I and not u/s. 194C. The AO calculated the difference in
amount deductible u/s. 194I and the amount deducted u/s. 194C.
Aggrieved,
the assessee preferred an appeal to CIT(A). The CIT(A) noted that the
contract was on a per trip basis for specified route. The rates per trip
were frozen for a period of one year. The vehicle i.e., the school bus
remains in possession of the transporter and the staff required to
operate the vehicle was also engaged by the transporter. All costs
incurred for running and maintenance of buses including the salaries of
driver and conductor were to be incurred by the transporter. Once the
trips made by these buses for carrying and dropping children from/to
school are complete, the transporter is at liberty to use the vehicle in
any manner. Following the ratio of the following decisions he held that
the contract was a works contract and provisions of section 194I were
not applicable.
a) Lotus Valley Education Society vs. ACIT (TDS) Noida 46 SOT 77 (Delhi) (URO)
b) Ahmedabad Urban Development Authority vs. ACIT 46 SOT 75 (Ahd) (URO)
c) ACIT (TDS) vs. Accenture Services Pvt. Ltd. 44 SOT 290 (Mumbai)
d) ITO vs. Indian Oil Corporation (15 Taxmann. com 210)(Delhi ITAT)
He decided the appeal in favour of the assessee.
Aggrieved, the revenue preferred an appeal to the Tribunal.
Held:
The
Tribunal noted that the issue is covered by various cases decided by
the Tribunal. It also noted that the facts are similar to the facts in
the case of Lotus Valley Education Society vs. ACIT (TDS), which was
decided by Delhi Bench in ITA No. 3254 & 3255 /Del/2010. Relying
upon the observations in para 6 of the said order the Tribunal decided
the issue in favour of the assessee.
The appeal filed by the revenue was dismissed.
