Section 194C and 194-I – TDS – Works contract/rent – Assessee refining crude oil and selling petroleum products – Agreement with another company for transportation of goods – Agreement stipulating proper maintenance of trucks – Not conclusive – Payment covered by section 194C and not section 194-I

58. CIT(TDS) vs. Indian Oil Corporation
Ltd.; 410 ITR 106 (Uttarakhand) Date of order: 6^th March, 2018

Section 194C and 194-I – TDS – Works
contract/rent – Assessee refining crude oil and selling petroleum products –
Agreement with another company for transportation of goods – Agreement
stipulating proper maintenance of trucks – Not conclusive – Payment covered by
section 194C and not section 194-I

The assessee-company was engaged in refining
crude oil and storing, distributing and selling the petroleum products and for
this purpose required tank trucks for road transportation of bulk petroleum
products from its various storage points to customers or other storage points.
For this purpose, it entered in to an agreement with another company which was
operating trucks. The assesse deducted tax at source u/s. 194C of the Act in
respect of payments to the said company.

The Commissioner (Appeals) held that the tax
was deductible u/s. 194C and not u/s. 194-I. The Tribunal upheld this. On
appeal by the Revenue, the Uttarakhand High Court upheld the decision of the
Tribunal and held as under:

“i)   Modern transportation contracts are fairly
complex having regard to various requirements, which fall to be fulfilled by
the contracting parties. Conditions like maintaining the tank trucks in sound
mechanical condition and having all the fittings up to the standards laid down
by the company from time to time would not make it a contract for use.

ii)   The tenor of the contract showed that the
parties to the contract understood the agreement as one where the carrier would
be paid transport charges and that too for the shortest route travelled by it
in the course of transporting the goods of the assessee from one point to
another. It unambiguously ruled out payment of idle charges. It also made it
clear that there was no entitlement in the carrier to any payment dehors the
actual transporting of the goods.

iii)   The carrier under the contract was
undoubtedly obliged to maintain the requisite number of trucks of a particular
type subject to various restrictions and conditions, but it was under the
obligation to operate the trucks for the purpose of transporting the goods
belonging to the assesse. Therefore, use of the words “exclusive right to use
the truck” found in clause 1 and also in clause 6(e) would not by itself be
decisive of the matter. Even after the amendment to the Explanation u/s. 194-I,
the case would not fall within its scope as it was a case of a contract for
transport of goods and, therefore, a contract of work within the meaning of
section 194C and not one which fell within the Explanation to section 194-I,
namely use of plant by the assessee.”