ITO, (TDS) V/s. Indian Oil Corporation (ITAT Delhi)- Bombay High Court in their decision dated 29.6.2007 in Indian National Ship Owners’ Association and Others Vs. CIT (TDS) in CWP no. 400 of 2007 concluded that the provisions of section 194I of the Act are applicable only in respect of rent for land or building (including factory building), furniture, fittings or any other machinery attached thereto and not for anything else like ships, transport vehicles (including railways) and freight/charter hire payments thereto.
Honourable High Court further held that explanation-III of section 194-C, clarifies that the expression “work” means carriage of goods and passengers by any mode of transport other than by railways and tax from freight payments have to be deducted under this section and not under section 194-I. of the Act. Following the view taken in this decision, ITAT in the case of Accenture Services (P) Ltd.,2010-TIOL-618-ITAT-Mum held that expression plant and machinery used in explanation to sec. 194I of the Act refers only to the plant and machinery used by the assessee in their business by hiring them but not the hiring the transport services. The ITAT Delhi Bench in their decision in the case of Lotus Education Society (supra) held that provisions of section 194I of the Act could not be applied in the case of payments made to bus operators, providing pick up and drop facility to school students. In Ahemdabad Development Authority, ITAT Ahmedabad Bench in their decision dated 10.3.2011 in ITA no. 1637/Ahd./2010 held in the context of deduction of tax at source from fixed rent payments for hiring cars that provisions of section 194C of the Act were applicable in respect of payment for vehicle hire charges and not the provisions of section 194I of the Act.
In the light of consistent view taken in the aforesaid decisions and considering the various clauses in the aforesaid Bulk Petroleum Products Road Transport agreement , we have no hesitation in upholding the findings of ld. CIT(A) in concluding that the arrangement for transportation of petroleum products was essentially a contract for transportation of goods and not an arrangement of hiring of vehicles. In view thereof, tax is required to be deducted at source from the payments to the carrier in terms of provisions of sec. 194C of the Act and not u/s 194I of the Act.
