TDS U/s. 194C applies on Bus rent paid by assessee school to transporter for carrying students

A careful consideration of the assessment order would reveal that AO while holding that assessee is liable for deduction of tax at source under the provisions of sec. 1941 of the Act has mainly rested his case on the ground that is the “rent” as defined in explanation u/s 1941 and the assessee has paid rent in respect of buses utilized by him being in the nature of plant.

In our opinion, simply for the reason that “rent” being explained under explanation given u/s 1941 in respect of a plant will not make the relevant payments liable for deduction u/s 1941. The sum and substance of the transaction has to be seen and it has to be decided that under which section the case of the assessee would fall. If one goes by the logic adopted by the AO, then the same will also be equally applicable in respect of Sec. 194 C where also under explanation-III to sub sec (2) of sec. 194C, the “work” has been defined or explained which according to clause(c) thereto includes “carriage of goods and passengers by any mode of transporter other than by railways.” According to the transport contract entered into by the assessee, the activity of the transport contractor will be a simple activity of carriage of passengers by any mode of transport other than by railways. The object of the assessee to enter into such agreement was a simple activity of carrying its students and staff from their homes to the school and similarly from school to their homes. The assessee has no responsibility whatsoever regarding the buses to be utilized for that purpose which was the sole responsibility of the transport contractor. The transport contractor only was liable to keep and maintain the required number of buses for such activity at their own expenses with the specified standards. Therefore, the said contract is purely in the nature of services rendered by the transport contractor to the assessee. The assessee was not having any responsibility whatsoever regarding the transport vehicles used in such activity. As against that, “rent” which is defined in explanation to sec. 194 inter-alia is for the use of “plant” which according to the AO includes buses. Hence, according to the facts of the present case, assessee itself has not utilized the buses being plants but they were used by the transport contractor for fulfilling the obligations set out in the contract agreement. Therefore, the provisions of Sec. 194 I could not be applied to the facts of the present case and it has to be held that assessee has rightly deducted tax at source under the provisions of sec. 194C of the Act.

IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH ‘B’: NEW DELHI)

BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER
And
SHRI T. S. KAPOOR, ACCOUNTANT MEMBER

ITA Nos.4878 & 4879/DEL/ 2012
(Assessment Years :2008-09 & 2009-10)

ACIT (TDS) Vs. Delhi Public School

ORDER