TDS on School bus fees to be deducted U/s. 194C – HC

ACIT (TDS) Vs. Lotus Valley Education Society (Allahabad High Court)

In the case of ACIT (TDS) Vs. Lotus Valley Education Society it was held by Allahabad High Court that explanation-III to sub section (2) of Section 194-C clearly provides that ‘work’ includes carriage of goods and passengers by any mode of transport other than by railways, so TDS on School Bus Fees Paid to Transporters is governed by Section 194C and not by Section 194I. 

Allahabad HC ruling in ACIT (TDS) Vs. Lotus Valley Education Society clarifies TDS on School Bus Fees under Section 194C, not 194I. Full text available for download.

Section 194-C, which clearly provides under explanation-III to sub section (2) of Section 194-C that ‘work’ includes carriage of goods and passengers by any mode of transport other than by railways

Word ‘rent’ in the explanation to 194-I includes ‘plant’ but that ‘plant’ has not been defined under definition clause of Section 2 of the Act, which is general definition clause under the Income Tax Act.

In the present case, the word ‘rent’ has not been defined in Section 2 of the Act. The definition of the word ‘plant’ under sub section (3) of Section 43, falls in Chapter IV – Computation of Total Income, which is neither relatable nor applicable to the Chapter XVII, relating to collection and recovery of tax. Even otherwise, it is difficult to believe that the word ‘plant’ defined in Chapter IV – computation of total income, falling under Section 43 of the Act, includes buses hired by the educational institutions. The definition of ‘plant’ in sub section (3) of Section 43 of the Act clearly states that ‘plant’ includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession. A plain and general interpretation of ‘plant’ in Chapter-IV of sub section (3) of Section 43 of the Act would show that it has included the use of ships, vehicles, books, scientific apparatus and surgical equipment for the purposes of Section 28 to 41. We are not permitted to add or subtract anything from it, nor can we read it as an inclusive definition to be used for the purpose of sections in Chapter XVII – collection & recovery of tax at source

We further find that Section 194-C of the Act provides for collection and deduction of tax at source in respect of the payments made to contractors and sub contractors.

Any person responsible for paying any sum to any resident for carrying out any work is liable to deduct an amount equal to one percent where the payment is being made or credit is being given to an individual or a Hindu undivided family and at two percent, where the payment is be made or credit is being given to a person other than an individual or a Hindu undivided family. The definition clauses for the purpose of Section 194-C provides that the term ‘work’ shall include (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting: (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specifications of a customer by using material purchased from such customer

The Tribunal did not commit any error of law in invoking Section 194-C, which clearly provides under explanation-III to sub section (2) of Section 194-C that ‘work’ includes carriage of goods and passengers by any mode of transport other than by railways

Source- ACIT (TDS) Vs. Lotus Valley Education Society (Allahabad High Court), ITA. Nos. 230 & 231 of 2011, Date of Order: 12.09.2013

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