Tax Deductible under 194C on Hire charges paid for Hiring of Vehicles

There is a controversy on whether the hire charges paid to hirers is liable to TDS under section 194C or 194I here are some clarifications for the same

According to section 194C the scope of 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 specification of a customer by using material purchased from such customer BUT DOESNOT INCLUDE manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person other than such customer

According to section 194I the term rent means any payment by whatever name called under any lease, sublease, tenancy or any other agreement or arrangement for the use of any:

a)      Land

b)      Building (includes factory building)

c)      Land appurtenant

d)      Machinery

e)      Plany

f)       Equipment

g)      Furniture

h)      Fittings

Some Issues:

1.      Hire Charges paid for Transportation of employees:

A company has entered into agreement with a transport service and as per the agreement the staff required for running bus and maintenance and repairs to it has to be done by the transporter and in this case it was held that the provisions of 194 I confirmed to the payment for rent on hiring of land and buildings, furniture but not for transport vehicle and other mode of transportation so the payments made for transport has fallen under the ambit of 194C

2.      Payment made for vehicle rent for transportation of passengers:

A transporter  of passengers has entered into agreement  for taking the passengers from different places to the institute and from there again to  different places in the city and for fulfilling the requirements of agreement the transporter has hired additional vehicles for carrying his work and has not deducted any TDS for the payments made by him to the person who has given the vehicles on rent and he has also provided the drivers and staff for running the bus so it was clearly held that the payment is covered under 194C

3.      Payment of car rent for  Transportation of employees:

If payment was made for any rent of a car for the transport of employees it will also be covered under 194C.

4.      Payment made to bus operators for pickup and dropping of students and staff:

Here a contract was entered into with a transporter with some conditions such as all the responsibility for running the buses has to be borne by the transporter here the AO held that the buses used will qualify under plant according to section 194I and  has to deduct TDS @10% but assessee is of the contention that it was a contract as the buses were not utilized as a plant but used for fulfilling the obligation so 194I will not be applicable and it was held that assessee has rightly deducted TDS under 194C.

On comparision of all the explanations it was never the intention of the legislature to overlap any of the items mentioned in meaning of work under section 194C.Therefore the payment made for carriage of employees school students cannot be made liable for TDS under 194I

Kiran