If company hires buses along with drivers for providing pick and drop facility to its employees then payment to such transporter shall attract TDS under section 194C.   

Case: Commissioner of Income Tax vs. Bharat Electronics Ltd.

 Facts:

The assessee being a company entered into contract with transporters for providing buses for  giving pick-up and drop facilities to its employees. The transporters were contractually obliged  to maintain buses in proper condition and drivers and conductors were also to be provided by them. On payment to transporter, the assessee deducted tax under sec 194C.

The AO while doing assessment opined that tax was to be deducted under section 194-I while making payments to transporters.

CIT (A) upheld the order of the AO. The Tribunal allowed the appeals of the assessee. The tribunal held that the clauses of contract between the assessee and the transporter require the assessee to deduct tax under section 194C and not under 194I.

On appeal to the High Court.

Held:

The Court viewed the following salient features of the contract:

a)      Control and possession of the buses used for pick-up and drop facilities always remains with the transport contractors. Drivers along with the helper are under the employment of the contractor and all statutory liability under Labour Laws and other related laws with regard to driver and helper vests on the contractor.

b)      Vehicles employed by the contractor are required to pick-up/drop the employees at the time, pick-up points and route as prescribed by the company. In case of deviation as regards to adherence of time, pick-up points or missing trip without prior approval, transport operator is liable to pay penalty as prescribed in the Agreement. Thus main essence of the contracts is providing pick up and drop facilities to the employees of the assessee company and not hiring the buses on rent.

c)      All the expenses towards Fuel i.e. CNG/Diesel, maintenance like tyres, spares, engine oil etc., insurance charges for vehicle, driver and passengers, permit fees, salaries of drivers and other staff are borne by the Transport operator.

d)     Name of the assessee company are not painted on the buses employed by the Transport operators for providing the services of pick-up and drop facilities to its employees. Vehicles only display route number boards while carrying employees of the company. This board cannot be displayed during the timings of the day when the vehicle is not plied for the company duties.

Thus, the contract would indicate that the assessee has not taken possession of the buses. The buses were to run for a fixed number of hours and were to be utilized for providing pick-up and drop facilities The buses remained in possession with the transporters. The transporters provided the drivers and the conductors. They were contractually obliged to maintain the buses in proper condition.

Therefore, the contract shall be governed by the provisions of Section 194C of the Act.

Hence, TDS u/s 194C shall be deducted on payment to transporter for providing chauffeur driven buses on hire.

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