03 July 2013
1):For deciding whether the payment of hire charges by the employer to the agency attracts deduction of tax under Section 194-I or Section 194C, the terms of the contract between the parties need to be examined.
2)If the agreement is for a service of transportation to be provided by the agency, the payment would attract tax deduction under Section 194C (the definition of the term ‘work’ includes inter alia carriage of goods and passengers by any mode of transport). like if there is agreement to provide transportation to employees from home to office and back attracts 194-C.
3)Another important factor to be considered is whether the car is under the control of the company or the agency.In the former case, the payment would generally constitute rent, whereas in the latter, the payment would be for carriage of passengers.
4)if there is specific job has been assigned to transporter than 194C will apply and otherwise section 194-I.
5)if a vehicle is leased for, say, a year and is under the control of the company and it is the company’s responsibility to run and maintain it, the payment would be in the nature of rent and Section 194-I would be applicable.
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