Dear Chintan,
Plz consider following points in this respect.
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Taxi on specific job:when ever taxi or any other vehicle booked for a specific Job like giving a contract to take employees from home to office and office to home .In these type of work a specific job has been assigned to vehicle and vehicle has not been hired as such so it should be covered u/s 194C and not under section 194I
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Control of owner of vehicle:In most of the time vehicles are hired with driver and control of the vehicle remain with the owner of the vehicle through driver,but this is not the deciding factor at all though its a point to be considered,whenever the control of vehicle remains with the the owner of the vehicle then it generally means that vehicle is specific job and not hired as such ,so deduction should be under 194C .but some times vehicle with drivers are also hired without specific jobs in that case person who has hired the vehicle can travel on it any where thought there may be some restriction but point is that no specific job has been assigned ,so in this case it will be covered under section 194-I
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Contract agreement:The main paper which will decide the issue is contract agreement and issue will be decided mainly on the basis of the term of agreements and if there are slight differences from contract that can be ignored.
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Running & maintenance :If running & maintenance expenses like petrol,repair etc has been incurred by the person who has hired the vehicle then we can say that it should be covered under section 194-I
Relevant circular on this issue:Circular : No. 558, dated 28-3-1990.
2. A question has arisen whether the provisions of section 194C are applicable to the payments made by a State Road Transport Corporation to private bus owners from whom buses are hired for plying on specified routes. Placing reliance on the answer given to question No. 5 in Boards Circular No. 98, dated 26-9-1972, wherein it was clarified that a transport contract cannot ordinarily be regarded as a works contract, it has been argued that a hire contract entered into by a bus owner with the StateRoad Transport Corporation cannot be regarded as a contract for carrying out any work and as such no deduction in respect of income-tax is required to be made from the payments made under the contract.
3. The matter has been examined in consultation with the Ministry of Law. The Board have been advised that the applicability of provisions of section 194C will have to be examined with reference to the terms and conditions of each contract. In a case where the Board had occasion to examine this issue, the terms and conditions governing the contract between the owner of the buses and the StateRoad Transport Corporation were, inter alia, as follows :
(i) The owner of the bus shall give his bus on hire to the corporation for plying on notified routes.
(ii) The owner shall provide a driver, with a valid licence and P.S. Badge for the vehicle supplied by him, who shall follow the instructions of the authorised officials of the Corporation.
(iii) The owner shall make available the bus for 14 hours a day and complete the schedules given to him for the day.
(iv) The owner shall keep the bus road-worthy in terms of Chapter V of the Motor Vehicles Act, 1939 and rules made thereunder from time to time by carrying out necessary maintenance and repairs.
(v) The Corporation shall provide a conductor for the operation of services with necessary equipment for issuing tickets to the passengers as well as luggage.
(vi) The owner shall submit his claim twice in a month, once for the period from 1st to 15th and the other for the remaining part of the month, accompanied by a certificate issued by the Traffic Supervisor of the depot with regard to the distance operated during the respective periods.
(vii) The corporation shall pay the owner at the rate of Rs. .....as fixed cost per day in addition to Rs. .....per km. operated as variable cost, etc., etc.
On the basis of these terms and conditions, the Board have been advised that although the contract may appear to be a single hire contract, it is actually a service contract (for carrying out any work) entered into between the StateRoad Transport Corporation and the owner of the bus for plying certain buses on certain routes and subject to certain conditions. In such cases, the provisions of section 194C are applicable and tax will have to be deducted at source from the payments made to the private bus owners. It may, therefore, be kept in mind that the applicability of provisions of section 194C in such cases may be considered on merits in the light of the aforesaid observations, and to this extent the clarification given in question No. 5 in Boards Circular No. 98, dated 26-9-1972 stand modified.
Rate under both The section:
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u/s 194 C basic rate 2 % minimum limit per contract 20000 or 50000 per annum
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u/s 194 I basic rate 10%(2% from 01.10.2009) minimum amount 120000 per annum
Note :From 01.10.2009 rate on taxi charges as rent also reduced to 2% only ,so from 01.10.2009 in both the sections rate are same .So it is Just a matter or selection of correct section and there is no room left for Income tax officer to charge any penalty as there is no revenue loss due to same rates.
Further Now coverage under section 194I is beneficial to assessee as compare to 194C due to higher cut of amount of Rs 120000/-
regards,
ratan
CAclubindia
