Here in this case the Assessee, Texas Instruments India, had acquired on “lease financing” a couple of motor vehicles from the financial leasing company. These vehicles had to be allocated to the employees of the Assessee for the purpose of office use. Moreover, the lessee applied for the tax deduction for the sum paid to the financial leasing company. However, the assessing officer had refuted the deduction that was sought by the Assessee for the payment that had been made to the lease financing company. The reason attributed to this decision was that there was the absence of tax deduction at source by the Assessee as per Section 194-C or under Section 194-I of the Act.
The assessee: however, challenged the decision of the assessing officer. Thereafter, CIT(A) accepted the contention of the assessee and it was held that section 194-C cannot be applied to the transaction. Thereafter, the case was appealed to the tribunal and the tribunal upheld the decision of CIT(A).
The Income Tax department put forth the contention that the assessee should have tax deducted at source (TDS) as per section 194-1 of the Act and since the same was not done, nil deductions could be claimed by the assessee.
However, counsel for the respondent-assessee contended that there had not been any carriage of goods or passengers in the aforesaid case. The assessee had entered into an agreement of financial leasing and acquired motor vehicles by paying lease rentals and provided the car to its employees. The counsel of respondent-assessee held that the car has been used by the concerned employees themselves and consequently the above-mentioned usage to employees has not been provided in any way by the leasing company.
