S.194C is applicable in case of “Vehicle hiring charges” and not S.194I:

Assesse had paid “Vehicle hiring charges” during the year under consideration and had deducted tax at source u/s 194C. AO was of the view that the assessee ought to have deducted tax u/s 194I and hence, he passed and order u/s 201(1), making huge addition on that count. The Hon’ble ITAT observed that S.194C categorically covers “Transportation”. The contractor was obliged to provide particular type of vehicle but not the same vehicle. Such contractor was to bear the cost of running and maintenance, repair and insurance, etc. and was obliged to provide another similar vehicle in case of break down. Even the assessee was to make payment on the basis of kms travelled and not any fixed amount. Such vehicles were, at all times, under the supervision and control of the said contractor. Hence, such contract was for carrying out specific work for the assessee and it cannot be said that a vehicle has been taken on hire. Further, vehicle hiring charges are not covered vide S.194I. Hence, it was held that S.194C is applicable and not S.194I. Accordingly, the addition in respect of the same was deleted.

[ACIT VS. GUJARAT STATE PETRONET LTD. – ITA NO.3371/Ahd 2010 & CO 17/Ahd/2011]