INCOME TAX ACT, 1961

Section 194C

Tax deduction at source - Under section 194C - Payment to truck operators - Truck engaged on freelance basis and, therefore, assessee pleading truck owner not being sub-contractor

Assessee-firm entered into contract with M/s. Aditya Cement Limited for transporting cement to various places in India. As assessee was not having transport vehicles of its own, it engaged services of other transporters for the purpose. AO noticed that while making payment to truck operators owners, assessee had not deducted tax under section 194C, even if payment under a single goods receipt (challan/bility) exceeded the sum of Rs. 20,000. Accordingly, AO disallowed such payments under section 40(a)(ia). Assessee invoked appellate jurisdiction and High Court upheld disallowance made by AO. Finally, assessee filed appeal before Supreme Court contending that liability under section 194C(2) would have arisen only if payments were made to 'sub-contractor' and that too, 'in pursuance of a contract' for the purpose of 'carrying out whole or any part of work undertaken by contractor' however, there was no oral or written contract of assessee truck operators/owners, whose vehicles were engaged to execute work of transportation of the goods only on freelance and need basis. Held: Whether assessee had specific and identified trucks on its rolls or had been picking them up on freelance basis, legal effect on status of parties had been the same that once a particular truck was engaged by assessee on hire charges for carrying out the part of work undertaken by it (i.e., transportation of goods of company), the operator/owner of that truck became sub-contractor and all the requirements of section 194C came into operation.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2005-06

INCOME TAX ACT, 1961

Section 40(a)(ia)

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