The Tax Publishers2020 TaxPub(DT) 5455 (Pune-Trib)

INCOME TAX ACT, 1961

Section 194C

Assessee had entered into agreement with transporters and harvesting contractors and sugarcane growers/farmers in its own capacity and not on behalf of the farmers. In such scenario, there was a strict relationship between assessee and the contractor/transporter as that of contractor and contractee and in such circumstances, assessee was under legal obligation to deduct TDS under section 194C.

Tax deduction at source - Under section 194C - Payment made towards cane harvesting, transportation and incentive expenses -

Assessee engaged in manufacturing of sugar made payment to H&T Contractors towards cane harvesting, transportation and incentive expenses and claimed deduction. AO disallowed deduction for want of TDS under section 194C. Assessee submitted that payment made to H&T Contractor was part of purchase price of sugarcane and hence not liable for deduction of tax under section 194C. Held: Assessee had entered into agreement with transporters and harvesting contractors and sugarcane growers/farmers in its own capacity and not on behalf of the farmers. The assessee had direct control on transporters/contractors and not through the members/farmers and payment to harvesters/transporters was liability of assessee and directly done by assessee to them, when farmers were only concerned with receipt of net sugarcane price fixed before start of season and when the facts were crystal clear that payments made by assessee were not made on behalf of the farmers, in such scenario, there was a strict relationship between assessee and the contractor/transporter as that of contractor and contractee and in such circumstances, assessee was under legal obligation to deduct TDS under section 194C. Since this legal obligation was not fulfilled by assessee, therefore, disallowance under section 40(a)(ia) was sustained.

REFERRED :

FAVOUR : Against the assessee.

A.Y. :


INCOME TAX ACT, 1961

Section 194C(6)

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