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February 2012

TDS: Payment to sub-contractors: Section 194C: Union of truck operators procuring contracts for its members: No sub-contracts: Tax not deductible at source.

By K. B. Bhujle
Advocate
Reading Time 2 mins
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[CIT v. Truck Operators Union, 339 ITR 532 (P&H)]
The assessee was a truck operators’ union. It procured contracts for its members. The Assessing Officer made an addition of Rs.6,30,32,453 by way of disallowance u/s.40(a)(ia) holding that such payment to the members required deduction of tax u/s.194C of the Act which was not done. The Tribunal deleted the addition and held as under:

“The assessee-union had been formed by truck operators in order to obtain bigger contracts through it. It was of course entitled to booking charges received, which constituted its main income and the main function of the assessee was to arrange contracts from different agencies for its member operators which were factually and collectively formed by such members. The freight received from the parties concerned belonged to the member truck operators by whose trucks the contracts were performed and as such, the same was disbursed to none else but them. The assessee-union did not give any sub-contract to its members as alleged by the Assessing Officer.”

On appeal by the Revenue, the Punjab and Haryana High Court upheld the decision of the Tribunal and held as under:

“When the union was acting only in the representative capacity and there was no separate contract between the union and its members for performance of the work as required for applicability of section 194C(2) of the Act, section 40(a)(ia) of the Act was not applicable.”

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