Payment to sub-contractors for transportation of LPG cylinders would be subject to TDS under Sec. 194C

IT: Where assessee entered into a contract with IOC for carriage of LPG cylinders, in view of fact that assessee in turn got transportation of cylinders done through three parties by entering into sub-contracts with them, payments of freight charges made to sub-contractors were covered by section 194C(2) and, thus, assessee was required to deduct tax at source while making payments in question

IT : Provisions of section 40(a)(ia) are applicable not only to amount which are shown as outstanding on closing of relevant previous year, but to entire expenditure which became liable for payment at any point of time during year under consideration and which was also paid before closing of year

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[2014] 47 taxmann.com 310 (Himachal Pradesh)

HIGH COURT OF HIMACHAL PRADESH

Palam Gas Service

v.

Commissioner of Income-tax

Section 194C of the Income-tax Act, 1961 - Deduction of tax at source - Contractors/Sub Contractors, payments to (LPG transportation) - Assessment year 2006-07 - Assessee was engaged in business of purchase and sale of LPG cylinders - Main contract of assessee for carriage of LPG was with IOC - Assessee received freight payments from IOC - Assessee, in turn, got transportation of LPG done through three parties to whom he made a part of freight payments received from IOC - Whether since freight charges were being paid by assessee to three persons in respect of sub-contract under section 194C(2) following its own contract with IOC, assessee was required to deduct tax at source while making freight payments - Held, yes - Whether since assessee failed to do so, payments in question deserved to be disallowed - Held, yes [Para 13] [In favour of revenue]

Section 40(a)(ia) of the Income-tax Act, 1961 - Business disallowance - Interest, etc., paid to resident without deduction of tax at source (Applicability of) - Assessment year 2006-07 - Whether provisions of section 40(a)(ia) are applicable not only to amount which are shown as outstanding on closing of relevant previous year, but to entire expenditure which became liable for payment at any point of time during year under consideration and which was also paid before closing of year - Held, yes [Para 15]