Contractor liable for tax deduction under section 194C: High Court decision upheld

The High Court upheld the lower authorities' decision, confirming the appellant's liability to deduct tax under section 194C of the Income-tax Act from the amount returned to the travel agents. The court determined that the appellant acted as a contractor appointing commission agents, thus being responsible for tax deduction. The appeals were dismissed, affirming the orders against the appellant for defaulting on tax deduction, emphasizing the contractor's obligation to pay tax under section 194C.

---

---

Issues involved: The controversy involved in the appeals is whether the appellant was liable to deduct tax u/s 194C of the Income-tax Act from the deposited amount returned to the travelling agents.

Summary:
The appeals were filed against a common judgment related to the assessment years 1996-97 to 1999-2000. The main question of law was whether tax deduction u/s 194C was required from the amount returned to the travel agents. The case involved M/s. Kumaon Mandal Vikas Nigam Ltd. making payments to agents for conducting tours. The Nigam entered into contracts with travel agents who provided buses and conducted tours for Central Government employees. The payments received were deposited with the Nigam, which then distributed 85% to the contractors as hire charges and 5% as commission. The issue arose as tax was not deducted by the Nigam, leading to orders against them under section 201(1)/201(1A) for defaulting on tax deduction. Appeals were made to higher authorities, ultimately reaching the High Court.

Upon review, it was established that the Nigam acted as a contractor appointing commission agents to conduct tours, deriving income from them. The Nigam distributed payments to tour operators, who were responsible for organizing tours and retaining profits after expenses. The court clarified that the liability to pay tax u/s 194C falls on the contractor, in this case, the Nigam, who appointed agents for their own operations. The court dismissed all appeals, confirming the orders of the lower authorities in favor of the Department. The judgment upheld the Nigam's liability for tax payment under section 194C.

---