TDS under section 194C applies where a routing intermediary is the assessee's own branch for contract work.

Where an intermediary is found on facts to be the assessee's own branch or outfit, payments routed through it for harvesting and transporting cane are treated as payments for work under an implied contract, attracting tax deduction at source under section 194C. The claim that the Zone Samiti was an independent body of farmers was rejected because it had no separate existence, no real funds of its own, and functioned as part of the assessee's office. The affidavits relied on by the assessee did not displace these factual findings, so the demand under sections 201 and 201(1A) was upheld.

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Issues: Whether the assessee was liable to deduct tax at source under section 194C on payments made for harvesting and transporting sugarcane through the so-called Zone Samiti, and whether the demand raised under sections 201 and 201(1A) was justified.

Analysis: The assessee's case that the Samiti was an independent body of farmers was rejected on facts. The arrangement and the surrounding documents showed that the Samiti had no independent existence, no real funds of its own, and functioned as a section of the assessee's own office. The fixed amount deducted at a uniform rate from members' cane price was not treated as a true advance to farmers but as funds routed through the assessee's own arrangement for carrying out harvesting and transportation. The affidavits relied upon by the assessee were found to be inconsistent with the actual working of the arrangement and could not displace the factual findings. Once the Samiti was held to be the assessee's own branch or outfit, the payments made through it to mukadams and transporters were payments made by the assessee for work contracted to be done, attracting section 194C.

Conclusion: The assessee was liable to deduct tax at source on the payments in question, and the demand raised under sections 201 and 201(1A) was upheld.

Ratio Decidendi: Where an intermediary is found on facts to be the assessee's own branch or outfit and the payments routed through it are for work carried out under an implied contract, the assessee remains liable to deduct tax at source under section 194C.

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