TDS disallowance on transport contract payments upheld where freight and octroi were routed through a contractor without deduction.

Freight and octroi payments routed through a transport contractor were treated as contractual transportation charges, not as isolated trip-wise reimbursements. The supporting lorry receipts showed that the assessee had entrusted transportation and clearing work to the contractor for the year, and the absence of a separate written or oral contract was not decisive. Because the payments aggregated beyond the statutory limit for the contractor and tax was not deducted at source, the conditions for disallowance under section 40(a)(ia) were satisfied. The first appellate authority's deletion was therefore not justified.

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Issues: Whether freight and octroi payments made by the assessee to truck owners through Roopal Roadways were liable to disallowance under section 40(a)(ia) for non-deduction of tax at source, on the ground that the payments were covered by section 194C(3).

Analysis: The payment pattern and the supporting lorry receipts showed that the transportation and clearing work was entrusted to Roopal Roadways for the relevant year. The finding that there was no separate oral or written contract was not accepted as decisive, because the real nature of the arrangement was a continuous contractual engagement for transportation work. The payments, though made trip-wise, were found to aggregate to more than the statutory limit in respect of the contractor, and the mode of disbursement to individual truck drivers did not alter the character of the underlying contract. Since tax was not deducted at source on such contractual payments, the conditions for invoking section 40(a)(ia) stood attracted.

Conclusion: The disallowance under section 40(a)(ia) was rightly made and the deletion by the first appellate authority was not justified.

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