Truck hire payments through middlemen did not attract TDS, so the section 40(ia) disallowance failed.

Freight or truck hire payments routed through middlemen were examined for TDS exposure under the Income-tax Act. The note states that the assessee's trucks were owned by persons who furnished Forms No. 15-I and were actually used for carriage of goods; on that basis, the payment was treated as accruing to the truck owners whose vehicles were hired. The resulting position recorded is that the assessee had no authority to deduct tax at source, so the disallowance under section 40(ia) could not stand and the revenue appeal was dismissed.

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Issues: Whether freight or truck hire payments made through middlemen attracted tax deduction at source so as to justify disallowance under section 40(ia) of the Income-tax Act, 1961.

Analysis: The assessee claimed that the trucks actually used for transportation belonged to the owners who had furnished Forms No. 15-I, and that those trucks were in fact used for carriage of goods. The Court accepted that the payment accrued to the truck owners whose vehicles were hired, and on that basis held that the assessee had no authority to deduct tax at source. In view of that finding, the basis of the disallowance did not survive.

Conclusion: The disallowance was not sustainable and the revenue appeal was dismissed.

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