TDS on transport payments through intermediary employee falls under section 194C, sustaining disallowance for non-deduction.

Payments routed through an employee for arranging transport operations were treated as payments for carrying out work through a sub-contractor, bringing them within section 194C of the Income-tax Act. The record showed the employee handled transport coordination and made further payments to truck owners and drivers, while the absence of details of the actual transporters supported the sub-contract character of the arrangement. The argument that individual payments were below the threshold was not accepted because the material reflected substantial aggregate payments to the intermediary. The view in Merilyn Shipping was also not followed. Accordingly, tax was deductible at source and disallowance under section 40(a)(ia) was upheld.

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Issues: Whether the payments made for transportation operations through the assessee's employee attracted deduction of tax at source under section 194C of the Income-tax Act, 1961 and, on failure to deduct tax, warranted disallowance under section 40(a)(ia) of the Income-tax Act, 1961.

Analysis: The assessee paid substantial amounts to an employee who, on the material on record, was engaged in arranging transportation and making further payments to truck owners and drivers. The absence of particulars of the actual transporters and the manner in which the payments were routed supported the finding that the employee functioned as a sub-contractor in the transport arrangement. Once the payment was made in pursuance of such an arrangement for carrying out work, section 194C became applicable. The plea that the individual payments to transporters were below the threshold was inconsistent with the record showing large aggregate payments to the intermediary. The reliance placed on the earlier view in Merilyn Shipping was also not accepted.

Conclusion: The payments fell within the scope of section 194C, tax was deductible at source, and the disallowance under section 40(a)(ia) was justified.

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