Freight TDS liability turns on whether the assessee is a mere transport facilitator, with estimated disallowance unsustainable.

An assessee acting merely as a transport facilitator or lorry booking agent, without owning vehicles and with freight receipts and payments largely offsetting each other except for a commission-like margin, was not treated as the person responsible for deducting tax at source on freight payments under section 194C. On that basis, disallowance under section 40(a)(ia) did not arise. An ad hoc disallowance made on an estimated basis was also held unsustainable because the foundational premise for treating the assessee as the deductor had failed, so the estimated addition was deleted.

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Issues: (i) Whether the assessee was liable to deduct tax at source under section 194C of the Income-tax Act, 1961 on freight payments so as to attract disallowance under section 40(a)(ia); (ii) whether the disallowance made on an ad hoc estimate basis could be sustained.

Issue (i): Whether the assessee was liable to deduct tax at source under section 194C of the Income-tax Act, 1961 on freight payments so as to attract disallowance under section 40(a)(ia).

Analysis: On the facts found, the assessee did not own vehicles and acted only as a facilitator who arranged transport for clients. The freight receipts and freight payments were nearly matched, leaving only a small margin that represented the assessee's earnings. The surrounding circumstances, including the absence of transportation-related expenditure other than office , supported the conclusion that the assessee was a mere lorry booking agent and not the person responsible for deducting tax at source on the payments to individual truck owners.

Conclusion: The assessee was not liable to deduct tax at source under section 194C, and the disallowance under section 40(a)(ia) was not attracted.

Issue (ii): Whether the disallowance made on an ad hoc estimate basis could be sustained.

Analysis: A disallowance under Chapter XVII-B and section 194C could not be upheld on an estimate basis in the absence of a legally sustainable foundation for treating the assessee as the deductor. Since the primary premise for the disallowance failed, the estimated addition also lacked support.

Conclusion: The ad hoc disallowance on estimate basis was unsustainable and was directed to be deleted.

Final Conclusion: The assessment addition was set aside in full, and the assessee succeeded in the appeal.

Ratio Decidendi: Where an assessee merely facilitates transportation as an intermediary or lorry booking agent and the payment structure shows only a commission-like margin, the assessee is not the person responsible for deduction of tax at source on freight payments, and an estimated disallowance under section 40(a)(ia) cannot be sustained.

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