TDS liability on freight and cartage payments turns on whether transporters already disclosed the income and paid tax.

Freight and cartage payments were examined for disallowance under section 40(a)(ia) and liability under section 201, but the Tribunal treated the decisive question as whether the transporters had already disclosed the receipts and paid tax. It noted the assessee's claim that the payments were made without a contractual arrangement and that the transporters were income-tax assessees with supporting material on record. The matter was remanded to the Assessing Officer for verification of the deductees' returns and tax payment, and if that verification is satisfied, the demand is to be deleted.

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Issues: Whether freight and cartage payments were liable to disallowance under section 40(a)(ia) and whether demand could be sustained under section 201 where the transporters had allegedly included the receipts in their returns and paid tax.

Analysis: The dispute turned on whether the payments attracted the TDS provisions and, if tax had not been deducted, whether the payees had nevertheless disclosed the income and discharged the tax liability. The Tribunal noted the assessee's case that the payments were made to transporters without a contractual arrangement and that the transporters were income-tax assessees with supporting particulars on record. It further relied on the principle that when the deductees have already offered the income to tax, the deductor should not be fastened with a corresponding demand, and directed verification of the evidence produced by the assessee.

Conclusion: The issue was remanded to the Assessing Officer for verification of whether the transporters had included the receipts in their returns and paid tax thereon; if so, the demand was to be deleted.

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