TDS on tanker hire payments to co-operative members requires a genuine sub-contract; mere vehicle placement is not enough.

A co-operative society's transport arrangement was treated as a collective activity of its members, not as contracting work outsourced to sub-contractors. Payments to tanker owners were made for placing tankers at the society's disposal and were computed trip-wise, but the tanker owners did not carry out any identifiable part of the work as sub-contractors. On that basis, section 194C(2) was held inapplicable and no tax deduction at source was required from those payments. A preliminary objection based on a difference in the society's name was also rejected because the records showed the same assessee identity, with the later name being only a translation of the limited-status description.

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Issues: (i) Whether the preliminary objection based on the name of the assessee vitiated the appeal; (ii) Whether payments made to tanker owners by the co-operative society attracted tax deduction at source under section 194C(2) of the Income-tax Act, 1961.

Issue (i): Whether the preliminary objection based on the name of the assessee vitiated the appeal.

Analysis: The name used before the authorities below and the name used in appeal referred to the same co-operative society, the latter being only a translation of the word indicating limited status. No change in identity of the assessee was shown.

Conclusion: The preliminary objection was rejected.

Issue (ii): Whether payments made to tanker owners by the co-operative society attracted tax deduction at source under section 194C(2) of the Income-tax Act, 1961.

Analysis: Section 194C(2) applies only where a contractor pays a sub-contractor for carrying out the whole or any part of the work undertaken by the contractor. The transport arrangement in question was found to be a collective activity of the society's members, with tanker owners merely providing their tankers and receiving hire-like payments computed trip-wise. The tanker owners did not carry out any identifiable part of the transport work as sub-contractors. The society was treated as a mutual collective entity rather than as a contractor outsourcing part of its work to members.

Conclusion: The payments did not fall within section 194C(2), and no tax was required to be deducted at source from the tanker owners' payments.

Final Conclusion: The disallowance and demand raised under the tax-deduction provisions were set aside, and the assessee's appeals succeeded.

Ratio Decidendi: Section 194C(2) applies only where the payee is a genuine sub-contractor carrying out the whole or part of the contractor's work; payments to members who merely place vehicles at the disposal of a co-operative society for collective execution of transport work are not payments to sub-contractors.

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