Tds applicability

[sunil mehta]

A proprietor (under  44AB audit in F.Y.2008-09) takes car on hire for his out city trips through a treavel agent .The travel agent does not own any car.He simply books the car through another car hire vendor. There is no contract /agreement between the businessman and the travel agent.The businessman sometimes take car on hire from other vendor also.The travel agent raises for lumpsum car hire charges(incld. petrol/road tax/driver chgs.)Per trip bill is below Rs.20000/-But total bills of travel agent for the financial year exceeds Rs.150000/- Query:-1)Whether Tds is applicable on above nature of transactions? 2)If yes, the u/s 194A or 194I ? 3)Quote any circular or judgement in support of the answer.

AI Summary

TDS Applies Under Section 194C for Hiring Cars with Drivers; Ensure Compliance with Section 40(a)(ii) to Avoid Disallowance. A proprietor subject to audit under section 44AB in FY 2008-09 hires cars for out-of-city trips through a travel agent who books cars through another vendor. The travel agent charges a lump sum per trip, with individual bills under Rs. 20,000, but total annual charges exceed Rs. 150,000. The query is whether TDS applies and under which section. Responses suggest TDS is applicable under section 194C, not 194I, as the car is hired with a driver, indicating a service rather than a lease. Compliance with section 40(a)(ii) is crucial to avoid disallowance of expenses.