TDS under Section 194C

[Dhananjay Patil]

Dear All

This is regarding the TDS provisions of the Income Tax Act, 1961. (Pl. Ref Section 194C).
Our client is a sugar factory, there are number of individual transporters (individual truck owners) as well as transport companies for the carriage of sugar cane from the farmers place to the factory. They all have provided the Permanent Account Number(PAN)with factory.

Till the financial Year 2010-2011 these truck owners use to apply for the lower deduction, and accordingly there was no deduction of tax.

Now as per the new amendments [Section 194C] we are thinking that not to deduct any tax from the payments made to the transporters, as the amended sub section 6 of 194C provides that:
'No deduction shall be made from any sum credited or paid or likely to becredited or paid during the previous year to the account of a contractor duringthe course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum.'

Now my doubt is that

1) whether the factory can treat these transporters as person eligible under this sub section 6 of 194C.

2)Whether the factory can, after obtaining the PAN from all these transporters take the decision to not to deduct the tax?

3)whether the above contract to carry the sugar cane from farmers place to factory will be the contract during the course of business of plying, hiring or leasing goods carriages?

Thanks in Advance

[CA.Mohammed Lakkadsha]

Yes , No deduction is required when PAN are provided by the transporters. it will constured as contract as contemplated in Sec 194(6). Moreover the company has to file ETDS returns providing information as regards all such payments to transporters wherein NO TDS has been done as Transporter has provided PAN. - CA.Mohammed Lakkadsha

AI Summary

TDS exemption for transporters on furnishing PAN permits no tax deduction for carriage contracts, subject to e TDS reporting. Payments to transporters who furnish their Permanent Account Number (PAN) are exempt from deduction of tax at source for carriage-related contracts; the payer may therefore refrain from deducting tax where PAN is produced, but must maintain PAN records and disclose the payments and PAN details in the electronic TDS reporting returns.