16 January 2024
Dc Company hiring us to transportation of mining minerals for place A to place B. We don’t have any vehicle so we hired 20-25 transporter (which own less than 10 vehicles during the previous year) with vehicle to do this job and directly paid to transporter and booked as a transportation expenses in our books of account. As per section-194c(6) if transporter own 10 or less goods carriages at any time during the previous year and furnishes declaration to that effect along with pan to the person paying or crediting such at time of payment or crediting the party, whichever is earlier.
Further dc co. Deducting TDS of (abc) of us.
Query- 1. Weather we will liable to deduct TDS third party transporter? 2. If we not deduct TDS on transportation expenses, it shall be allowable as an expenses at the time of audit u/s 44ab? 3. If we not deduct TDS on transportation expenses in above case what should the remedy at time of income tax notice or scrutiny?
11 July 2024
Based on the scenario described, here are the answers to your queries related to TDS (Tax Deducted at Source) on transportation expenses paid to third-party transporters:
1. **Liability to Deduct TDS on Third-Party Transporters:** - As per Section 194C of the Income Tax Act, TDS is applicable on payments made to contractors for carrying out any work, including transport of goods. However, if the transporter owns 10 or fewer goods carriages during the previous year and furnishes a declaration along with PAN to the payer, TDS is not required to be deducted. - In your case, since the individual transporters (who own less than 10 vehicles) are being hired to transport mining minerals, they can provide a declaration to you stating their eligibility under Section 194C(6). Upon receiving this declaration along with their PAN, you are not liable to deduct TDS on payments made to them.
2. **Allowability of Expenses if TDS is Not Deducted:** - If TDS is not deducted on transportation expenses where it is not required (due to compliance with Section 194C(6)), the expenses are still allowable as deductions while computing income under the Income Tax Act. - During the audit under Section 44AB (if applicable), you need to ensure that proper documentation and declarations from the transporters are maintained to substantiate the claim of not deducting TDS.
3. **Remedy in Case of Income Tax Notice or Scrutiny:** - In case of scrutiny or notice from the Income Tax Department questioning the non-deduction of TDS on transportation expenses, you should be prepared to provide the following: - Declarations from each transporter stating ownership of less than 10 goods carriages during the previous year and providing their PAN. - Copies of agreements or contracts with the transporters. - Details of payments made to the transporters along with proof of payment. - Ensure that these documents are readily available for submission to the tax authorities to justify the non-deduction of TDS.
### Conclusion:
In summary, if the transporters you hire own less than 10 goods carriages and provide a declaration along with their PAN, you are not required to deduct TDS under Section 194C. The expenses paid to such transporters will still be allowable as deductions in your books of accounts and during audit under Section 44AB. Ensure you maintain proper documentation to substantiate your compliance in case of any scrutiny by the tax authorities.
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