Section 194C of the Indian Income Tax Act, 1961 states that no deduction shall be made from any sum credited or paid to a contractor who owns ten or less goods carriages, where such contractor has furnished a declaration with their Permanent Account Number to the person paying or crediting the sum.
Section 194C(6) of the Income Tax Act states that if a transporter owns more than 10 vehicles on the date of the transaction and subsequently sells some vehicles such that the number of owned vehicles is less than 10 and gives a declaration to this effect, then TDS need not be deducted even if the number of vehicles exceeds 10 subsequently during the same year.
Further, even if any transporter owns zero vehicles i.e. he hires the vehicle from third party for the purpose contract he will get the benefit of the section because zero is also less than 10 even though this is not the intent of the statute.
The real intention of the Law maker is explained vide circular no. 19/2015 dated 27.11.2015 issued by the Central Board of Direct Taxes.
“The condition of not owning more than ten goods carriages by the transporter is required to be fulfilled on the date on which the amount is credited or paid, whichever is earlier. In case a transporter does not own ten goods carriages on the date on which the amount is credited or paid but becomes owner of ten goods carriages later in the previous year, the payer shall not be required to deduct tax from the payment made to the transporter during the period of the previous year when he was not owning more than ten goods carriages. However, the tax shall be required to be deducted from the payment made during that part of the previous year during which the transporter owned more than ten goods carriages.”
“Further, this exemption from TDS is applicable only in respect of transport charges received for plying, hiring or leasing of goods carriage (s) owned by the transporter. Therefore, if a person receives payment in respect of plying, hiring or leasing of goods carriage (s) which are not owned by him, he shall not be entitled to claim exemption from TDS in respect of these payments.”