TDS apllicability on advance payment of freight.

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This discussion explores who is responsible for deducting Tax Deducted at Source (TDS) under Section 194C when a supplier pays freight charges in advance on behalf of a purchaser. The core issue is whether the supplier, who makes the payment but treats it as a receivable, or the purchaser, who books the expense but doesn't make the payment, is liable for TDS. The consensus leans towards the purchaser being responsible for TDS, as they are ultimately bearing the freight expense.

Tara Jain

Tara Jain (Querist)
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10 April 2020 Mr. A is a supplier and Mr. B is a purchaser. Mr. A supplies goods to Mr. B and pays freight in advance on behalf of Mr. B.
Now the question is who will deduct TDS u/s 194C.
Mr. A who is making payment of freight to transporter on behalf of Mr. B but Mr. will not debit the same to profit & loss account but will debit the amount to party as receivable. or Mr B- who will book the expense but he is not making the payment so when will he make the TDS.

CA Suresh Jain

CA Suresh Jain (Expert)
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10 April 2020 The narration given by you results into a transaction of loan given to B as payment is made to transporter on behalf of him. B should instruct A to pay the amount of transportation charges net of TDS and B should make entry in his books for borrowing the gross amount from A

CA Suresh Jain

CA Suresh Jain (Expert)
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10 April 2020 By mistake mentioned "borrowing the Gross amount from A" instead of "debiting gross amount to transporter i.e. amount paid by A plus TDS applicable'

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