It is well known that The Finance Act 2015 has approved amendment to section 194C (6) providing for deduction of tax at source unless the transporter who is engaged in the business of playing, hiring or leasing goods carriage, owns not more than goods carriages and furnishes a declaration to this effect along with PAN to the payer. The amendment is applicable from 01-06-2015

A lot of queries have been received seeking to know the meaning of the word ‘owner’ as occurring in section 194C(6) regarding deduction of tax at source. Should the term “owns” be taken essentially to mean registered owner under Motor Vehicles (MV) Act or should it be read to mean the beneficial owner?

The term owner has occurred in the Income tax Act, 1961 at number of times, in number of section, providing for a charge on the income or giving a benefit to the assessee.

Section 44AE
Section 44AE provides for special provisions for computing profits and gains of business of playing, hiring or leasing goods carriage. The presumptive taxation is based on the number of goods carriage owned by the assessee. The term ‘owner’ has been defined in explanation to the section as under:

“an assessee, who is in possession of a goods carriage, whether taken on hire purchase or on instalments and for which the whole or part of the amount payable is still due, shall be deemed to be the   owner   of such goods carriage”

Thus, for the purpose of section 44AE, the term owner means anyone in possession of the goods carriage and not the registered owner. This assumes importance in defining the term “owns” in section 194C(6) because, the taxation of the assessee transporter is squarely covered under the provisions of section 44AE.

Court’s View on the expression “owner”
The Hon’ble Supreme Court has also decide the question of ownership based on the intention of the legislature, namely “to give benefit or to tax the assessee.”

(1) Owner for the purpose of depreciation benefit
The word ownership fell for the consideration of the Supreme Court in Mysore Minerals Ltd v CIT (1999) 239 ITR 775. The controversy before the Supreme Court was related to the true meaning of the word "owned" in section 32(1). The Apex Court held that the expression ‘Building owned by the assessee’ in section 32(1) means the person who have acquired the possession over the building in his own right and uses the same for the purposes of the business or profession despite the fact that a legal title has not been passed on to him under the requirements of laws such as the Transfer of Property Act and the Registration Act, etc. The Court opined that section 32 of the Act confers a benefit on the assessee, it should be so interpreted to enable the assessee getting the benefit intended to be given by the legislature to the assessee.

(2) Owner for the purpose of charge on House Property
The expression “owner” as appearing in section 22 related to income from house property also fell for the interpretation by the Supreme Court in CIT v Podar Cement Pvt. Ltd.(1997) 226 ITR 625. In this case also, the Court held that having regard to the object of the Income-tax Act, namely, " to tax the income", "owner" is a person who is entitled to receive income from the property in his own right.

Thus for the purpose of section 194C(6), the term ‘who owns” essentially means the one “who possesses”

MS Word format of Declaration from Transportation Click Here >>

Provisions of Section 194C(6) are independent of Section 194C(6) for disallowance u/s 40(a)(ia)Click Here >>