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Section 40a (ia) is badly hit the taxpayers whose direct cost (prime cost) comes under TDS provisions. For Example Lorry freight paid to lorry owners by transport operators liable to TDS as sub-contractor u/s 194C. I notice some cases in which almost gross receipt taken as net profit by the AO after applying section 40a(ia) due to that net profit comes 90% of gross receipts instead of 2% to 5% which is normally in this industry. Section 40a (ia) is applicable on expenses claimed u/s 30 to 39. Now question is that the prime cost allowed u/s 28 or 37 because both section are general in nature. Is it possible to claim the lorry freight paid (which is prime cost for transport business) claimed u/s 28 itself? If it claimed u/s 28 then section 40a (ia) not applicable