E.Loganathan, Gummidipoondi V. ITO, Kancheepuram

CO 44/CHNY/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8504 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G BASKAR
• Assessee Lawyers: N MADHAVAN
• Section: 143(3); 194C

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI. BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT & SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 2 096/MDS/2012 ASSESSMENT YEAR : 2007-08 & C.O. NO. 44/MDS/2013 [IN I.T.A. NO.2096/MDS/2012] THE INCOME TAX OFFICER, WARD I(2), KANCHIPURAM. VS. SHRI E. LOGANATHAN, SEMPETTAI VILLAGE,KAVARAPETTAI, GUMMIDIPOONDI 601 206. [PAN: ACCPL8112A] (APPELLANT) (RESPONDENT/ CROSS OBJECTOR) APPELLANT BY : SHRI N. MADHAVAN, JCIT RESPONDENT BY : SHRI G. BASKAR, ADVOCATE DATE OF HEARING : 22.05.2013 DATE OF PRONOUNCEMENT : 29.05.2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION AT T HE BEHEST OF THE ASSESSEE, EMANATE FROM THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS) IX, CHENNAI DATED 28.08.2012 RELEVANT TO THE ASSESSMENT YEAR 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CIVIL CONTRACTOR AND I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 2096 096096 096/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. NO. C.O. NO. C.O. NO. C.O. NO. 44 4444 44/MDS/13 /MDS/13 /MDS/13 /MDS/13 2 HAD FILED RETURN FOR THE YEAR UNDER CONSIDERATION D ECLARING TOTAL INCOME OF ` .2,92,200/- AND AGRICULTURAL INCOME OF ` .90,000/-. THE RETURN WAS PROCESSED INITIALLY UNDER SECTION 143(1) OF THE INCOME TAX AC T, 1961 AND SUBSEQUENTLY AFTER DUE PROCESS; ASSESSMENT WAS COMPLETED UNDER S ECTION 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER HAS OBSERVED THAT FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS CLAIMED AN EXPENDITURE TOWARDS SUB-CONTRACT PAYMENT OF ` .41,82,763/-. WHILE QUESTIONING TDS DEDUCTION ON THE SUB-CONTRACT PAYMENT, THE ASSESSEE HAS STATED THAT NO TDS HAS BEEN DEDUCTED O N THAT PAYMENT. AS PER SECTION 40(A)(IA), THE AMOUNT PAYABLE TO CONTRA CTOR OR SUB-CONTRACTOR, BEING A RESIDENT, FOR CARRYING OUT ANY WORK (INCLUD ING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER 17B AND SUCH TAX HAS NOT BEEN DEDUCTED, THE ENTIRE AMOUNT IS NOT ALLOWED TO BE CLAIMED AS EXPENDITURE IN COMPUTING THE INCOME C HARGEABLE UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION. I N THIS CASE, THE ASSESSEE HAS NOT DEDUCTED TDS ON THE PAYMENT MADE TOWARDS SU B-CONTRACT, AND AS SUCH, THE ENTIRE AMOUNT CLAIMED AS EXPENDITURE UNDE R THIS HEAD OF ` .41,82,763/- STANDS DISALLOWED AND ADDED BACK TO TH E TOTAL INCOME OF THE ASSESSEE. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER BEFORE THE CIT(APPEALS). I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 2096 096096 096/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. NO. C.O. NO. C.O. NO. C.O. NO. 44 4444 44/MDS/13 /MDS/13 /MDS/13 /MDS/13 3 4. IT WAS CONTENDED BEFORE THE CIT(APPEALS) THAT T HE ENTIRE CONTRACT HAS BEEN TOTALLY ASSIGNED IN FAVOUR OF ONE SHRI K. MANI AND THERE IS NO SUB- CONTRACT BETWEEN THE ASSESSEE AND SHRI MANI. WHATEV ER MONEY RECEIVED ON THE CONTRACT HAS BEEN PAID TO SHRI MANI. THEREFORE, THE ASSESSEE IS NOT UNDER OBLIGATION TO DEDUCT TDS AND SECTION 40(A)(IA ) HAS NO APPLICATION. THE CIT(APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE HAS OUTSOURCED THE WOR K TO SHRI K. MANI, WHICH IS NOTHING BUT SUB-CONTRACTING THE WORK. SO, THE WO RK ASSIGNED TO SHRI MANI IS SUB-CONTRACT WORK AND THE ASSESSEE SHOULD HAVE D EDUCTED TDS UNDER SECTION 194C AND ASSESSEE DID NOT DO SO. THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) CLEARLY ATTRACT IN ASSESSEES CAS E. HOWEVER, THE LD. CIT(APPEALS) RELIED ON THE DECISION OF SPECIAL BENC H OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF MERILYN SHIPPING TRANSPORTS VS. ADDL. CIT [20 TAXMAN.COM 244 (VIZAG SB)], IN WHICH IT HAS BEEN HELD THAT IF THE AMOUNTS ARE PAID BEFORE THE END OF THE FINANCIAL YE AR THE PROVISIONS UNDER SECTION 40(A)(IA) ARE NOT APPLICABLE. THEREFORE, BY FOLLOWING THE SPECIAL BENCH DECISION, THE LD. CIT(APPEALS) DIRECTED THE A SSESSING OFFICER TO DELETE THE ADDITION. 5. AGGRIEVED, THE REVENUE PREFERRED AN APPEAL BEFO RE THE TRIBUNAL. 6. DURING THE COURSE OF HEARING, THE LD. DR STRONG LY RELIED ON THE ORDER OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 2096 096096 096/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. NO. C.O. NO. C.O. NO. C.O. NO. 44 4444 44/MDS/13 /MDS/13 /MDS/13 /MDS/13 4 THE ASSESSING OFFICER AND CONTENDED THAT THE LD. CI T(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER UNDER SECTION 40(A)(IA) BY FOLLOWING THE DECISION OF SPECIAL BENC H OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF MERILYN SHIPPING TRANSPORTS VS . ADDL. CIT (SUPRA) . HE, FURTHER RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. M.D. JAKIR HOSSAIN MONDAL IN ITAT NO. 31 OF 2013 G.A. NO. 320 OF 2013, IN WHICH THE HONBLE CALCUTTA HIGH COURT HAS SET ASIDE THE ORDER OF THE SPECIAL BENCH AND FILED A COPY OF SAME. 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS FAIRLY CONCEDED THE ARGUMENTS OF THE LD. DR. 8. WE HAVE HEARD BOTH SIDES, PERUSED THE ORDERS OF AUTHORITIES BELOW AND ALSO GONE THE ORDERS OF SPECIAL BENCH, VISAKHAP ATNAM BENCH IN THE CASE OF MERILYN SHIPPING TRANSPORTS VS. ADDL. CIT ( SUPRA) AS WELL AS DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. M.D. JAKIR HOSSAIN MONDAL (SUPRA). THE LD. CIT(APPEALS), BY FO LLOWING THE SPECIAL BENCH DECISION DIRECTED THE ASSESSING OFFICER TO DE LETE THE ADDITION. HOWEVER, HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. M.D. JAKIR HOSSAIN MONDAL IN ITAT NO. 31 OF 2013 G.A. NO. 320 OF 2013 SET ASIDE THE ORDER OF THE SPECIAL BENCH AND THE LAW LAID DOWN BY THE SPECIAL BENCH IS NO MORE RES INTEGRA . THEREFORE, THE GROUND RAISED BY THE REVENUE STAND S ALLOWED IN VIEW OF THE DECISION OF THE HONBLE CALC UTTA HIGH COURT. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 2096 096096 096/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. NO. C.O. NO. C.O. NO. C.O. NO. 44 4444 44/MDS/13 /MDS/13 /MDS/13 /MDS/13 5 9. SO FAR AS CROSS OBJECTION FILED BY THE ASSESSEE WITH REGARD TO MERITS OF THE CASE IS CONCERNED, THE ISSUE RAISED IN GROUN D NOS.2, 3.1 AND 3.2 ARE NOT PRESSED AND ARE DISMISSED ACCORDINGLY. GROUND N OS. 1.1, 1.2 AND 1.3 ARE CONCERNED, RELATING TO MERITS OF THE CASE, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THERE IS NO SUB-CONTRAC T BETWEEN THE ASSESSEE AND SHRI K. MANI. THEREFORE, THE ASSESSEE IS NOT UN DER OBLIGATION TO DEDUCT TDS. THE LD. DR CONTENDED THAT WHEN THE ASSESSEE WA S UNDER THE OBLIGATION TO MAKE PAYMENT TOWARDS EXPENDITURE, IT WAS THE LIABILITY OF THE ASSESSEE TO DEDUCT TDS AT SUCH POINT OF TIME. 10. WE HAVE HEARD BOTH SIDES AND FIND THAT THE ASS ESSING OFFICER HAS OBSERVED THAT THE CLAIM OF EXPENDITURE OF ` .41,82,763/- IS A SUB-CONTRACT PAYMENT. THE LD. CIT(APPEALS) HAS OBSERVED THAT THE ASSESSEE HAS OUTSOURCED THE WORK TO SHRI K. MANI, WHICH IS NOTHI NG BUT SUB-CONTRACTING THE WORK. EVEN FOR OUTSOURCING THE WORK, INCURRING SUCH A HUGE EXPENDITURE, THE ASSESSEE SHOULD HAVE ENTERED INTO AN AGREEMENT WITH SHRI MANI AND IT IS NOT CLEAR FROM THE CIT(APPEALS) ANY AGREEMENT BETWEEN T HE ASSESSEE AND SHRI MANI HAS BEEN ENTERED INTO. THESE ASPECTS WERE NOT CONSIDERED BY THE CIT(APPEALS) OR THE ASSESSING OFFICER. WE, THEREFOR E, DIRECT THE ASSESSING OFFICER TO CONSIDER THE ABOVE FACTS AND DECIDE THE ISSUE AFRESH AFTER ALLOWING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 2096 096096 096/M/ /M/ /M/ /M/1 11 12 22 2 & && & C.O. NO. C.O. NO. C.O. NO. C.O. NO. 44 4444 44/MDS/13 /MDS/13 /MDS/13 /MDS/13 6 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS AL LOWED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 29 TH OF MAY, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 29.05.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.