A.Kasi Viswanadham, Kakinada V. ACIT, Circle-1, Kakinada

CO 48/VIZ/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 4026 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 06-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHAN
• Section: 40A(3); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ I.T.A.NO. 138 /VIZ/201 7 ( / ASSESSMENT YEAR:20 12 - 13 ) ACIT, CIRCLE - 1, KAKINADA VS. A.KASIVISWANADHAM KAKINADA [PAN : AAEFA9252A] ( / APPELLANT) ( / RESPONDENT) CROSS OBJECTION NO.48/VIZ/2017 ARISING OUT OF I.T.A.NO.70/VIZ/2018 ( / ASSESSMENT YEAR:20 12 - 13 ) A.KASIVISWANADHAM KAKINADA [PAN : AAEFA9252A] VS. ACIT, CIRCLE - 1, KAKINADA ( / APPELLANT) ( / RESPONDENT) ./ I.T.A.NO S . 35 - 36 /VIZ/2018 ( / ASSESSMENT YEAR S :20 11 - 12 AND 2013 - 14 RESPECTIVELY ) DCIT, CIRCLE - 1 KAKINADA VS. A.KASIVISWANADHAM KAKINADA [PAN : AAEFA9252A] ( / APPELLANT) ( / RESPONDENT) 2 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE ./ I.T.A.NO S . 33 - 34 /VIZ/2018 ( / ASSESSMENT YEAR:20 13 - 14 AND 2014 - 15 RESPECTIVELY ) DCIT, CIRCLE - 1 KAKINADA VS. A.K.V.LOGISTICS PVT. LTD. KAKINADA [PAN : AAHCA6877F] ( / APPELLANT) ( / RESPONDENT) ./ I.T.A.NO. 1 3 9 /VIZ/201 7 ( / ASSESSMENT YEAR:20 12 - 13 ) ACIT, CIRCLE - 1 KAKINADA VS. A.K.V.LOGISTICS PVT. LTD. ANAKAPALLE [PAN : AAHCA6877F] ( / APPELLANT) ( / RESPONDENT) CROSS OBJECTION NO.47/VIZ/2017 ARISING OUT OF I.T.A.NO. 139 /VIZ/201 7 ( / ASSESSMENT YEAR:20 12 - 13 ) A.K.V.LOGISTICS PVT. LTD. KAKINADA [PAN : AAHCA6877F] VS. ACIT, CIRCLE - 1 KAKINADA ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : MOHD. AFZAL, AR / RESPONDENT BY : SHRI R.S.ARAVINDAKSHAN , DR / DATE OF HEARING : 06 .0 6 .2018 / DATE OF PRONOUNCEMENT : 20 .0 7 .2018 3 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE / O R D E R P ER BENCH : 1. THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 2, GUNTUR AND CIT(A) - 2, VISAKHAPATNAM AS UNDER FOR THE ASSESSMENT YEAR 2011 - 12 TO 2014 - 15. (A) ITA NO.138/VIZ/2017 AGAINST THE ORDER OF [CIT(A)] - 2 , GUNTUR VIDE ITA NO. 0 169/ 201 5 - 1 6 , DATED 0 5 . 01 .201 7, (B) ITA NO.35 - 36/VIZ/2018 AGAINST THE ORDER OF CIT(A) - 2, VISAKHAPATNAM VIDE ITA NO.10421/2016 - 17/ACIT,C - 1,KKD/2017 - 18 AND ITA NO.82/2016 - 17/ITO,W - 1,KKD/2017 - 18 DATED 21.12.2017 . (C) ITA NOS.33 - 34/VIZ/2018 AGAINST THE ORDERS OF THE CIT(A) - 2, VISAKHAPATNAM VIDE ORDER ITA NO.81/2016 - 17/AC C - 1,KKD/2017 - 18AND ITA NO.10423/2016 - 17/AC, C - 1,KKD/2017 - 18 DATED 21.12.2017 (D) ITA NO.139/VIZ/2017 AGAINST THE ORDERS OF CIT(A) - 2, GUNTUR VIDE ITA NO.170/2015 - 16 DATED 05.01.2017. 1.1. C ROSS O BJECTIONS NO.47 - 48/VIZ/2017 ARE FILED BY THE ASSESSEE ARISING OUT OF ITA NOS. 139/VIZ/2017 AND 138/VIZ/2017 RESPECTIVELY IN SUPPORT OF THE ORDERS OF CIT(A) VIDE FOR THE ASSESSMENT YEAR 20 12 - 13 . SINCE THE ISSU ES 4 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE INVOLVED IN THESE APPEALS ARE IDENTICAL , ALL THE APPEALS ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF IN A COMMON ORDER FOR THE SAKE OF CONVENIENCE AS UNDER . 2. THE ASSESSES ARE ENGAGED IN THE BUSINESS OF TRANSPORT AND OTHER ALLIED SHIPPING ACTIVITIES. THE NATURE OF T HE WORK OF THE ASSESSEES REQUIRE LOT OF LABOUR WITH IN SHORT NOTICE OF TIME AND DEPENDS ON THE ARRIVAL OF THE CARGO. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, TH E ASSESSES HAVE INCURRED LABOUR EXPENSES AND THE PAYMENTS WERE MADE THROUGH MAISTRIES WHO PROCURE D THE LABOUR AS PER THE NEED OF THE ASSESSEE S . THE ASSESSING OFFICER (AO) INFERRED THAT THERE IS A PRIN CI PAL/ AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND MAIST RY AND THE TRANSACTION S W ERE IN THE NATURE OF SUPPLY OF LABOUR CONTRACT AND ACCORDINGLY HELD THAT SUCH PAYMENTS ARE LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF I.T.ACT. SINCE THE ASSESSEE HAS NOT MADE THE TDS ON LABOUR CHARGES, THE AO DISALLOWED T HE EXPENDITURE U/S 40(A)(IA) OF I.T.ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND ARGUED THAT THERE WERE 33 INDIVIDUALS REFERRED TO IN THE ASSESSMENT O RDER AS MAISTRIES. THEIR JOB I S TO PROCURE THE LABOUR AS AND 5 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE WHEN REQUIRED AND THE PAYMENTS WERE MADE THROUGH ONE OF THE LABOUR(MAISTRY) . THE AMOUNTS DEBI TED TO THE ACCOUNTS OF THE MAIS T RIES A RE THE ACTUAL PAYMENTS MADE TO THE LABOURERS AND MAISTRIES HAVE ONLY FACILITATE D THE PAYMENT S TO THE INDIVIDUAL LABOUR. THE ASSESSEE SUBMITTED BEFORE THE LD.CIT(A) THAT THERE WAS NO AGREEMENT IN WRITING OR ORAL BETWEEN THE ASSESSEE AND THE MAISTRIES AND I N THE ABSENCE OF ANY CONTRACT BETWEEN BOTH THE PARTIES, IT CANNOT BE CONSTRUED THAT THERE EXISTS ANY PRINCIPAL AGENT RELATIONSHIP /CONTRACT BETWEEN THEM. THE ASSESSEE ALSO RELIED ON THE FOLLOWING DECISIONS. (I) SAMANWAYA VS. ACIT (2009) 34 SOT 332 (KOL - TRIB) (II) MARINALINI BIRI MFG. CO.(P) LTD., HIGH COURT OF CALCUTTA (1992) 105 CTR 0327 (III) SHIVA CONSTRUCT IONS BURDWAN VS. DEPARTMENT OF INCOME TAX ITA NO.2162/KOL/2010, DATED 14.07.2011 (I V ) R.SUBBARAJU RAJAHMUNDRY VS. ADDL.CIT RANGE, RAJAHMUNDRY ITA NO.235, 287, 372, 368/VIZ/2008 DATED. 18.11.2010 THE LD.CIT(A) OBSERV ED THAT THE LABOUR MAISTRIES WERE NOT T HE LABOUR CONTRACTORS AND THE PAYMENT S MADE TO LABOUR MAISTRIES DOES NOT PARTAKE THE CHARACTER OF CONTRACT PAYMENT AS CONTEMPLATED UNDER SECTION 194C OF I.T.ACT, ACCORDINGLY HELD THAT THE PAYMENTS MADE TO THE MAISTRIES DOES NOT 6 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE ATTRACT DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT AND ACCORDINGLY DIRECTED THE AO TO DELETE THE ADDITION. 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. DURING THE APPEAL HEARING, THE LD.DR ARGUED THAT THE ASSESSES HAVE MADE THE PAYMENTS TO THE MAISTRIES WHO ARE NONE OTHER THAN THE LABOUR CONTRACTORS. THOUGH THERE WAS NO CONTRACT IN WRITING, THERE WAS IMPLIED CONTRACT FOR SUPPLY OF LABOUR IN WHICH CASE, THE ASSESSEE IS OBLIGED TO DEDUCT THE TDS AS PROVIDED U/S 194C OF I.T.ACT. THE LD.DR ALSO RELIED ON THE DECISION OF ITAT MUMBAI C BENCH IN THE CASE OF ITO VS. GOPAL S. RAJPUR (2016) 65 TAXMANN.COM 294 AND THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT. J.RAMA VS. CIT (344 ITR 0608) AND ARGUED THAT LAW DOES NO T STIPULATE THE EXISTENCE OF WRITTEN CONTRACT AS A CONDITION PRECEDENT FOR DEDUCTION OF TDS. THE CONTRACT MAY BE IN WRITING OR IT MAY B E ORAL, BUT THE LIABILITY TO DEDUCT THE TAX AT SOURCE ARISES WHEN THE RECIPIENT OF THE SAID AMOUNT RECEIVES PAYMENT IN E XCESS OF RS.20,000/ - . THEREFORE, ARGUED THAT THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION S CITED SUPRA AND THE ASSESSEE IS LIABLE FOR DEDUCTION OF TDS AND THE ORDER OF THE LD.CIT(A) REQUIRED TO BE SET ASIDE AND THE ORDER OF THE AO HAS TO BE RES TORED. 7 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE 5. PER CONTRA, THE LD.AR ARGUED THAT THE MAISTRIES ARE NOT THE LABOUR CONTRACTORS AND T HEY ARE FIRST AMONG THE GROUP OF FEW PEOPLE CLAIMING TO BE THE LEADER OF THAT GROUP. THEY PROCURE THE LABOUR ALONG WITH THEM AS WHEN REQUIRED AND F OR THE SAKE O F CONVENIENCE, THE ASSESSEE MAKES THE PAYMENT S TO THE ONE OF THE MAISTRIES OR GROUP LEADER WHO IN TURN DISTRIBUTES THE PAYMENTS TO THE REST OF THE GROUP MEMBERS. DURING THE APPEAL HEARING, T HE L D.A.R HAS DEMONSTRATED THAT THE PAYMENTS MADE TO THE GROUP LEADERS OR MAISTRIES WERE DISTRIBUTED TO THE RESPECTIVE INDIVIDUAL LABOUR ERS IN PAG E NO.18 TO 31 OF THE PAPER BOOK. THE LD.AR ARGUED THAT THE MAISTRY OR GROUP LEADER ONLY PROCURES THE LABOUR AS AND WHEN REQUIRED AND THE ASSESSEE GETS THE WORK DONE UNDER THEIR SUPERVISION. THERE WAS NO IMPLIED OR EXPRESS CONTRACT FOR SUPPLY OF LABOUR BETWEEN THE ASSESSEE AND THE MAISTRY, THUS ARGUED THAT THERE IS NO CONTRACT AND THE QUESTION OF DEDUCTION OF TAX AT SOURCE DOES NOT ARISE. LD.A R D ISTINGUISHED THE C ASE LAWS RELIED UPON BY THE LD.D R STATING THAT THE FACTS OF THE CASE IN GOPAL S.RAJPUR (SUPRA) AS WELL AS SMT.J.RAMA (SUPRA) WERE ENGAGED IN TRANSPORT CONTRACTORS AND HIRING THE FLEET OF VEHICLES. IN THE TRANSPORT THE VEHICLES HIRED C ARR Y THE GO ODS FROM ONE PLACE TO ONE PLACE AND DELIVER THE SAME AT THE DESTINATION. HENCE IN HIRING VEHICLES THERE IS AN IMPLIED CONTRACT TO CARRY THE GOODS IN THE VEHICLE, HENCE ATTRACTS THE TDS U/S 194C/194I. IN THE 8 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE INSTANT CASE EXCEPT PROCURING THE LA BOUR, THE MAISTRY DOES N OT DO ANY SERVICE AND WORK WAS GOT DONE UNDER THE SUPERVISION OF THE ASSESSEE BUT NOT UNDER THE SUPERVISION OF THE MAISTRY. THEREFORE ARGUED THAT THE CASE LA WS RELIED UPON BY THE REVENUE ARE NOT APPLICABLE IN THE ASS ESSEES CASE AND DO NOT HELP THE ASSESSEE . THE LD.AR TAKEN THE SUPPORT OF THE DECISION OF THIS BENCH IN THE C A SE OF R.SUBBA RAJU VS ADDL CIT, RAJAHMUNDRY IN ITA 235/V/2008 DATED 18.11.2010 WHICH WAS FOLLOWED BY THE LD.CIT(A). THE ASSESSEE ALSO TAKEN SUPPORT OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR.COMMISSIONER OF INCOME TAX 3 VS. SWASTHIK CONSTRUCTION IN TAX APPEAL NO.82 8 OF 2017 DATED 20.12.2017 AND ARGUED THAT THE HONBLE HIGH COURT HELD THAT IN THE ABSENCE OF ANY CONTRACT BETWEEN THE ASSESSEE AND A SPECIFIED PERSON FOR CARRYING OUT ANY WORK CONTEMPLATED IN THIS SECTION, THE PROVISIONS OF TDS U/S 194C ARE NOT ATTRACTED AND NO DIS ALLOWANCE REQUIRED TO BE MADE U/ S 40(A)(IA) OF I.T.ACT. THE ASSESSEE ALSO RELIED ON THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S KARNATAKA RURAL INFRASTRUCTURE DEVELOPMENT LTD. VS. ITO IN INCOME TAX APPEAL NOS.26 - 31/2014 AND 184 - 186/2014 DATED 18.08.2014 AND ARGUED THAT THE JUDG EMENT OF HONBLE HIGH COURT SUPPORTS THE VIEW OF THE ASSESSEE FOR NON DEDUCTION OF TAX AT SOURCE. 9 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE 6. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORDS OF THE AUTHORITIES BELOW. IN THE INSTANT CASE, THE ASSESSEE IS ENGAGED IN LABOUR ORIENTED INDUSTRY WHICH REQUIRES THE LABOUR AS AND WHEN THE SHIP ARRIVES WITH IN A SHORT NOTICE OF TIME . T HE ASSESSEE IDENTIFIED SOME OF THE MAISTRIES OR GROUP LEADERS TO PROCURE THE LABOUR WH O CAN WORK AS PER THE REQUIREMENT OF THE JOB . AS STATED BY THE LD.AR, THE GROUP LEADERS ARE ONLY RESPONSIBLE FOR PROCURING THE LABOUR AND WORK WAS GOT DONE BY THE ASSESSEE UNDER THEIR PERSONAL SUPERVISION. AS A T THE END OF THE WEEK, THE PAYMENT TO THE LA BOUR WAS DISTRIBUTED THROUGH THE GROUP LEADERS WHO ARE ALSO CALLED MAISTRIES FOR THE SAKE OF CONVENIENCE INSTEAD OF MAKING THE PAYMENT INDIVIDUALLY . THERE WAS NO WRITTEN OR ORAL AGREEMENT OR CONTRACT BETWEEN THE MAISTRIES AND THE ASSESSEE FOR GETTING THE WORK DONE THROUGH THE MAISTRY OR TO SUPPLY THE LABOR. AS ARGUED BY THE LD.AR, MAISTRY IS FIRST AMONG FOUR TO FIVE PERSONS OF A GROUP OF LABOUR ERS AND FOR THE SAKE OF CONVENIENCE THE ASSESSEE HAS MADE THE PAYMENT TO THE GROU P LEADER WHO IN TURN PAID THE AMOUNT TO THE REMAINING LABOUR ERS IN THE GROUP. NEITHER THERE WAS A CONTRACT FOR SUPPLY OF LABOUR NOR THERE WAS CONTRACT FOR GETTING THE WORK DONE THROUGH LABOUR BY THE ASSESSEE WITH THE MAISTRI ES. THIS FACT WAS ESTABLISHED WITH THE RECEIPTS OBTAINE D FR O M THE MAISTRIES WHO DISTRIBUTED THE AMOUNTS TO THE RESPECTIVE LABOURERS AS PER PAGE NO. 18 TO 10 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE 31 OF THE PAPER BOOK . THE AO SIMPLY CONSIDERED THE PAYMENTS MADE TO T H E GROUP LE ADERS AND LANDED IN A PRESUMPTION THAT THERE WAS CONTRACT IN EXISTENCE FOR S UPPLY OF LABOUR BETWEEN THE MAISTRIES AND THE ASSESSE E . THE AO DID NOT EXAMINE THE MAISTRIES BEFORE COMING TO SUCH CONCLUSION . AS PER THE PROVISIONS OF SECTION 194C OF THE I.T.ACT, THERE MUST BE CONTRACT FOR DEDUCTION OF TDS INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK. IN THE INSTANT CASE, THE REVENUE HAS NOT ESTABLISHED THAT THERE WAS A CONTRACT IN EXISTENCE B ETWEEN THE ASSESSEE AND THE MAISTRIES. THE ASSESSEE RELIED ON THE DECISION OF HONBLE HIGH COURT OF GUJARAT IN THE CASE OF SWASTIK CONSTRU CTIONS (SUPRA), WHEREIN HONBLE HIGH COURT HELD THAT SECTION 194C IS ATTRACTED WHEN PAYMENT IS MADE FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE SPECIFIED PERSON. THERE HAS TO BE A RELATION OF CONTRACTOR AND CONTRACT EE BETWEEN THE ASSESSEE AND THE HEAD OF LABOURERS. MERELY HANDING OVER THE LABOUR PAYMENTS TO ONE OR TWO PERSONS ON THE SITE FOR DIS TRIBUTING THE AMOUNT AMONG THE LABOURS DOES NOT PAR TAKE THE CHARACTER OF AVAILING THE SERVICE OF THE LABOUR CONTRACTOR AND HENCE DOES NOT ATTRACT THE PROVISIONS OF TDS. SIMILARLY, THE HONBLE KARNATAKA HIGH COURT INTH E CASE OF KARNATAKA RURAL INFRASTRUCTURE DEVELOPMENT LTD., HELD THAT THE ASSESSEE CANNOT GO I N SEARCH OF EMPLOYEES AND T HE RESPONSIBILITY IS GIVEN TO A PERSON WHO BRINGS THE LABOUR FORCE 11 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE CALLED A GROUP LEADER. HE IS ALSO ONE AMONG THE WORKERS WHO IS ENGAGED IN TH E WORKS. FURTHER, KOLKATA TRIBUNAL IN THE CASE OF DILIP SHA H IN ITA NO.582/KOL/2014 DATED 5.5.2017 HELD THAT TH E ASSESSEE BEING THE LABOUR SARDARS ARE NOT SUPPLIERS OF LABOUR AND CONFIRMED THE DELETION OF ADDITION MADE BY THE AO. THE LD. CIT(A) FOLLOWED THE DECISION OF THIS B ENCH IN THE CASE OF R.SUBBA RAJU VS ADDL CIT,RAJAHMUNDRY CITED SUPRA, WHEREIN THE COORDINAT E BENCH OF THIS TRIBUNAL HELD AS UNDER : 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW, DOCUMENTS PLACED ON RECORD AND THE DETAILS OF THE DISALLOWANCE MADE U/S 40A(3) AND 40(A)(IA) OF THE ACT GIVEN IN THE ASSESSMENT ORDERS AND FROM ITS CAREFUL PERUSAL, WE FIND THAT MAJOR PAYMENTS WERE MADE UNDER THE HEAD LABOUR CHARGES. MEANING THEREBY THA THE PAYMENTS WERE MADE TO MEET THE LABOUR EXPENSES INCURRED IN CONSTRUCTION ACTIVITY. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN CONSTRUCTION ACTIVITY FOR WHICH HUGE LABOUR IS REQUIRED OT BE ENGAGED. IN SUCH TYPE OF LARGE CONSTRUCTION ACTIVITY, IT IS NOT POSSIBLE TO ARRANGE A HUGE LABOUR BY THE ASSESSEE. THE GROUP LEADERS WERE ENGAGED OT ARRANGE THE LABOURS AND SAID TE AM LEADER COLLECTS THE PAYMENTS FROM THE CONTRACTORS ON THEIR BEHALF. THE LABOUR I.E. MISTRIES OR THE BELDARS USED TO WORK AT THE SITE AT THE INSTRUCTION OF THE CONTRACTOR OR HIS AGENT. IT IS NOT A CASE THAT BY SIMPLY ENGAGING THE LABOUR THROUGH THEIR GR OUP LEADERS, THE CONTRACT IS ASSIGNED TO THEM. THEY ARE SIMPLY UTILIZED TO ACCOMPLISH THE WORK OF CONSTRUCTION. FROM THE DETAILS OF THE PAYMENTS, IT IS ALSO EVIDENT THAT THE PAYMENTS ARE NOT MADE REGULARLY. IT WAS MADE AFTER INTERVAL OF FEW DAYS. MEANI NG THEREBY, WHATEVER AMOUNT IS ACCRUED TO THE LABOURERS, IT WAS PAID THROUGH THEIR GROUP LEADERS OF WHICH VOUCHERS WERE OBTAINED BY THE ASSESSES AND PLACED ON RECORD. 10. FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE DO NOT FIND THAT R EVENUE HAS EVER DOUBTED THE GENUINENESS OF THE PAYMENT TO THE LABOURERS. THEREFORE, THE ISSUE BEFORE US IS; WHETHER SUCH TYPE OF PAYMENTS ATTRACTS THE DEDUCTION OF TDS U/S 194C OF THE ACT? NOTHING IS PLACED ON RECORD BY THE REVENUE TO ESTABLISH T H A T ASSESSEE HAS EVER SUB - LETTED OR ASSIGNED ITS CONTRACT TO THE PERSONS TO WHOM THE PAYMENTS WERE MADE. IN THE ABSENCE OF THE EVIDENCE, THE CONTENTION OF THE ASSESSEE THAT HE HAS MADE THE PAYMENT TO GROUP LEADERS OF THE LABOURERS I.E. MISTRIES OR THE BELDARS ON THEIR BEHALF AND THEY WERE WORKING AT THE INSTRUCTION OF THE CONTRACTOR I.E. ASSESSEE OR ITS AGENT 12 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE CANNOT BE OUTRIGHTLY REJECTED. THEREFORE, PROVISIONS OF SECTION 194C ARE NOT ATTRACTED. WE ACCORDINGLY DO NOT FIND OURSELVES IN AGREEMENT WITH THE OBSE RVATION OF THE CIT(A) MADE IN THIS REGARD. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIREC T THE AO TO ALLOW THE PAYMENT MADE UNDER THE HEAD LABOUR CHARGES TO THE GROUP LEADERS OF THE LABOURERS. THE ASSESSEE ALSO RELIED ON THE DECISION OF ITA T, VISAKHAPATNAM IN THE CASE OF ITO VS. BEST FEEDS IN ITA NO.282/VIZ/2013 DATED 5.2.2016, WHEREIN THE COORDINATE BENCH CONFIRMED THE ORDER OF THE LD.CIT(A) IN DELETING THE ADDITION OF 40(A )(IA) IN RESPECT OF THE PAYMENT MADE TO MAISTRIES. FOR READY REFERE NCE, WE EXTRACT PARA NO.11 OF THE TRIBUNAL ORDER WHICH READS AS UNDER : 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER DISALLOWED HAMALI CHARGES AND PRODUCTION CHARGES BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE A SSESS E E HAS MADE THE PAYMENT TO THE MESTRI FOR SUPPLY OF LABOURERS, THEREFORE, IT ATTRACTS THE PROVISIONS OF SECTION 194C OF THE ACT, THEREFORE, DISALLOWED THE AMOUNT UNDER SECTION 40(A)(IA) OF THE ACT, IT WAS THE CONTENTION OF THE ASSESSEE TH AT THE AMOUNTS PAID TOWARDS HAM ALI CHARGES AND PRODUCTION CHARGES ARE NOT COVERED UNDER SECTION 194C OF THE ACT. THE ASSESSEE FURTHER SUBM ITTED THAT THESE PAYMENTS WERE MADE TO DAILY WORKERS EMPLOYED IN THE FACTORY FOR HANDLING THE MATERIALS AND THE PAYMENTS WERE MADE ON WEEKLY/FORTNIGHTLY BASIS THE PAYMENTS WERE MADE THROUGH THE M ESTRI FOR THE SAKE OF CONVENIENCE. THEREFORE, IT CANNOT BE CONSTRUED AS WORK CONTRACT TO INVOKE THE PROVISIONS OF SECTION 194C OF THE ACT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS FURNISHED LEDGER ACCOUNT COPIES OF HAMALI CHARGES AND PRODUCTION CHARGES ALONG WITH NAME AND ADDRESS OF THE PERSONS TO WHOM THE PAYMENTS WERE MADE. ON VERIFICATION OF THE LEDGER ACCOUNTS; IT WAS NOTICED THAT THE ASSESSEE HAS MADE THE PAYMENTS ON WEEKLY BASIS TOWARDS WAGES PAYMENTS TO THE DAILY WORKERS EMPLOYED IN THE FACTORY. THE ASSESSEE MADE THE PAYMENTS THROUGH THE ME STRI, JUST BECAUSE FOR IT IS CONVENIENT AND ALSO THIS HAS TWO ADVANTAGES I.E. IT IS THE RESPONSIBILITY OF THE MESTRI TO PROVIDE LABOUR TO THE MANAGEMENT ON ONE HAND AND ON THE OTHER HAND, IT IS CONVENIENT TO THE ASSESSEE INSTEAD OF DE ALING THE WHOLE LOT, THE ASSESSE E COULD DEAL WITH A SINGLE PERSON. THIS IS A RECOGNIZED SYSTEM FOLLOWED EVERYWHERE WHERE THERE IN UNSKILLED WORK FORCE. JUST BECAUSE THE PAYMENTS ARE MADE THROUGH THE M ESTRI, THE ASSESSING OFFICER WAS NOT CORRECT IN COMING T O THE CONCLUSION THAT THERE EXIST WRITTEN OR ORAL CONTRACT FOR SUPPLY OF LABOUR WHICH ATTRACTS THE PROVISIONS OF SECTION 194C OF THE ACT. THERE IS NO 13 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE CONTRACT BETWEEN THE MESTRI AND THE ASSESSEE, AS SUCH THESE PAYMENTS ARE NOT COVERED UNDER THE PROVISIONS OF SECTION 194C OF THE ACT, THEREFORE THE ASSESSING OFFICER WAS NOT CORRECT IN DISALLOWING THE AMOUNTS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE COMMISSIONER (APPEAL) AFTER CONSIDERING THE RELEVANT DETAILS AND SUBMISSIONS OF THE ASSES SEE DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER PASSED BY THE COMMISSIONER (APPEAL). HENCE, WE INCLINED TO UPHOLD THE ORDER PASSED BY THE COMMISSIONER (APPEAL) AND DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITIONS. 6.1. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE PAYMENT IS GENUINE. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS GOT THE WORK DONE BY THE LABOURERS UNDER THEIR SUPERVISION. THE DEPARTMENT COULD NO T ESTABL ISH THAT THERE IS EXPRESS OR IMPLIED CONTRACT BETWEEN THE ASSESSEE AND MAISTRIES. THEREFORE, THE FA C TS OF THE ASSESSES CASE ARE SQUARELY COVERED BY THE DECISION S OF THIS CO O R DINATE BENCH INTH E CASE OF R SUBBARAJU AND BEST FEEDS. R ESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINA TE BENCH, WE HOLD THAT PAYMENTS MADE TO THE LABOUR THROUGH MAISTRIES CANNOT BE CONSTRUED AS A CONTRACT BETWEEN THE ASSESSEE AND MAISTRIES AND DOES NOT ATTRACT THE TDS U/S 194 C OF I.T.ACT AND CONSEQUENT LY NO DISALLOWANCE IS CALLED FOR U/S 40( I )(IA) OF I.T.ACT. 6.2. THE LD.DR RELIED ON THE DECISIONS OF J.RAMA OF HONBLE KARNATAKA HIGH COURT AND GOPAL S. RAJ OF ITAT MUMBAI GBENCH. BOTH THE CASE S ARE RELATED TO THE TRANSPORT CONTRACTORS AND THE VEHICL ES WERE HIRED BY T HE ASSESSEE FOR TRANSPORTATION OF GOODS AND THERE WAS AN IMPLIED CONTRACT FOR 14 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE CARRYING THE GOODS F ROM ONE PLACE TO ANOTHER PLACE AND HENCE THE HONBLE HIGH COURT S HA VE TAKEN THE VIEW THAT THERE WAS AN IMPLIED CONTR A CT , W HEREAS IN THE INSTANT CASE, MAISTRY IS ONLY A GROUP LEADER WHO IS ONE AMONG THE CO WORKERS . ALL THE LABOUR FORCE INCLUDING THE MAISTRY HA S TO DO THE WORK UNDER THE SUPERVISION OF THE ASSESSEE AND MAISTRY IS ONLY A FACILITATOR FOR PAYMENT S . THEREFORE, THE C A SE LAWS RELIED UPON BY THE REVENU E DOES NOT COME TO THE HELP OF THE REVENUE , THUS , THE CASE LAWS RELIED UPON BY THE REVENUE ARE DISTINGUISHABLE AND NOT APPLICABLE IN THE ASSESSES CASE. HONBLE GUJARAT HIGH COURT IN 91 TAXMAN N . COM 10 IN THE CASE OF PR.CIT - 3 VS. SWASTIK CONSTRUCTIONS RELIE D UPON BY THE ASSESSEE HELD THAT PAYMENTS MADE TO LABOUR MAISTRIES DOES NOT ATTRACT THE TDS AND CONSEQUENT LY NO DISALLOWANCE IS CALLED FOR U/S 40( I )(IA) OF I.T.ACT. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEALS OF THE REVENUE. 7. CROSS OBJECTIONS FILED BY THE ASSESSEE ARE SUPPORTING THE ORDERS OF LD.CIT(A) . SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE, NO SEPARATE ADJUDICATION IS REQUIRED AND ACCORDINGLY THE CROSS OBJECTIONS OF THE ASSESSEE STANDS ALLOWED. 15 ITA NOS.138/VIZ/2017, CO NO.48/VIZ/2017, 35 - 36/VIZ/2018 35 - 36/VIZ/2018, 33 - 34/VIZ/2018, 139/VIZ/2017, CO NO.47/VIZ/2017 A.KASIVISWANADHAM, KAKINADA AND A.K.V.LOGISTICS, KAKINADA / ANAKAPALLE 8. IN THE RESULT APPEALS OF THE REVENUE ARE DISMISSED AND CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 TH JU LY , 201 8 . S D/ - S D/ - ( . . ) ( . ) ( D.S. SUNDER SINGH ) (V. DURGA RAO) /ACCOUNTANT MEMBER / JUDICIAL MEMBER /VISAKHAPATNAM /DATED : 20 .0 7 .2018 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1 . / THE ASSESSEE - SRI A.KASIVISWANADHAM & M/S AKV LOGISTICS PVT. LTD., D.NO.16 - 26 - 1/5, SAMBAMURTHY NAGAR, VENKATESWARA NAGAR AREA, KAKINADA 2 . / THE REVENUE ACIT / DCIT , CIRCLE - 1, KAKINADA 3. THE PR. COMMISSIONER OF INCOME TAX - 2,VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME - TAX(APPEALS) - 2 , GUNTUR 5 . , , / DR, ITAT, VISAKHAPATNAM 6. / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM