M/s. Garas Corporation, Tuticorin V. ITO, Tuticorin

CO 66/CHNY/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5708 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 10-02-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-02-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RANGARAJAN
• Assessee Lawyers: G BASKAR
• Section: 194C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D, CHENNAI BEFORE SHRI U.B.S. BEDI, J.M. & SHRI ABRAHAM P. GEORGE, A.M. I.TA. NO. 1036MDS/2010 ASSESSMENT YEAR: 2006-07 THE INCOME TAX OFFICER, WARD I (1), TUTICORIN. VS. M/S. GARAS CORPORATION, 126/6B, NEW COLONY, TUTICORIN. [PAN:AACFG1538K] C.O. NO. 66/MDS/2010 [IN I.TA. NO. 1036MDS/2010] ASSESSMENT YEAR: 2006-07 M/S. GARAS CORPORATION, 126/6B, NEW COLONY, TUTICORIN. VS. THE INCOME TAX OFFICER, WARD I (1), TUTICORIN. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.E.B. RANGARAJAN ASSESSEE BY : SHRI G. BASKAR O R D E R PER U.B.S. BEDI, J.M. THIS APPEAL OF THE DEPAR TMENT AND CO OF THE ASSESSEE ARISES FROM THE ORDER OF THE LD. CIT(A) I, MADURAI DATED 29.03.2010 RELE VANT TO THE ASSESSMENT YEAR 2006-07. 2. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FIRSTLY, THE CO FILED BY THE ASSESSEE IS MAINLY IN SUPPORT OF THE ORDER AND SECONDLY, HE HAS INSTRUCTION FROM HIS CLIENT NOT TO PRESS THE CROSS OBJECTI ON AND BY MAKING ENDORSEMENT TO THIS EFFECT ON THE BOTTO M OF FORM 36A, THE ASSESSEES COUNSEL PLEADED FOR DISMISSAL OF THE CROSS OBJECTI ON, WHICH IS HEREBY DISMISSED AS NOT PRESSED. 3. AS REGARDS, APPEAL OF THE DEPAR TMENT, THE ASSESSING OFFICER HAS CHALLENGED THE ACTION OF THE LD. CI T(A) IN DELETING THE ADDITION OF ` .20,98,911/- ITA NO. 1036/MDS/10 & CO NO. 66/MDS/10 2 MADE UNDER SECTION 40(A)(IA) ON THE GROUND THAT T HERE EXISTS NO CONTRACT BETWEEN THE KANGANEES AND THE ASSESSEE FOLLOWING THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF M/S. P.M. PATEL AND SONS AND OTHERS VS. UNION OF INDIA AND OTHERS AIR 1987 (SC) 447- 1986 LAB I.C. 1410 RELATING TO WRIT PETITION NOS. 3605 TO 3609 DATED 25.09.1985 AND ALSO BOARDS CIRCULAR NO. 487( F.NO.275/34/86 I.T.(B) DATED 08.06.1987. THE CIT(A) HAS FAILED TO NOT E THAT AS PER THE BOARDS CIRCULAR NO. 433 DATED 25.09.1985, THE PROVISIONS OF SECTION 19 4C OF THE INCOME TAX ACT,1961, WOULD APPLY IN RESPECT OF PAYME NTS MADE TO MUNSHIS AND THAT WOULD APPLY TO PAYMENTS UNDER ORAL CONTRACTS ALSO. THE PAYMENTS TO MUNSHIS WHICH WOULD BE HIT BY THE PROVISIONS OF SECTI ON 194C COVERED NOT ONLY THE PAYMENTS TO THEM FOR RAW MATERIAL BUT ALSO THE PAYMENT S TO THE WORKERS. FURTHER, CIRCULAR NO. 487 IS A CLARIFICATION OF CI RCULAR NO. 433 SUBSEQUENT TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S. P.M. PATEL AND S ONS AND OTHERS VS. UNION OF INDIA AND OTHERS, WHER EIN IT WAS CLARIFIED THAT T HE PAYMENTS TO MUNSHIS NEED NOT INCLUDED PAYMENTS TO SUCH HOME WORKERS AS FALL IN CATEGORY (B) OF PARA 2 OF THE ABOVE SAID CIRCULAR NO. 487 WH ICH IS NOT APPLICABLE TO T HE FACTS OF PRESENT CASE. FURTHER, THE LD. CIT(A) ERR ED IN DELETING THE DISALLOWANCE OF LORRY FREIGHT OF ` .52126/- MADE UNDER SECTION 40( A)(IA) ON THE GROUND THAT THE PAYMENT IS LESS THAN ` .50,000/-, WHEN HE HAS ALSO FAILED TO NOT E THAT THE ASSESSEE HAS OMITTED TO ENTER THE AMOUNT PAID ` .2139/- THROUGH TAC LTD. ON 18.10.2005 IN THE LORRY FREIGHT LEDGER ACCOUNT AND SHOW N THE LORRY FREIGHT LESS THAN ` .50,000/- AND IT IS PLEADED FOR SETTING ASIDE THE ORDER OF THE LD. CIT(A) AND RESTOR ING THAT OF THE ASSESSING OFFICER. ITA NO. 1036/MDS/10 & CO NO. 66/MDS/10 3 4. THE LD. COUNSEL FOR THE ASSESSEE, WHILE FILING THE DETAILS OF CONTRACT PAYMENTS TO SEVERAL PERSONS, HAS DEMONSTRAT ED BY PRESENTING MUSTER ROLLS OF THE LABOURERS IN ORDER TO SHOW THAT THESE KANGANEES ARE DOING THE JOB OF COLLECTING LABOURERS REQUIRED FOR DOING WORK ON PER DA Y BASIS AND THEY ALSO WORK WITH THE LABOURERS AND BEING PAID SOME AMOUNT AS BEI NG PAID TO THE LABOURERS SO THEY ARE NOT RAISING ANY PAYMENT ON BEHALF OF THE LABOURERS AND LABOURERS ARE BEING PAID DIRECTLY BY THE ASSESSEE INCLUDING KANGANEES AND THEREFORE, IT CANNOT BE SAID THAT THERE IS ANY CONTRACT IN EXISTENCE BETWEEN THE ASSESSEE AND THE KANGANEES. SO, THE LD. CIT(A) IS FULLY JU STIFIED IN DELETING THE ADDITION MADE UNDER SECTION 40(A)(IA) BY THE ASSESSING OFFICER AND SINCE THERE IS NO PRIVITY OF CONTRACT BETWEEN THE ASSESSEE AND T HE KANGANEES, THEREFORE, SE CTION 194C OF I.T. ACT WOULD NOT APPLY IN THIS CASE AND THE LD. CIT(A), WHILE CONSIDERING SUCH ASPECT AND FOLLOWING THE DECISION OF THE HONBLE SU PREME COURT AND BOARD CIRCULAR HAS REACHED A PROPER CONCLUSION TO DELETE T HE ADDITION AND OTHERWISE, THE LD. DR COULD NOT BE ABLE TO PLACE ANY CONTRARY MA TERIAL OR ANY PRECEDENTS IN FAVOUR OF THE DEPARTMENT, THEREFORE, T HE ACTION OF THE LD. CIT(A) REQUIRES TO BE CONFIRMED, WHICH MAY BE UPHELD. 5. WE HAVE HEARD BOTH THE SIDES, CONS IDERED THE MATERIAL ON RECORD, GONE THROUGH THE ORDER OF THE AUT HORITIES BELOW AS WELL AS PRECEDENTS RELIED UPON BY THE LD. CIT(A) AND BOARD CIRCULAR CITED AND APPLIED. CONSIDERIN G THE ENTIRETY OF FACTS, CIRCUMSTANCES AND MATERIAL ON RECORD, WE ARE OF THE VIEW THAT IN THIS CASE, THE ASSESSEE HAS SUCCESSFULLY DEMONSTRAT ED THAT THERE WERE NO CONTRACT IN EXISTENCE BETWEEN THE KANGANEES AND THE A SSESSEE FOR LABOURERS, WHO WORK AND ENGAGED BY THE ASSESSEE ON DAILY BASIS AND SOME AMOUNT OF CHARGES HAVE BEEN ITA NO. 1036/MDS/10 & CO NO. 66/MDS/10 4 PAID TO THE KANGANEES AND LABOURERS BY THE ASSESSEE AND THEREFORE, CONSIDERING ALL THESE ASPECTS IN THE LIGHT OF THE HONBLE SUPREME C OURTS DECISION AS WELL AS CIRCULAR ISSUED BY THE CBDT, THE LD. CIT(A) IS FULLY JUST IFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICE R UNDER SECTION 40(A)(IA), AS SUCH, WHILE CONCURRING WITH THE FINDING AND CONCLUSION AS DRAWN BY THE LD. CIT(A), WE CONFIRM HIS ACTION AND DISMISS THE APPEAL OF THE DEPARTMENT BEING DEVOID OF ANY MERITS. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT AND THE CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED SOON AFTER THE CONCLUSION OF HEARING ON 10.02.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 10.02.2011. VM/- COPY TO : APPELLANT/RES PONDENT/CIT(A)- /CIT, /DR