The ITO, Ward-8(4), Surat V. Shri Yogeshkumar Mohanbhai Patel, Surat

ITA 1000/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0004 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ ITA NO. 1000/AHD/2012 / ASSESSMENT YEAR : 2009-10 INCOME - TAX OFFICER, WARD 8 (4), SURAT VS SHRI YOGESHKUMAR MOHANBHAI PATEL, 7, DHARTI SOC., NR. SAI BABA PETROL PUMP, KATARGRAM, SURAT PAN : AIHPP 1747 Q / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI JAMES KURIAN, SR DR ASSESSEE BY : SHRI TUSHAR HEMANI, AR / DATE OF HEARING : 24/11/2016 / DATE OF PRONOUNCEMENT: 29 /11/2016 / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER:- THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, SURAT DATED 28.02.2012 FOR ASSESSMENT YEAR 2009-10. 2. THE DEPARTMENT HAS TAKEN FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,37,29,548-/MADE BY THE AO ON ACCOUNT OF DEFAULT IN OBSERVING THE PROVISION U/S 40(A)(IA) OF THE I.T. ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE DECISION OF THE LD. CIT(A) IS IN-CONTRAVENTION TO THE PROVISIONS OF SEC. 194C (EXPLANATION III OF SUBSECTION 7) R.W.S.40(A)(IA) OF THE I.T.ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER BY CONFIRMING THE ADDITION MADE ON ACCOUNT OF DEFAULT IN OBSERVING THE PROVISION U/S 40(A)(IA) OF THE I.T. ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. ITA NO. 1000/AHD/2012 ITO VS. SHRI YOGESHKUMAR MOHANBHAI PATEL AY : 2009-10 2 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF INDUSTRIAL CONSTRUCTION WORK ON LABOUR BASIS IN THE NAME AND STYLE OF M/S. YOGESH ENTERPRISE. IT WAS OBSERVED THAT THE ASSESSEE HAS MADE LABOUR PAYMENT OF RS.1,60,52,918/- DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO FURNISH PARTY/CONTRACTOR- WISE DETAILS TO WHOM THE ABOVE LABOUR EXPENSES OF RS.1,60,52,918/- WAS PAID, AND ALSO THE DUE TDS WAS MADE AND DEPOSITED TO THE CENTRAL GOVT. ACCOUNT, THEREON. THE RELEVANT DETAILS WERE FILED BEFORE THE AO AND ON GOING THROUGH THE SAME, THE AO OBSERVED THAT THE ASSESSEE HAS MADE TOTAL LABOUR PAYMENT OF RS.1,60,52,918/- AND OUT OF THIS, LABOUR PAYMENT OF RS.1,37,29,548/- WAS MADE UPTO THE MONTH OF FEBRUARY, 2009 ON WHICH NEITHER TDS WAS DEDUCTED BEFORE MARCH, 2009 NOW DEPOSITED THE SAME BEFORE 31ST MARCH, 2009. HENCE, THE A.O. HAS DISALLOWED RS.1,37,29,548/- (TOTAL LABOUR CHARGES PAID) AS TDS WAS NOT DEDUCTED U/S 194C(2) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF LABOUR PAYMENT, BY HOLDING AS UNDER:- 6. I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE A.O. ACTION OF DISALLOWING THE LABOUR PAYMENT CANNOT BE APPROVED DUE TO THE FOLLOWING REASONS: I. FOR THE A.Y. IN CONSIDERATION THE PROVISIONS OF SEC. 194C(2) OF THE ACT CASTED THE RESPONSIBILITY ON THE CONTRACTOR TO DEDUCT THE TDS ON ANY PAYMENT MADE TO ANY SUB-CONTRACTOR. THERE ARE NO PROVISIONS IN THE RELEVANT SECTION WHICH CAST RESPONSIBILITY ON THE SUB-CONTRACTOR TO DEDUCT TDS ON ANY PAYMENT MADE TO ANY PERSON TO WHOM THE SUB-CONTRACTOR HAS SUBCONTRACTED HIS WORK. IN THIS CASE, THE APPELLANT IS A SUB-CONTRACTOR AND IT WAS NOT REQUIRED TO DEDUCT TDS ON PAYMENTS TO SUB-CONTRACTOR. THE ORDER PASSED BY THE A.O. CANNOT BE HELD TO BE A SPEAKING ORDER BECAUSE HE HAS NOT COMMENTED ANYTHING UPON THE SUBMISSIONS MADE BY THE APPELLANT DURING THE ITA NO. 1000/AHD/2012 ITO VS. SHRI YOGESHKUMAR MOHANBHAI PATEL AY : 2009-10 3 ASSESSMENT PROCEEDINGS ESPECIALLY ABOUT THE APPLICABILITY OF PROVISIONS OF SECTION 194C (2). SO FAR AS OWN LABOUR PAYMENT IS CONCERNED, THE PROVISIONS OF SEC. 194C CANNOT BE INVOKED AT ALL BECAUSE SUCH PAYMENT CAN NEVER BE IMAGINED AS PAYMENT OUT OF CONTRACTUAL OBLIGATIONS. II. THERE IS A FORCE IN SUBMISSIONS OF THE APPELLANT THAT DIRECT EXPENSES LIKE LABOUR CHARGES ARE COVERED BY PROVISION OF SEC. 28(I) NOT BY PROVISIONS OF SEC. 40(A)(IA). THIS VIEW HAS BEEN CONFIRMED IN THE CASE OF K. SHRINIVAS NAIDU VS ACIT 131 TTJ 17 HYD. BENCH. IN VIEW OF THE ABOVE POSITION OF LAW AND FACTS THE ADDITION ON ACCOUNT OF DISALLOWANCE OF LABOUR PAYMENT IS HEREBY DELETED AND THE GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE AFORESAID ORDER OF THE LD. CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. SO FAR AS THE APPLICABILITY OF TDS PROVISION IS CONCERNED, WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2007-08 IN ITA NO.1447/AHD/2011, WHEREIN IT HAS BEEN HELD THAT SINCE THE ASSESSEE HAS MADE LABOUR PAYMENTS AS A SUB- CONTRACTOR, TDS PROVISIONS ARE NOT APPLICABLE AND THEREFORE, NO DISALLOWANCE IS CALLED FOR U/S 40(A)(IA) OF THE ACT. THE RELEVANT OBSERVATIONS OF THE CO-ORDINATE BENCH ARE AS UNDER:- 4.1. WE FIND THAT THE AO IN PARA-5.3 OF HIS ORDER HAS OBSERVED THAT THE ASSESSEE WAS AWARDED THE CONTRACT FORM VARIOUS COMPANIES AND THE ASSESSEE DEBITED LABOUR CHARGES OF RS.1,68,07,463/-. AS PER THE PROVISIONS OF SECTION 194C(2) OF THE I.T. ACT, THE ASSESSEE HAD TO DEDUCT TAX AT SOURCE EQUAL TO @1% OF SUCH SUM AS PAID TO THE LABOUR CONTRACTORS FOR CARRYING OUT THE WORK. THE ASSESSEE AS PER ORDER-SHEET ENTRY DATED 03/12/2009, SUBMITTED THAT HE DID NOT FILE THE TDS RETURN AND THEREBY INFERRING THAT HE HAD FAILED TO DEDUCT THE TAX AT SOURCE ON THE LABOUR PAYMENTS OF RS.1,68,07,463/-. HOWEVER, THE CONTENTION OF THE ASSESSEE WAS THAT ASSESSEE BEING NOT A CONTRACTOR, THEREFORE THE PROVISIONS OF SECTION 194C(2) OF THE ACT WAS NOT APPLICABLE. THE ASSESSEE ITA NO. 1000/AHD/2012 ITO VS. SHRI YOGESHKUMAR MOHANBHAI PATEL AY : 2009-10 4 ALSO PLACED RELIANCE ON THE JUDGEMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. PRASHANT H.SHAH. THE HONBLE GUJARAT HIGH COURT IN THE SAID CASE HELD THAT FOR APPLICATION OF SECTION 194C(2) OF THE ACT WHAT WAS NECESSARY WAS A RELATIONSHIP BETWEEN THE CONTRACTOR AND SUB- CONTRACTOR AND NOT MERELY BE HIRING OF AN AGENCY BY THE CONTRACTOR DURING THE COURSE OF EXECUTION OF THE WORK. IN THE PRESENT CASE, SUCH VITAL REQUIREMENT OF RELATIONSHIP OF A CONTRACTOR AND SUB-CONTRACTOR BETWEEN THE ASSESSEE AND THE TRANSPORTERS WAS MISSING. THE HONBLE HIGH COURT FURTHER HELD THAT THEREFORE THE TRIBUNAL WAS PERFECTLY JUSTIFIED IN HOLDING THAT LIABILITY TO DEDUCT TAX AT SOURCE IN THE PRESENT CASE DO NOT ARISE. IN THE CASE IN HAND, THE UNDISPUTED FACT IS THAT THE CASE OF THE ASSESSEE IS NOT A CONTRACTOR BUT A SUB-CONTRACTOR. BEFORE THE AO, THE ASSESSEE DEMONSTRATED BY SUBMITTING THAT GRASIM INDUSTRIES LTD. WAS THE CONTRACTEE AND SIMPLEX INFRASTRUCTURE LTD. WAS A CONTRACTOR. THE ASSESSEE WAS A SUB-CONTRACTOR OF SIMPLEX INFRASTRUCTURE LTD. SIMILARLY, TORRENT POWER GENERATION LTD. WAS A CONTRACTEE AND SHAPOORJI PALOJI & CO.LTD. WAS A CONTRACTOR AND THE YOGESH ENTERPRISES WAS A SUB-CONTRACTOR. THE SUBMISSION OF THE ASSESSEE IS THAT HE MADE PAYMENTS AS SUB-CONTRACTOR TOWARDS LABOUR EXPENSES, THEREFORE HE WAS NOT REQUIRED TO DEDUCT THE TAX AT SOURCE. THE LD.CIT(A) HAS RECORDED THE FACT THAT OUT OF PAYMENT OF RS.1,68,07,463/-, THE ASSESSEE HAD MADE PAYMENT TO OUTSIDE PARTIES A SUM OF RS.1,44,16,556/- AND LABOUR CHARGES TO ITS OWN LABOURERS A SUM OF RS.23,93,907/-. THEREFORE, THE DISPUTE IS WITH REGARD TO THE PAYMENTS MADE TOWARDS LABOUR CHARGES WHETHER THE ASSESSEE WAS REQUIRED TO DEDUCT THE TAX AT SOURCE OR NOT. AS PER SECTION 194-C(2) OF THE ACT, THE CONTRACTOR IS REQUIRED TO DEDUCT THE TAX ON THE PAYMENT MADE TO THE SUB-CONTRACTOR. IN THE CASE IN HAND, THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS MADE THE PAYMENTS TOWARDS LABOUR CHARGES AS A SUB-CONTRACTOR. MOREOVER, THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD SUGGESTING THAT PAYMENTS DEBITED AS LABOUR EXPENSES WERE MADE AS PER SUBSISTING CONTRACT BETWEEN THE ASSESSEE AND LABOUR CONTRACTORS. IN THE ABSENCE OF SUCH MATERIAL, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND RAISED IN THE REVENUES APPEAL IS REJECTED. 6.1 IN ANY CASE, THE ASSESSEE HAD SUBSEQUENTLY MADE TDS OF RS.1,62,618/- ON SUCH LABOUR PAYMENTS AND DEPOSITED THE SAME TO THE GOVT. ACCOUNT PRIOR TO THE DATE OF FILING OF RETURN OF INCOME U/S 139(1) OF THE ACT. IT IS ALSO SETTLED LAW THAT WHEN TDS HAS BEEN DEPOSITED PRIOR TO THE DUE DATE OF FILING RETURN OF INCOME, NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) IN RESPECT OF CONCERNED PAYMENTS SINCE AMENDMENT MADE IN SECTION 40(A)(IA) BY FINANCE ACT, 2010 HAS BEEN HELD TO BE CURATIVE AND THAT THE SAME HAS RETROSPECTIVE ITA NO. 1000/AHD/2012 ITO VS. SHRI YOGESHKUMAR MOHANBHAI PATEL AY : 2009-10 5 EFFECT FROM 01.04.2005 AS HELD BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. OMPRAKASH CHAUDHARY, REPORTED IN (2015) 57 TAXMANN.COM 38 (GUJ.). IN THE LIGHT OF ABOVE DISCUSSION AND IN VIEW OF THE DECISION OF ITAT IN ASSESSEES OWN CASE (SUPRA) AND THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF OMPRAKASH CHAUDHARY (SUPRA), WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHICH IS UPHELD AND THE REVENUES APPEAL IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 29 NOVEMBER, 2016 AT AHMEDABAD. SD/- SD/- SD/- SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER (MAHAVIR PRASAD) JUDICIAL MEMBER AHMEDABAD; TRUE COPY PRITI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-V 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD