Srinivasa Constructions Ltd., Hyderabad V. ACIT, Hyderabad

ITA 1079/HYD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59304 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 14-11-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Section: 133A; 194C; 201(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS.1078 & 1079//HYD/2011 ASSTT. YEARS: 2003-04 & 2004-05 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. TAN:HYDS02528B VS A CIT, CIR - 3(2), HYDERABAD. / APPELLANT RESPONDENT APPELLANT BY : SRI A. SRINIVAS RESPONDENT BY : SRI K. VISWANATHAM DATE OF HEARING : 16-02-2012. DATE OF PRONOUNCEMENT : 29-02-2012. ORDER PER CHANDRA POOJARI, A.M. THESE APPEALS PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS PASSED BY THE CIT (A)-II, HYDERABAD BOTH DATED 17-9-2007 AND THEY PERTAIN TO THE ASSESSMENT YEARS 2003-04 AND 2004-05. THE ASSESSEE RAISED COMMON GROUNDS OF APPEALS FOR THESE TWO ASSESSMENT YEARS. HENCE, THESE ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE RAISED THE GROUND WITH REGARD TO CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFICE R TREATING THE ASSESSEE AT DEFAULT UNDER SECTIONS 201 (1) AND 201 (1A) OF THE ACT READ WITH SECTION 154 OF TH E ACT. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPA NY IS ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 2 ENGAGED IN THE BUSINESS OF CIVIL CONTRACT WORKS. A SURVEY UNDER SECTION 133A WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 17-2-2004. SUBSEQUENT TO THE SURVEY, NECESSARY ENQUIRIES AND INVESTIGATION WAS CONDUCTED BY THE TDS AUTHORITY AND THE ASSESSEE WAS FOUND TO BE A DEFAULTER IN RESPECT OF PAYMENT OF INTEREST ATTRACT ING THE PROVISIONS OF SECTION 194A OF THE ACT, PAYMENT TO S UB CONTRACTORS AND LABOUR PAYMENTS ATTRACTING THE PROV ISIONS OF SECTION 194C OF THE ACT AND PAYMENT OF PROFESSIO NAL AND CONSULTANCY CHARGES ATTRACTING THE PROVISIONS O F SECTION 194J. ACCORDINGLY, THE ASSESSING OFFICER COMPUTED SHORT DEDUCTION UNDER SECTION 201(1) AND INTEREST UNDER SECTION 201 (1A) AS UNDER:- NATURE OF PAYMENT DEFAULT DEMAND INTE REST U/S 2 01(1) U/S 201(1A) INTEREST 194A NIL RS.1,41,006 CONSULTANCY 194J RS.3,800 RS. 4,300 CHARGES SUB-CONTRACT & LABOUR CHARGES 194C RS.7,90,887 RS. 3,29,943 THUS, A TOTAL DEMAND FOR SHORT DEDUCTION UNDER SECT ION 201(1) AMOUNTING TO RS.7,94,687/- AND CONSEQUENTIAL INTEREST U/S 201(1A) OF RS.4,75,249/- WAS RAISED. SUBSEQUENTLY, THE SAID ORDER HAS BEEN RECTIFIED BY THE ASSESSING OFFICER VIDE ORDER UNDER SECTION 154 OF T HE ACT DATED 16-12-2005 WHEREIN, THE SHORT DEDUCTION UNDER SECTION 201(1) AND 201(1A) WAS WORKED OUT ONLY FOR THE DEFAULT UNDER SECTION 194C ON ACCOUNT OF PAYMENT UN DER LABOUR CHARGES AND A FINAL DEMAND OF RS.9,88,229/- HAD BEEN RAISED COMPRISING OF SHORT DEDUCTION UNDER SEC TION 201(1) AMOUNTING TO RS.7,53,625/- AND INTEREST UNDE R ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 3 SECTION 201(1A) AMOUNTING TO RS.2,34,604/-. AGGRIEV ED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). 3. SIMILARLY, FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER COMPUTED SHORT DEDUCTION UNDER SE CTION 201(1) AND INTEREST UNDER SECTION 201 (1A) AS UNDER :- NATURE OF PAYMENT DEFAULT DEMAND INTE REST U/S 2 01(1) U/S 201(1A) CONSULTANCY CHARGES 194J RS.7,125 R S.5,430 SUB-CONTRACT &LABOUR CHARGES 194C RS.20,68,755 RS. 6 ,60,145 & LABOUR CHARGES THUS, A TOTAL DEMAND FOR SHORT DEDUCTION UNDER SECT ION 201(1) AMOUNTING TO RS.20,75,880/- AND CONSEQUENTIA L INTEREST U/S 201(1A) OF RS.6,65,575/- WAS RAISED. SUBSEQUENTLY, THE SAID ORDER HAS BEEN RECTIFIED BY THE ASSESSING OFFICER VIDE ORDER UNDER SECTION 154 OF T HE ACT DATED 16-12-2005 WHEREIN, THE SHORT DEDUCTION UNDER SECTION 201(1) AND 201(1A) WAS WORKED OUT AFTER VERIFICATION OF THE TAX PAID BY THE ASSESSEE. ACCOR DINGLY, THE ASSESSING OFFICER WORKED OUT A TOTAL DEMAND OF RS,26,91,845/- COMPRISING OF SHORT DEDUCTION UNDER SECTION 201(1) AMOUNTING TO RS.20,75,880/- AND INTE REST UNDER SECTION 201(1A) AMOUNTING TO RS.6,15,965/-. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OFFIC ER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPE AL, THE CIT (A) CONFIRMED THE ORDERS OF THE ASSESSMENT OFFICER FOR THE YEARS UNDER CONSIDERATION. FURTHER AGGRIEV ED, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE O RDER OF THE TRIBUNAL DATED 21-3-2011 PASSED IN ITA NOS. 11 98 AND 1199/HYD/2007 IN THE CASE OF SRINIVASA CIVIL WO RKS PVT. LIMITED PERTAINING TO THE ASSESSMENT YEARS 200 3-04 AND 2004-05 WHEREIN THE TRIBUNAL HELD IN PARAGRAPH S 8,9 AND 10 AS FOLLOWS:- 8. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. TH E SECTION 194C READS AS FOLLOWS: 9. TO SETTLE THE CONTROVERSY INVOLVED HEREIN, IT IS NECESSARY TO KNOW ABOUT THE PROVISIONS OF SECTION 194C OF THE IT ACT. PAYMENTS MADE TO CONTRACTORS AN D SUB CONTRACTORS: (1) ANY PERSON RESPONSIBLE FOR PAY ING ANY SUM TO ANY RESIDENT (HEREINAFTER IN THIS SECTIO N REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A) THE CENTRAL GOVT. OR ANY STATE GOVT. B) ANY LOCAL AUTHORITY; OR C) ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRA L, STATE OR PROVINCIAL ACT, OR D) ANY COMPANY OR E) ANY COOPERATIVE SOCIETY; OR F) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER ANY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYI NG THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNIN G, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, OR FO R BOTH; OR G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860(21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA ; OR H) ANY TRUST; OR ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 5 I) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UNDER CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY U/S 3 OF THE UGC, 1956 (3 OF 1956) OR J) ANY FIRM OR (K) ANY INDIVIDUAL OR AN HUF, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CL.(A) O R CL.(B) OF S.44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO BE ACCOUNT OF THE CONTRACTOR; SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCO UNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO I) ONE PERCENT IN CASE OF ADVERTISING II) ANY OTHER CASE TWO PERCENT, OF SUCH SUM AS INCO ME TAX ON INCOME COMPRISED THEREIN. 10. THE HONBLE SUPREME COURT IN THE CASE OF BIRLA CEMENT WORKS VS. CBDT (2001) 248 ITR 216 (SC) HAS LAID DOWN THE CONDITIONS PRECEDENT FOR ATTRACTING T HE PROVISIONS OF SECTION 194C OF THE ACT VIZ., (1) THE RE MUST BE A CONTRACT BETWEEN THE PERSON RESPONSIBLE FOR MAKING PAYMENT TO CONTRACTOR (2) THE CONTRACT MUST BE FOR CARRYING OUT OF ANY WORK, (3) THE WORK IS TO BE CARRIED THROUGH THE CONTRACTOR (4) THE CONSIDERATIO N FOR THE CONTRACT SHOULD EXCEED RS.10,000/ (20,000)- I.E . THE AMOUNT FIXED BY SUB. SEC. 194C AND (5) THAT THE PAYMENT IS MADE TO THE CONTRACTOR FOR THE WORK CARR IED OUT BY HIM. IN THE PRESENT CASE, THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE MAISTRY CREATED THROUG H THE AGREEMENT. THE AGREEMENT NEED NOT BE IN WRITING . THE ASSESSEE PAID THE MONEY TO THE MAISTRY FOR SUPP LY OF LABOUR FOR CARRYING ANY WORK WHICH IS POPULARLY KNOWN AS LABOUR CONTRACT, THERE IS LEGAL OBLIGATION ON THE ASSESSEE TO DEDUCT TAX AT THE SPECIFIED RATE AN D DEPOSIT THE SAME WITH THE GOVT. IT IS PERSISTENT TO NOTE THAT IN SECTION 194C THE LEGISLATURE IS UNAMBIGUOUS TERMS MADE IT CLEAR THAT THE PAYEE OR RECIPIENT SHO ULD BE CONTRACTOR OR SUB CONTRACTOR. IN THE PRESENT CASE, ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 6 BECAUSE OF AN AGREEMENT BETWEEN THE ASSESSEE AND THE MAISTRY THE PAYMENT WAS MADE FOR SUPPLY OF LABOUR FOR CARRYING OUT THE WORK FOR THE BENEFIT OF THE ASSESSEE. THUS, THE ASSESSEE CANNOT SHIRK FROM ITS LIABILITY OF DEDUCTION OF TAX. FURTHER, THE WORD CONTRACTOR FOR THE PURPOSE OF THESE PROVISIONS WO ULD BE ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CENTRAL OR ANY STATE GOVT OR ANY LOCAL AUTHORITY, A NY CORPORATION ESTABLISHED B OR UNDER A CENTRAL, STATE PROVINCIAL ACT, ANY COMPANY OR ANY COOPERATIVE SOCI ETY FOR CARRYING ON ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK AND A SUBCONTRACTOR WOULD MEAN ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CONTRACTOR FOR CARRYING OUT, OR FOR THE SUPPLY OF L ABOUR FOR CARRYING OUT, THE WHOLE OR THE PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR UNDER A CONTRACT WITH ANY OF THE AUTHORITIES NAMED ABOVE OF FOR SUPPLY WHETHER WHOLLY OR PARTLY AND LABOUR WHICH THE CONTR ACT HAS UNDERTAKEN TO SUPPLY IN TERMS OF HIS CONTRACT W ITH ANY OF THE AFORESAID AUTHORITIES. WE FIND, IN THE P RESENT CASE, THE CONTROVERSY IS REGARDING THE PAYMENTS MAD E FOR DISBURSEMENT OF LABOUR CHARGES TO MAISTRIES. TH E MAIN CONTENTION LF THE ASSESSEES COUNSEL IS THAT T HERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE MAISTRI ES AND IT CANNOT BE SAID TO BE LABOUR CONTRACTORS WITH IN THE MEANING OF THE PROVISIONS OF SECTION 194C . ACCORDING TO HIM, THERE IS NO REQUIREMENT IN LAW TO DEDUCT TAX AT SOURCE BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 194C OF THE ACT AND HE PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE O F SAMANWAYA VS. ACIT (34 SOT 332 (KOL. ) ON THE OTHER HAND, THE DR PLACED RELIANCE ON THE JUDGEMENT OF UTTARANCHAL HIGH COURT IN THE CASE OF KUMAON MANDAL VIKAS NIGAM LTD. VS. ITO (290 ITR 538). IN OUR OPINION, WHEN THE MOBILISATION OF LABO UR IS ASSIGNED TO THE LABOUR CONTRACTOR, THERE IS AN AGREEMENT BETWEEN THE ASSESSEE AND THE MAISTRY AND FOR WHICH THE ASSESSEE HAS PAID CHARGES. THIS FACT IS EMANATED FROM THE ORDER OF THE ASSESSING OFFICER AN D THE ASSESSEE COULD NOT BRING OUT ANY CONCRETE EVIDENCE/MATERIAL TO SUGGEST THAT THERE IS NO CONTR ACT BETWEEN THE ASSESSEE AND THE MAISTRIES. IN SUCH CIRCUMSTANCES, IT IS NATURAL TO COME TO THE CONCLUS ION THAT THE PAYMENTS WAS MADE FOR SUPPLY OF LABOUR FOR CARRYING OUT THE WORK OF THE ASSESSEE. WHERE ANY WO RK IS CARRIED OUT BY SUPPLYING THE MANPOWER, THE PROVISIONS OF SECTION 194C IS ATTRACTED. IN THE PRE SENT ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 7 CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT THE PAYMENT IS NOT RELATED TO THE SUPPLY OF LABOURS. NOTHING HAS BEEN BROUGHT ON RECORD TO THE EFFECT TH AT MANPOWER WAS NOT PROVIDED BY THE MAISTRIES HIMSELF. IN VIEW OF THIS MATTER, IN OUR OPINION, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER. THIS GROUND OF THE ASSESSEE IN BOTH THE APPEALS IS DISMISSED. 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSING OFF ICER AND THE CIT FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS NOT ENGAGED ANY LABOUR CONTRACTOR AND ALL THE PAYMENTS MADE TOWARDS LABOURERS WHO ARE EMPLOYED B Y THE ASSESSEE DIRECTLY AND AS SUCH THE PROVISIONS OF SECTION 194C DO NOT APPLY. THE ASSESSING OFFICER AND THE FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE DIFFER ENCE BETWEEN THE RELATIONSHIP OF CONTRACTOR-CONTRACTEE A ND EMPLOYER- EMPLOYEE AND THE FACT THAT LABOURERS ARE EMPLOYED BY THE ASSESSEE ITSELF HAS BEEN RECORDED B Y THE ASSESSING OFFICER HIMSELF IN THE STATEMENT TAKEN ON OATH FROM THE MANAGING DIRECTOR IN THE COURSE OF ASSESSM ENT PROCEEDINGS WHEREIN THE MANAGING DIRECTOR CATEGORIC ALLY STATED THAT THE MASTERIES ARE ALSO EMPLOYEES AND HE AD A GROUP OF LABOURERS AND THAT EACH OF THE MASTRI IS I N CHARGE OF THE GROUP. IT IS FURTHER SUBMITTED THAT THE FIRST APPELLATE AUTHORITY WHILE ACCEPTING THE FACT THAT T HE MASTERIES ARE EMPLOYEES, ERRED IN HOLDING THEM AS CONTRACTORS. ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 8 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN GRIEVANCE OF THE ASSESSEE IS THAT THE ASSESSEE MADE THE PAYMENTS TO EACH LABOURER INDIVIDUALLY NOT TO MASTR I AND IT IS ACCOUNTED FOR THE SAID PAYMENTS IN ITS CASH B OOK. AS THE INDIVIDUAL PAYMENT DOES NOT EXIST THE PRESCRIBE D LIMIT UNDER SECTION 194C OF THE ACT, THE ORDER OF THE TRI BUNAL IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. T HE ASSESSING OFFICER HELD THAT IT IS NOT POSSIBLE TO T HE ASSESSEE-COMPANY TO MOBILISE SUCH HUGE NUMBER OF LABOURERS OR CONTROL THEM AT ONE PLACE AS LABOUR TU RNOVER IN SUCH PROJECTS IS VERY HIGH. ACCORDING TO THE AS SESSING OFFICER, THE ASSESSEE COULD NOT HAVE MADE THE PAYME NT TO EACH INDIVIDUAL LABOUR WHO IS ITS EMPLOYEE AND INST EAD OF PAYING THEM DIRECTLY, THE AMOUNTS WERE PAID TO THE MIDDLEMEN. AFTER CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE ASSESSING OFFICER IS REQUIRED TO EXAMINE THE ASSESS EES CASH BOOK AND FIND OUT WHETHER THE ASSESSEE HAS DIR ECTLY PAID THE AMOUNTS TO THE INDIVIDUAL LABOURERS OR THE SAME WAS PAID THROUGH THE MASTRI. IF THE ASSESSEE PAID THE SAID PAYMENTS TO THE INDIVIDUAL LABOUR, THEN THE AS SESSEE IS NOT LIABLE TO DEDUCT TDS UNDER SECTION 194C OF T HE ACT, OTHERWISE THE ASSESSEE IS LIABLE TO DEDUCT TDS U/S 194C OF THE ACT. IN VIEW OF THE ABOVE, WE SET ASIDE THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER T O DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECISION OF THE TRIBUNAL MENTIONED SUPRA IN ITA NOS. 1198 & 1199/HYD/2007 FO R ASSESSMENT YEARS 2003-04 AND 2004-05 AND OUR ABOVE OBSERVATIONS. ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 9 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE COURT ON 29-02-2012 . SD/- SD/- (ASHA VIJAYA RAGHAVAN) (CHANDRA POOJ ARI) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED:29-02-2012. COPY FORWARDED TO: 1. M/S. RAMU & RAVI, CAS, 814, 8 TH FLOOR, RAGHAVARATNA TOWERS, CHIRAG ALI LANE, ABIDS, HYDERABAD.. 2. ITO, WARD- 15(2), HYDERABAD. 3. THE CIT (A)-II, HYDERABAD 4. THE CIT CONCERNED, HYDERABAD. 5. THE DR, ITAT, HYDERABAD JMR* ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 10 ITA NOS.1078 &1079/H/2011 SRINIVASA CONSTRUCTIONS LTD., HYDERABAD. =============================== 11