M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU V. ASSISTANT COMMISSIONER OF INCOME TAX, JHUNJHUNU

ITA 1143/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7454 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 24-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA JCIT DHK
• Assessee Lawyers: MANU DHANKAR
• Keywords: Question of law; Corroborative evidences; TDS; Set aside
• Section: 143(3); 40(a)(ia); 194C; 192; 73

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA -@ ITA NO. 1143/JP/2019 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2011-12 M/S PMS CONSTRUCTION COMPANY, B-33, RIICO RESIDENTIAL COLONY, JHUNJHUNU. CUKE VS. A.C.I.T., JHUNJHUNU. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AALFP 0852 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI MANU DHANKAR (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27/01/2020 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/01/2020 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29/07/2019 OF LD. CIT(A)-3, JAIPUR FOR THE A.Y. 2011-12. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES, THE HONBLE CIT(A) HAS LEGALLY AND FACTUALLY ERRED BY MAKING AN ADDITION @ 20% ON THE LABOUR EXPENSES. THE CIT(A) TOTALLY IGNORED THE SET ASIDE ORDER PASSED BY THE ITAT, JAIPUR WHERE THE CONTRACT EXPENSES (THE LABOUR EXPENSES IS A COMPONENT OF CONTRACT EXPENSES) DISALLOWANCE WAS DELETED BY THE ITAT. 2. THE HONBLE CIT(A) HAS LEGALLY AND FACTUALLY ERRED IN IGNORING THE HISTORY OF THE CASE WHILE MAKING THE ADDITION @ 20% OF THE LABOUR EXPENSES. ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 2 3. THE ASSESSEE MAY CRAVE TO AMEND, ALTER, MODIFY OR RAISE ANY OTHER GROUND OF APPEAL. 2. DURING THE SCRUTINY ASSESSMENT PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) ON 21/03/2014, THE A.O. MADE, INTER ALIA, DISALLOWANCE OF LABOUR CHARGES OF RS. 81,45,754/- U/S 40(A)(IA) OF THE ACT FOR WANT OF TDS. THE LD. CIT(A) VIDE ITS ORDER DATED 07/01/2016 CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON FURTHER APPEAL, THIS TRIBUNAL VIDE ORDER DATED 26/10/2017 SET ASIDE THIS ISSUE TO THE RECORD OF THE LD. CIT(A) FOR DECIDING THE SAME AFRESH AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. THUS, THIS IS SECOND ROUND OR APPEAL AFTER THE LD. CIT(A) AGAIN MADE A DISALLOWANCE OF 20% OF THE LABOUR CHARGES AS AGAINST THE ENTIRE LABOUR CHARGES OF RS. 81,45,754/- MADE IN THE FIRST ROUND OF LITIGATION. 3. WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) IN THE SET ASIDE PROCEEDINGS HAVE GIVEN A FINDING THAT THE WAGES PAID BY THE ASSESSEE ARE NOT SUBJECTED TO TDS U/S 194C OF THE ACT. HOWEVER, A FURTHER DISALLOWANCE OF 20% OF THE EXPENSES WERE MADE BY THE LD. CIT(A) WHILE PASSING THE IMPUGNED ORDER WHICH IS BEYOND THE SCOPE OF SET ASIDE PROCEEDINGS AS DIRECTED BY THE TRIBUNAL. THUS, THE LD AR HAS SUBMITTED THAT THE DISALLOWANCE MADE BY THE LD. ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 3 CIT(A) IS ILLEGAL AND ARBITRARY ONCE THE PROCEEDINGS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE IN RESPECT OF PAYMENT OF WAGES. 4. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE IMPUGNED ORDER OF THE LD. CIT(A). 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AT THE OUTSET WE NOTE THAT THE A.O. HAS MADE THE DISALLOWANCE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BY HOLDING THAT THE PAYMENT MADE BY THE ASSESSEE IS UNDER A CONTRACT TO THE CONTRACT WORKERS AND THEREFORE, THE PROVISIONS OF SECTION 194C OF THE ACT ARE APPLICABLE. THE A.O. HAS, ACCORDINGLY, MADE DISALLOWANCE OF THE ENTIRE AMOUNT OF PAYMENT TOWARDS WAGES BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE MATTER WAS CARRIED TO THIS TRIBUNAL AND VIDE ORDER DATED 26/10/2017, THIS TRIBUNAL IN PARA 3.3. HAS SET ASIDE THIS ISSUE TO THE RECORD OF THE LD. CIT(A) FOR DECIDING THE SAME AFRESH AS UNDER: 3.3 WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND THAT LD. CIT(A) GIVEN A FINDING ON FACT THAT EVIDENCES WERE PRODUCED BY THE ASSESSEE DO NOT INSPIRE CONFIDENCE. WE FIND THAT THE LD. CIT(A) WAS NOT DECIDED THE ISSUE WHETHER THE TAX WAS DEDUCTIBLE AND THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WAS APPLICABLE. THEREFORE, CONSIDERING THE TOTALITY OF FACT, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF LD. CIT(A) TO DECIDE AFRESH, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 4 THUS, IT IS CLEAR THAT THE ISSUE WHICH WAS SET ASIDE TO THE RECORD OF THE LD. CIT(A) FOR DECIDING THE SAME AFRESH IS ONLY APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN RESPECT OF THE WAGES PAYMENT MADE BY THE ASSESSEE. WE FURTHER NOTE THAT IN THE FIRST ROUND OF APPEAL, THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE A.O. BY OBSERVING THAT THE EVIDENCES PRODUCED BY THE ASSESSEE IN SUPPORT OF CLAIM THAT THE PAYMENT MADE WAS TOWARDS WAGES TO THE WORKERS/LABOURERS AND IS NOT A PAYMENT MADE UNDER CONTRACT, DO NOT INSPIRE CONFIDENCE. THEREFORE, THERE WAS NO ISSUE OR ANY QUESTION EITHER BEFORE THE A.O. OR TAKEN UP BY THE LD. CIT(A) IN THE FIRST ROUND OF APPEAL REGARDING ACTUAL PAYMENT MADE BY THE ASSESSEE OR ANY LACK OF SUPPORTING EVIDENCE FOR THE CLAIM OF EXPENDITURE. THE ONLY ISSUE WHICH WAS TAKEN UP BY THE A.O. AS WELL AS BY THE LD. CIT(A) IN THE FIRST ROUND OF APPEAL IS DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT BY TREATING THE PAYMENT AS A CONTRACTUAL PAYMENT AND NOT MERELY A PAYMENT OF WAGES TO THE LABOURERS. THUS, THE ISSUE WHICH WAS SET ASIDE BY THE TRIBUNAL TO THE LD. CIT(A) IS ONLY REGARDING THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT AND NOT THE CORRECTNESS OF CLAIM OF EXPENDITURE. THE LD. CIT(A) IN THE SET ASIDE PROCEEDINGS WHILE PASSING THE IMPUGNED ORDER HAS CLEARLY HELD THAT THE PAYMENT IN QUESTION DOES NOT ATTRACT PROVISIONS OF SECTION 194C(1) OF THE ACT AND THEREFORE, NOT LIABLE FOR ANY DEDUCTION OF TAX AT SOURCE. THE RELEVANT FINDING OF THE LD. CIT(A) IN PARA 3.3. AS UNDER: ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 5 3.3 I HAVE CAREFULLY CONSIDERED THE OBSERVATION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, SUBMISSION REJOINDER FILED BY THE A'R OF THE APPELLANT AND REMAND REPORT OF THE ASSESSING OFFICER. I FIND THAT THE ASSESSING OFFICER MADE DISALLOWANCE U/S 40(A)(IA) OF THE I.T. ACT OF RS.81,45,754/- MAKING DETAIL OBSERVATION IN THE ASSESSMENT ORDER. I FIND THAT THE FIRM ENGAGED LABOUR'S ON DAILY WAGE BASIS AND A DAILY WAGE RANGING FROM RS.300 PER DAY TO RS.400 PER DAY WERE PAID. THEY WERE PAID AT FLAT RATES ON THE BASIS OF NUMBER OF DAYS. THE TOTAL WAGES FOR A PARTICULAR LABOUR FOR THE WHOLE MONTH WERE DEBITED AT MONTH END GIVEN DETAILS OF WORK DONE BY HIM ON THE BASIS OF WAGE REGISTERS MAINTAINED. THEY WERE PAID AT FLAT RATES ON THE BASIS OF NUMBER OF DAYS. THE LEDGER ACCOUNTS OF INDIVIDUAL WORKERS WERE OPENED FOR CONVENIENCE OF RECORDING THE WAGES AND IT IS IMPOSSIBLE FOR THE FIRM TO POST EVERY WAGE ENTRY OF EVERY SINGLE DAY IN THE LEDGER ACCOUNT AS IT WOULD AMOUNT TO THOUSANDS OF ENTRIES EVERY MONTH AND MONTHLY PAYMENT OF EVERY INDIVIDUAL LABOUR IS DEBITED THOUGH WAGE REGISTERS. EMPLOYEE EMPLOYER RELATION EXISTED BETWEEN THE LABOUR AND THE ASSESSEE FIRM. THE 'ALLEGED SUB -CONTRACTORS' HAS NOWHERE RAISED THE BILL TO THE ASSESSEE FIRM AND NO PAYMENTS WERE MADE ON THE BASIS OF AMOUNT OF WORK EXECUTED. THE PAYMENTS WERE MADE ON THE BASIS OF PER DAY. THE ASSESSING OFFICER HAS NOWHERE IN HIS ASSESSMENT ORDER HAS BRING ANYTHING ON RECORD THAT ESTABLISHED THAT THERE WAS NO `EMPLOYEE- EMPLOYER' RELATIONSHIP. THE WORK EXECUTED BY THE ASSESSEE FIRM WAS AWARDED BY THE PWD AND THE MUNICIPALITY, JHUNJHUNU. THE WORK ORDER OF THE WORK AWARDED HAS A CLAUSE THAT WORK WAS TO BE COMPLETED BY THE APPELLANT HIMSELF ONLY AND IN NO CASE THE SAME COULD BE SUB-CONTRACTED TO ANY ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 6 AGENCY CONTRACTOR SUB-CONTRACTOR, WITHOUT THE PRIOR APPROVAL OF THE DEPARTMENT. SO, THE VERY AWARD OF WORK HAS A PRE-CONDITION THAT IT CANNOT BE `SUB-CONTRACTED' WHOLLY OR IN PARTS TO ANY OTHER PERSON. THE AWARDER HAS NOT RAISED ANY OBJECTION REGARDING ANY POSSIBLE SUB-CONTRACT WORK AND THE ASSESSEE FIRM IS CONTINUOUSLY WORKING WITH THE PWD. THE APPELLANT FILED COPY OF THE AGREEMENTS WITH THE PWD AND CERTIFICATE ISSUED BY PWD IN ORIGINAL THAT NO SUB-CONTRACT WAS EXECUTED BY THE ASSESSEE. THE ASSESSING OFFICER HAS STATED THAT ASSESSEE FIRM HAS SUBCONTRACTED WORK TO THE LABOURORS. IT IS A FUNNY SITUATION THAT ASSESSEE ENGAGED WITH 73 SUB-CONTRACTS WITH EACH LABOUR. IF HE WOULD HAVE INTENDED TO SUB-CONTRACT, HE WOULD HAVE GIVEN IT TO SINGLE SUBCONTRACTOR. IT IS JUST IMPOSSIBLE TO IMAGINE THAT A FIRM ENGAGES WITH 73 PETTY SUB-CONTRACTORS AND MEASURE THE WORK DONE BY THEM AND MAKE PAYMENTS. IT IS JUST THE IMAGINATION OF THE ASSESSING OFFICER THAT HAS TERMED A SIMPLE 'EMPLOYEE-EMPLOYER' RELATIONSHIP AS SUB- CONTRACT. THE ASSESSING OFFICER ALSO DID NOT ANY ADVERSE FINDING IN HIS REMAND REPORT ON THE CERTIFICATE GIVEN BY THE APPELLANT THAT NO SUB CONTRACT WAS EXECUTED BY THE APPELLANT. THE A/R ALSO RELIED UPON THE FOLLOWING CASE LAWS. THE ISSUE OF TREATING THE CASUAL LABOUR EMPLOYED AS 'CONTRACT LABOURS' HAS ARISEN IN THE PAST AND HAS BEEN ADDRESSED BY VARIOUS COURTS. WE PRODUCE THE RELEVANT JUDGMENTS RELATING TO THE ISSUE FOR YOUR READY REFERENCE:- ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 7 IN THE COMPLETE IDENTICAL CASE OF ITO VS. TULSI RAM MODI (APPEAL NO. 960(JP) OF 2011) THE HONORABLE ITAT, JAIPUR BENCH, JAIPUR HAS HELD 'WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS MENTIONED ABOVE IT CLEARLY EMERGES THAT BY MAIN CONTRACT WITH PRINCIPAL NEXT RETAIL INDIA ASSESSEE WAS BARRED BY HIRING ANY SUBCONTRACTOR. WE ARE UNABLE TO SUBSCRIBE TO THE AOS VIEW THAT AS THE LABOURERS WERE ORALLY EMPLOYED OR THE SALARIES WERE DISBURSED THROUGH SENIOR WORKMAN CONSTITUTE ADVERSE FACTS TO LEAD TO A CONCLUSION THAT ASSESSEE HIRED SUBCONTRACTORS TO COMPLETE THE WORK. SIMILARLY NO ADVERSE INFERENCE CAN BE DERIVED FROM AUDITOR'S REMARK AS IT IS ONLY STATEMENT OF FACT ABOUT WAGES AND IN ANY CASE AUDITOR'S VAGUE REMARKS CANNOT BE CONSTRUED AS A CONCLUSIVE STATEMENT. THIS IS THE JOB OF AO TO PERUSE THE FACTS, CIRCUMSTANCES AND MATERIAL IN ENTIRETY AND NOT TO RESORT TO PIECE MEAL OBSERVATIONS. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) HOLDING THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TDS U/S 194C, HIS ORDER ON MERITS IS UPHELD. SINCE WE HOLD THAT THERE IS NO LIABILITY U/S 194C THERE IS NO VIOLATION OF SEC. 40(A)(IA), THERE IS NO NEED TO ADJUDICATE ABOUT THE MERYLIN SHIPPING ISSUE.' THE JURISDICTIONAL RAJASTHAN HIGH COURT IN THE CASE OF M/S RIDDHI SIDDHI INDUSTRIES (D.B. INCOME TAX APPEAL NO. 53/2015) HAS CONFIRMED THE VIEW OF CIT (APPEALS) AND HAS HELD AS UNDER:- ACCORDING TO CIT(A). SUCH LABORER HIRED BY THE ASSESSEE EMPLOYED AS CASUAL LABORERS COULD NOT BE CONSIDERED TO BE SUBCONTRACTOR AND FINALLY WAS OF THE VIEW THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS U/S 194C AND THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS NOT WARRANTED. HOWEVER, ORDER OF THE CIT APPEALS CAME TO BE FURTHER ASSAILED BY THE REVENUE BEFORE THE TRIBUNAL & ON RE-APPRECIATION OF THE EVIDENCE THE TRIBUNAL WHILE CONFIRMING THE VIEW OF CIT(APPEALS) OBSERVED THAT NO ADVERSE INFERENCE CAN BE DERIVED FROM THE AUDITORS REMARK AS IT IS ONLY THE STATEMENT OF FACT ABOUT WAGES AND IN ANY CASE AUDITORS ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 8 VAGUE REMARKS CANNOT BE CONSTRUED AS A CONCLUSIVE STATEMENT AND THIS IS THE JOB OF AO TO PURSUE THE FACTS, CIRCUMSTANCES AND MATERIAL IN ENTIRETY AND NOT TO RESORT TO PIECE MEAL OBSERVATIONS AND IN THE GIVEN FACTS & CIRCUMSTANCES OBSERVED THAT THE VIEW EXPRESSED BY CIT(APPEALS) HOLDING THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TDS U/S 194C DESERVES ACCEPTANCE AND THERE APPEARS NO VIOLATION OF SEC.40(A)(IA) OF THE ACT. AFTER HEARING COUNSEL FOR APPELLANT & TAKING NOTE OF THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT AS REGARDS APPLICABILITY OF THE PROVISIONS OF TDS U/S 194C OF THE ACT IS CONCERNED, THAT HAS BEEN EXAMINED ON FACTUAL MATRIX IN DETAIL & THE VIEW EXPRESSED BY CIT APPEALS ON APPRECIATION OF FACTS CAME TO BE CONFIRMED BY THE TRIBUNAL ON RE- APPRECIATION OF EVIDENCE & IN OUR CONSIDERED VIEW THERE APPEARS NO SUBSTANTIAL QUESTION OF LAW EMERGES FOR OUR CONSIDERATION IN THE INSTANT APPEAL. CONSEQUENTLY, THE APPEAL FAILS AND IS HEREBY DISMISSED.' IN THE CASE OF ACIT VS. KALINID AGRO BIOTECH LIMITED (ITA NO.4292/DELHI/2009) ITAT DELHI BENCH 'D' HAS HELD 'WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE, IT IS CLEAR THAT THE ASSESSING OFFICER HAS DISALLOWED THE PAYMENT ON THE PRESUMPTION THAT THE PAYMENT WAS MADE TO THE CONTRACTORS AND THE ASSESSEE HAD KEPT THE PAYMENTS BELOW RS.20,000/- DELIBERATELY IN ORDER TO CIRCUMVENT THE PROVISIONS OF SECTION 194C OF THE ACT. THE PROVISIONS OF SECTION 194C ARE APPLICABLE IN RESPECT OF A PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT REFERRED TO AS RESIDENT BEING A CONTRACTOR FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK IN PURSUANCE OF THE CONTRACT BETWEEN THE CONTRACTOR AND THE PERSON SPECIFIED IN SECTION 194C(1) OF THE ACT. THE EXPRESSION USED IS 'ANY SUM'. THEREFORE, IF THE PAYMENT HAS BEEN MADE TO A CONTRACTOR, ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 9 THE PAYER HAS TO DEDUCT TAX AT SOURCE ON EVEN AMOUNTS LESS THAN RS.20,000/-. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE PAYMENTS ON ACCOUNT OF LABOUR CHARGES WERE MADE TO CONTRACTORS. ON THE CONTRARY THE ASSESSEE HAD MADE PAYMENT TO LABOURERS DIRECTLY. THEREFORE, THE PROVISIONS OF SECTION 194C OF THE ACT ARE NOT APPLICABLE. THE ASSESSING OFFICER HAD MADE DISALLOWANCE ON AD HOC BASIS OUT OF TOTAL LABOUR CHARGES OF RS.10,14,365/-. SINCE NO MATERIAL HAS BEEN BROUGHT ON RECORD, IN OUR CONSIDERED OPINION THE ASSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION.' THE HON'BLE TRIBUNAL OF DELHI IN THE CASE OF ST. STEPHEN'S HOSPITAL VS. DCIT REPORTED IN 6 SOT 60 WHEREIN IT WAS HELD AS UNDER:- 'A CAREFUL PERUSAL OF THE SAID APPOINTMENT LETTERS SHOWED THAT OUT OF THE 18 CONSULTANT DOCTORS IN QUESTION, 11 DOCTORS WERE BEING PAID A FIXED MONTHLY AMOUNT BY THE ASSESSEE, WHEREAS THE REMAINING 7 DOCTORS WERE BEING PAID SOME FIXED SHARE OF FEES RECEIVED FROM PRIVATE PATIENTS TREATED BY THEM IN ADDITION TO THE FIXED MONTHLY PAYMENT. BARRING THAT ASPECT, THERE WAS NO MATERIAL DIFFERENCE IN THE TERMS AND CONDITIONS OF THEIR APPOINTMENT. KEEPING IN VIEW THE POSITION ARISING FROM THE TERMS OF APPOINTMENT OF CONSULTANT DOCTORS AS WELL AS THE SERVICE RULES GOVERNING THE EMPLOYEES OF THE ASSESSEE'S HOSPITAL, IT COULD REASONABLY BE CONCLUDED THAT ALL THE CONSULTANT DOCTORS WERE EMPLOYEES OF THE ASSESSEE, AND THAT EVEN IF THERE WAS A DISTINCTION BETWEEN THE TERMS OF EMPLOYMENT OF THE PERMANENT EMPLOYEES AND THOSE OF CONSULTANT DOCTORS, THE FACT WAS THAT THEY WERE THE EMPLOYEES OF THE ASSESSEE FALLING IN THE CATEGORY OF FIXED PERIOD/CONTRACT EMPLOYEE AND/OR PART-TIME EMPLOYEE. IT, THEREFORE, FOLLOWED THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONSULTANT DOCTORS WAS PURELY THAT OF EMPLOYER AND EMPLOYEE AND REMUNERATION PAID TO THEM IN TERMS OF THE SAID RELATIONSHIP WAS SALARY WHICH ATTRACTED THE PROVISIONS OF SECTION 192. THE TREATMENT GIVEN BY THE ASSESSEE AS WELL AS THE CONSULTANT DOCTORS TO THE REMUNERATION PAID IN THEIR RESPECTIVE BOOKS OF ACCOUNT WAS NOT CONCLUSIVE TO ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 10 DECIDE THE NATURE OF THE SAID REMUNERATION WHICH HAD TO BE ASCERTAINED ON THE BASIS OF RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONSULTANT DOCTORS. THERE WAS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONSULTANT DOCTORS AND, CONSEQUENTLY, REMUNERATION PAID TO THEM WAS CHARGEABLE TO TAX UNDER THE HEAD 'SALARIES'. THE SAID PAYMENTS, THUS, WERE SUBJECT TO DEDUCTION OF TAX AS PER PROVISIONS OF SECTION 192 AND NOT AS PER PROVISIONS OF SECTION 194J. THUS, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN TREATING THE ASSESSEE AS IN DEFAULT FOR SHORT DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MADE TO THE CONSULTANT DOCTORS. THE ASSESSEE'S APPEAL WAS, ACCORDINGLY, DISMISSED.' THE HONORABLE DELHI HIGH COURT HAS DIRECTLY DEALT WITH THIS POINT IN THE CASE OF CIT VS. DEWAN CHAND (2009) 173 TAXMAN WHICH HAS DIRECT BEARING ON THE FACTS OF PRESENT CASE, HOLDING THEREIN THAT WHERE THE PAYMENT WAS MADE DIRECTLY TO THE LABORS IN THE FORM OF DAILY WAGES IT WAS HELD THAT SUCH PAYMENTS WERE NOT IN THE NATURE OF PAYMENTS UNDER CONTRACT, BUT HAD CHARACTER OF WAGES. HENCE SECTION 194C IS NOT APPLICABLE IN THE CASE. THE ITAT BENCH KOLKATA IN A COMPLETE IDENTICAL CASE RATNA MUKHERJEE (ITA559/KO1/2013) HAS HELD THAT AS PER THE PROVISIONS OF SECTION 17(1) OF THE ACT SALARY INCLUDES WAGES AND THEREFORE CONCEPTUALLY THERE IS NO DIFFERENCE BETWEEN SALARY & WAGES. WAGES ARE TREATED JUST LIKE SALARY AND ARE TAXABLE ON SAME BASIS. SO, WAGES ARE COVERED UNDER SECTION 192 OF THE ACT. THEREFORE THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE ON WAGES. THE SIMILAR PROPORTION HAS BEEN LAID DOWN IN VARIOUS CASES, SOME OF WHICH ARE AS FOLLOWS:- ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 11 (III) LAXMI PROTEIN PRODUCTS PVT. LTD., ITAT AHEMDABAD, BENCH 'A', AHEMDABAD ITA NO.3244/AHD/2009 (IV) TAPAS PAUL ITAT KOLKATA, BENCH 'A', KOLKATA ITA NO.237/KOL /2014 ALL THESE CASES HAVE DIRECT BEARING TO OUR CASE AND WE SUBMIT FULL COPY OF THE ORDERS FOR YOUR KIND PERUSAL AND RECORD. THE FACTS OF THIS CASE ARE ALSO IDENTICAL AS DISCUSS ABOVE. THEREFORE CONSIDERING THE ABOVE OBSERVATION AND FOLLOWING THE ABOVE CITED DECISION 1 AM THE VIEW THAT THE PAYMENT MADE OF WAGE PAID TO LABOUR ARE NOT LIABLE TO ANY TDS DEDUCTION. THEREFORE THE PROVISION U/S 40(A)(IA) ARE NOT APPLICABLE. IN MY VIEW THE ADDITION MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 OF RS.81,45,754/- IS NOT JUSTIFIED AND NOT AS PER LAW. ON PERUSAL OF OVERALL FACTS IT IS SEEN THAT THE PAYMENT OF LABOUR CHARGES IS MADE TO THE LABOURER DIRECTLY. THE SAME IS EVIDENT FROM THE LABOURER SHEET ITSELF. FURTHER THE DOCUMENT AND ORDER OF CIT(A) PASSED ON 07.01.2016 IT IS SEEN THAT THE PAYMENT TO LABOURERS ARE NOT FULLY VERIFIABLE. THE PAYMENT IS MADE TO VARIOUS LABOURERS AFTER THREE MONTHS WHICH IS NOT PRACTICALLY POSSIBLE. IN MANY SHEETS THE SIGNATURE OF LABOURERS VARIES ON MONTH TO MONTH. CONSIDERING ALL THESE FACTS I FIND THAT IS WOULD BE REASONABLE TO DISALLOW 20% OF LABOUR EXPENSES WHICH COMES TO RS.16,29,151/-. HENCE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS RESTRICTED TO RS.16,29,151/- AND BALANCE AMOUNT OF RS.65,16,603/- IS DELETED. THIS GROUND IS PARTLY ALLOWED. ONCE THE LD. CIT(A) WAS SATISFIED THAT THE PAYMENT IN QUESTION IS NOT LIABLE FOR TDS THEN THE ISSUE WHICH WAS SET ASIDE FOR RECONSIDERATION AND ADJUDICATION STANDS OVER AND DECIDED IN FAVOUR OF THE ASSESSEE. THE FURTHER DISALLOWANCE MADE BY THE LD. CIT(A) OF 20% OF THE LABOUR EXPENSES ITA 1143/JP/2019_ M/S PMS CONSTRUCTION CO. VS ACIT 12 BY QUESTIONING THE CORRECTNESS OF THE CLAIM IS CLEARLY BEYOND THE SCOPE OF SET ASIDE PROCEEDINGS AND JURISDICTION OF THE LD. CIT(A) IN THE SET ASIDE PROCEEDINGS. ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE OF 20% OF THE LABOUR CHARGES MADE BY THE LD. CIT(A) IS UNJUSTIFIED AND ARBITRARY AND THE SAME IS DELETED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JANUARY, 2020. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27 TH JANUARY, 2020 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S PMS CONSTRUCTION COMPANY, JHUNJHUNU. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1143/JP/2019) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR