DCIT, Circle - 33, Kolkata, Kolkata V. M/s. S.S. Construction, Kolkata

ITA 1199/KOL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5583 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 11-06-2010
• Court: TRIBUNAL
• Department Lawyers: PIYUSH KOLHE
• Assessee Lawyers: MONOJ DUTT
• Section: 194C

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () BEFORE . . . . . . . . , , , , , !'# !'# !'# !'# /AND . .. . . .. .' '' ' , $ ) [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C . D. RAO, AM] #% #% #% #% / I.T.A NO. 1199 /KOL/2010 &' '() &' '() &' '() &' '()/ // / ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, -VS- M/S. S. S . CONSTRUCTION CIRCLE-33, KOLKATA. (PA NO. AAKFS 4328 P) (+, / APPELLANT ) (-+,/ RESPONDENT ) FOR THE APPELLANT : SRI PIYUSH KOLHE FOR THE RESPONDENT SRI MONOJ DUTT . / ORDER PER D. K. TYAGI, JM ( . . . . . . . . , , , , ) THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CI T(A), KOLKATA DATED 31.03.2010 FOR ASSESSMENT YEAR 2007-08 ON THE SOLE GROUND OF DELETING THE ADDITION U/S. 40A(IA) OF THE I. T. ACT. 2. BRIEFLY STATED FACTS OF THE CASE AS OBSERVED BY THE ASSESSING OFFICER ARE THAT THE ASSESSEE IS A WORKS CONTRACTOR WITH THE PWD. THE R ETURN WAS FILED ON 30.10.2007 SHOWING TOTAL INCOME OF RS.4,76,400/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS P AID LABOUR CHARGES, AMOUNTING TO RS.20,52,377/-, TO CERTAIN PERSONS, WITHOUT DEDUCTI NG TAX AT SOURCE. IT WAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT THERE WAS NO CONT RACT BETWEEN THE ASSESSEE AND THE ABOVE PERSONS AND SO, THERE WAS NO APPLICATION OF S ECTION 194C. THE ASSESSING OFFICER NOTED THAT THE PROVISIONS OF SECTION 194C ARE WIDE ENOUGH TO COVER ORAL CONTRACTS ALSO. SECONDLY, IT WAS ALSO EXPLAINED BEFORE THE ASSESSIN G OFFICER THAT THE ABOVE PAYMENTS INCLUDE THOSE OF RS.1,05,600/-, MADE TO MANOJ PANEL S FOR SUPPLY AND INSTALLATION OF ELECTRICAL PANELS. SINCE THE COST OF MATERIALS AND THE LABOUR COMPONENT THERE CANNOT BE DISTINGUISHED, THE WHOLE AMOUNT HAS BEEN INCLUDED U NDER THE HEAD LABOUR CHARGES TO AVOID STATUTORY COMPLICATIONS. HOWEVER, THE ASSESS EE WAS NOT LIABLE TO DEDUCT TAX IN VIEW OF CLAUSE (VI)(B) OF THE CBDT CIRCULAR NO. 723 DATED 19.09.1995. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATIONS AND THEN, D ISALLOWED THE PAYMENTS OF RS.20,52,377/- BY INVOKING THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE I. T. ACT. IN APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF TH E ITAT, KOLKATA BENCHES IN THE CASE 2 OF M/S. SAMANWAYA VS. ACIT (2009) 34 SOT 332 DELETE D THE ADDITION OF RS.19,46,777/- MADE U/S. 40(A)(IA) OF THE I. T. ACT . AGGRIEVED BY THE SAID ORDER, NOW THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFORE THE FIRST APPELLATE AUTHORITY FURTHER SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE KOLKATA, ITAT IN THE CASE OF M/S. SAMANWAYA VS. ACIT REPORTE D IN (2009) 34 SOT 332. HE ALSO SUBMITTED THAT THE LD. CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY FOLLOWING THE SAID DECISION OF THE ITAT. HENCE, HIS ACTION MAY BE UPH ELD. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE ASSESSING OFFICER AND URGED BEFORE THE BENCH TO SET ASIDE THE ACTION OF T HE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT, KOLKATA BENCHES, IN THE CASE OF M/S. SAMANWAYA VS. ACIT REPORTED IN (2009) 34 SOT 332, WHEREIN THE TRIBUNAL HAS HELD AS UNDER : 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL FOR THE ASSE SSEE. BEFORE WE EMBARKED ON DISCUSSION ON THE CONTROVERSY INVOLVED IN THIS PRES ENT GROUND OF APPEAL, IT IS NECESSARY FIRST TO DISCUSS THE PROVISIONS WHICH LED TO THE CO NTROVERSY. SECTION 40(A)(IA) OF THE I. T. ACT, 1961 REQUIRES THAT UNLESS TAX IS DEDUCTED ACCO RDING TO S 194C ON PAYMENT TO CONTRACTORS OR SUB-CONTRACTORS, WHICH INCLUDES SUPP LIER OF LABOURS FOR CARRYING OUT ANY WORK, WILL ATTRACT DISALLOWANCE AS EXPENDITURE. SEC TION 194C OF THE I.T. ACT, 1961 READS AS UNDER:- 194C. PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO AN Y RESIDENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND- (A) THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT; OR (B) ANY LOCAL AUTHORITY; OR (C) ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT; OR (D) ANY COMPANY; OR (E) ANY CO-OPERATIVE SOCIETY; OR (F) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER ANY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, OR FOR BOTH; OR (G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRA TION 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 3 (I) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UN DER A CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSITY GRANTS COMMISSION ACT, 1956 (3 OF 1956); OR (J) ANY FIRM; OR (K) ANY INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHOSE T OTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE(A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH S UCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR, SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT 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 PER CENT IN CASE OF ADVERTISING, (II) IN ANY OTHER CASE TWO PER CENT, OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN WE FIND THAT THE HONBLE SUPREME COURT IN BIRLA CEM ENT WORKS -VS- CBDT SUPRA HAD LAID DOWN THE CONDITIONS PRECEDENT FOR ATTRACTING T HE PROVISION S. 194C OF THE I.T. ACT, 1961; NAMELY, (I) THERE MUST BE A CONTRACT BETWEEN THE PERSON RESPONSIBLE FOR MAKING PAYMENT TO CONTRACTOR, (II) THE CONTRACT MUST BE FOR CARRYING OUT OF ANY WORK, (III) THE WORK IS TO BE CARRIED THROUGH THE CONTRACTOR, (IV) THE CONSIDERATION FOR THE CONTRACT SHOULD EXCEED RS. 10,000/- I.E. THE AMOUNT FIXED BY S. 194C AND (V) THAT THE PAYMENT IS MADE TO THE CONTRACTOR FOR THE WORK CARRIED OUT BY HIM. WE FURTHER FIND IN ITO -VS- RAMA NAND & CO SUPRA THAT A CONTRACTOR FOR THE PU RPOSE OF THESE PROVISIONS WOULD BE ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE C ENTRAL OR ANY STATE GOVERNMENT, OR ANY LOCAL AUTHORITY, ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT, ANY COMPANY OR ANY CO-OPERATIVE SOC IETY FOR CARRYING ON ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WOR K AND A SUB-CONTRACTOR WOULD MEAN ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CONTRACTOR FOR CARRYING OUT, OR FOR THE SUPPLY OF LABOUR FOR CARRYING OUT , THE WHOLE O R THE PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR UNDER A CONTRACT WITH ANY OF THE AUT HORITIES NAMED ABOVE OF FOR SUPPLY WHETHER WHOLLY OR PARTLY AND LABOUR WHICH THE CONTR ACTOR HAS UNDERTAKEN TO SUPPLY IN TERMS OF HIS CONTRACT WITH ANY OF THE AFORESAID AUT HORITIES. WE THEREFORE FIND THAT S. 40(A)(IA) OF THE I.T. ACT, 1961 CANNOT BE READ IN I SOLATION OR TO THE EXCLUSION OF S. 194C. WE FIND THAT IN THIS PRESENT CASE, THE CONTROVERSY IS REGARDING TO PAYMENTS MADE FOR DISBURSEMENT OF LABOUR CHARGES TO LABOUR SARDARS. W E FURTHER FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAD SPECIFICALLY STATED BEFORE T HE LD. LOWER AUTHORITIES THAT THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SAR DARS. WE ALSO FIND THAT THE REVENUE AUTHORITIES COULD NOT CONTROVERT THE SUBMIS SION OF THE ASSESSEE IN THIS RESPECT. AT THE TIME OF HEARING BEFORE US, THE LD. DR COULD NOT BRING OUT ANY EVIDENCE BY PRODUCING COGENT MATERIAL IN RESPECT OF ANY CONTRAC T BETWEEN THE ASSESSEE AND THE LABOUR SARDARS TO CONTRADICT THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARS. IT IS NOT IN DISPUTE THAT A CONTRACTOR OR A SUB-CONTRACTOR IS ENGAGED ON THE BASIS OF A CONTRACT WHICH IS THE MOST IMPORTANT ESSENCE OF A CONTRACT JOB AND IS A P RIMARY REQUIREMENT FOR THE APPLICATION OF S. 194C OF THE ACT. WE, THEREFORE, F IND FORCE IN THE ARGUMENT OF THE LD. COUNSEL OF THE ASSESSEE THAT THE LABOUR SARDARS IN THE INSTANT CASE CANNOT BE SAID TO BE LABOUR CONTRACTORS WITHIN THE MEANING OF THE PROVIS ION OF S. 194C(2). IN THE CIRCUMSTANCES, THERE IS NO REQUIREMENT IN LAW TO DE DUCT TAX AT SOURCE BY THE ASSESSEE UNDER THE PROVISIONS OF S. 194C(2). THIS VIEW OF OU RS IS ALSO SUPPORTED BY THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN CIT -VS- ESSK AY CONSTRUCTION CO. SUPRA WHEREIN IT WAS HELD THAT ONCE A FINDING HAS BEEN RE CORDED THAT THERE WAS NO SUBCONTRACT OF WORK, THERE COULD NOT BE ANY APPLICABILITY OF SE CTION 194C(2) OF THE I.T. ACT, 1961. THEREFORE THE RATIO LAID DOWN IN THE AFORESAID JUDG MENT IS SQUARELY APPLICABLE TO THE 4 FACTS OF THIS CASE. WE FURTHER FIND THAT THE ASSESS EE HAS MADE PAYMENTS TO INDIVIDUAL LABOURS, WHICH IS EVIDENT FROM THE MUSTER-ROLL ENCL OSED IN THE PAPER BOOK PAGE 21. WE ALSO FIND FROM THE MUSTER ROLL THAT THE PERSON SIGN ING AS LABOUR SARDAR IS ALSO INCLUDED IN THE SERIAL OF THE LABOURS. WE FIND THAT IN THIS CASE, ADMITTEDLY, THE LABOUR SARDARS IN THE PRESENT CASE HAS NO LOCUS STANDI AS LABOUR CONT RACTOR AS A LABOUR SARDAR AND A LABOUR CONTRACTOR ARE AS DIFFERENT AS CHALK AND CHE ESE. WE FIND THAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDAR S FOR SUPPLY OF LABOURS AND WITHOUT WHICH THERE CANNOT BE ANY APPLICATION OF S. 194C AND AS SUCH THE INVOCATION OF PROVISION OF S. 40(A)(IA) IS OUTSIDE THE SCOPE AND AMBIT OF THE SUCH ENACTMENT. IN VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THA T S.194C(2) BEING NOT APPLICABLE IN THIS CASE, THE DISALLOWANCE OF RS. 74,33,210/- MADE BY THE AO BY INVOKING S. 40(A)(IA) OF THE I. T. ACT, 1961 AND SUSTAINED BY THE LD. CIT (A) IS HEREBY DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. WE ALSO FIND THAT THE LD. CIT(A) BY FOLLOWING THE AFORESAID DECISION, CITED SUPRA, HAS DELETED THE ADDITION SO MADE BY THE ASSESSING OFFIC ER U/S. 40(A)(IA) OF THE ACT. RELEVANT PORTION OF THE ORDER OF THE LD. CIT(A) IS REPRODUCED HEREUNDER : 8. I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDE RED THE SUBMISSION OF THE APPELLANT. I HAVE ALSO PERUSED THE JUDICIAL PRONOU NCEMENTS RELIED UPON BY THE APPELLANT. I FIND THAT THE CASE OF THE APPELLANT I S SQUARELY COVERED BY THE DECISION OF THE HONBLE ITAT A BENCH, KOLKATA IN THE CASE OF M/S. SAMANWAYA VS. ACIT (2009) 34 SOT 332. THE ASSESSING OFFICER HAS BROUGHT NO MATE RIAL OR EVIDENCE ON RECORD TO SHOW THAT THERE WAS ANY CONTRACT BETWEEN THE APPELLANT A ND THE LABOUR SARDARS. FROM THE PERUSAL OF THE MUSTER ROLLS, IT CAN BE SEEN THAT TH E PAYMENTS WERE MADE TO INDIVIDUAL LABOURERS; MOREOVER, THE PERSONS SIGNING AS LABOUR SARDARS ARE ALSO EMPLOYED AS LABOURERS, AND ARE INCLUDED IN THE LIST OF LABOURER S. IN VIEW OF THE ABOVE, AND, THE RATIO LAID DOWN BY THE JURISDICTIONAL ITAT, THE LABOUR SA RDARS CANNOT BE TERMED AS LABOUR CONTRACTORS WITHIN THE MEANING OF SECTION 194C; AND CONSEQUENTLY, THE IMPUGNED DISALLOWANCE OF RS.19,46,777/- IS BEYOND THE SCOPE AND AMBIT OF THE PROVISIONS OF SECTION 40(A)(IA). THE ADDITION OF RS.19,46,777/- IS DELETED. IN VIEW OF THE ABOVE, AND ALSO IN THE ABSENCE OF AN Y CONTROVERTING MATERIAL BROUGHT ON RECORD BY THE REVENUE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE ADDITION OF RS.19,46,777/- AND THE SAM E IS HEREBY UPHELD. THE APPEAL OF THE REVENUE IS, THEREFORE, DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.9.10 SD/- SD/- . . ' , $ . . , (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( $ $ $ $) )) ) DATED :30TH SEPTEMBER, 2010 '/0 &12 3' JD.(SR.P.S.) 5 . 4 -5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT DCIT, CIRCLE-33, KOLKATA. 2 -+, / RESPONDENT , M/S. S. S. CONSTRUCTION, 15/2, BROJO MOHAN DEBYA ROAD, BEHALA, KOLKATA-700 008. 3 . .& / THE CIT, 4 . .& ( )/ THE CIT(A), KOLKATA 5 . '> -& / DR, KOLKATA BENCHES, KOLKATA 5 -/ TRUE COPY , .&?/ BY ORDER , @ #2 / DEPUTY REGISTRAR .