Aristocon Engineers Co-operative Society Ltd., Kolkata V. DCIT, Circle - 33, Kolkata, Kolkata

ITA 1212/KOL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3102 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2013
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-09-2011
• Court: TRIBUNAL
• Department Lawyers: DILI P KR RAKSHIT
• Assessee Lawyers: T P KAR
• Keywords: Non-deduction of tax
• Section: 143(3); 194C

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [ () . .. . . .. . , ,, , , !' #! $'# #! $'# #! $'# #! $'#, ,, , ] ]] ] [BEFORE HONBLE SRI K.K.GUPTA, AM & HONBLE SRI MAHAVIR SINGH, JM] '& '& '& '& /ITA NO.1212/KOL/2011 $'( !)*/ ASSESSMENT YEARS : 2008-09 (,- / APPELLANT ) - !' - ( /0,- /RESPONDENT) ARISTOCON ENGINEERS COOPERATIVE . D.C.I.T., CIRCL E-33, SOCIETY LTD., KOLKATA -VERSUS- KOLKATA (PAN:AAAAA 6256 H) ,- 1 2 / FOR THE APPELLANT: SHRI T.P.KAR, FCA /0,- 1 2 / FOR THE RESPONDENT: SHRI DILIP KR.RAKSHIT, SR.DR '!3 1 4 /DATE OF HEARING : 02.04.2013 5) 1 4 /DATE OF PRONOUNCEMENT : 05.04.2013. 6 / ORDER PER SHRI K.K.GUPTA, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-XX, KOLKATA DATED 01.06.2011 FOR ASSESSMENT YEAR 2008-0 9 BY RAISING THE FOLLOWING SOLE GROUND : 1. THAT HOW FAR THE CIT(A) IS CORRECT IN MAKING CO NFIRM THE DELETION OF THE CLAIM OF EXPENSES RS.891115 TOWARDS THE EXPENSES U/S 40(A)(I A) MADE BY THE ASSESSING OFFICER FOR NON-DEDUCTION OF TDS UNDER SECTION 194C(2) FOR THE PAYMENTS MADE TO THE LABOURERS THROUGH THE SARDARS/MUNSHIS OF EACH GROUP OF DAILY LABOURERS WHOSE TOTAL PAYMENTS FOR EACH OF THEM ARE BELOW RS.50000/- ON CONSIDERING TH E MUNSHIS/SARDARS AS THE SUB- CONTRACTORS FOR SUPPLY OF LABOURERS IN TERMS OF THE INCOME TAX ACT 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A CIVIL CONTRACTOR AND FILED RETURN OF INCOME DECLARING INCOME OF RS.98,632/- CL AIMING DEDUCTION U/S 80P OF THE ACT BEING A COOPERATIVE SOCIETY. THE AO DURING THE COURSE OF ASSESSMENT U/S 143(3) OBSERVED THAT THE ASSESSEE HAD MADE PAYMENTS TO LAB OUR CONTRACTORS. THE AO HAD DISALLOWED THE TOTAL AMOUNT CLAIMED AS EXPENDITURE AMOUNTING TO RS.20,82,203/- BEING THE AMOUNT TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT. THE AO BIFURCATED THE NON DEDUCTION OF TAX AT SOURCE ON THE PAID AMOUNT AND T HE PAYABLE AMOUNT. THE PAID ITA NO. 1212/KOL/2011 2 AMOUNT WAS RS.11,36,278/- AND THE PAYABLE AMOUNT WA S RS.8,91,115/-.BOTH WERE DISALLOWED BY THE LD. A.O. AGGRIEVED THE ASSESSEE W ENT IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, WHO CONFIRMED THE ADDITION AGA INST THE PAYABLE AMOUNT TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT BY INVOKING THE PROVISION OF SECTION 194C OF THE IT ACT AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US BUT THE LD.CIT(A) DELETED THE DISALLOWANCE ON ACCOUNT OF THE PAID AMOUNT AMOUNTIN G TO RS.11,36,278/- . 3. IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSE SSEE THAT THE LD. CIT(A) HAS ERRED IN PARTLY DELETING THE DISALLOWANCE U/S 40(A) (IA) OF THE ACT. HE SUBMITTED THAT THE WHOLE AMOUNT BEING THE PAYMENT TO LABOURERS AMOUNTI NG TO RS.20,82,203/- WAS BY WAY OF CONTRACT/OBLIGATION BY INVOKING THE PROVISIO N OF SECTION 194C OF THE ACT. IT WAS AOS OWN FINDING THAT THE AMOUNT PAID AND PAYAB LE WERE TO BE CONSIDERED U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SO URCE U/S 194C OF THE ACT, WHICH WAS NEVER THE CASE AS FACTS BROUGHT ON RECORD, IN SO FA R AS, THE LD. CIT(A) BY DELETING THE ADDITION OR DISALLOWANCE OF RS.11,36,278/- HAS PART LY AGREED TO THE PROPOSITION AS SUBMITTED BY THE ASSESSEE APPELLANT. HE SUBMITTED T HAT THERE WAS NO ACTION TO BE TAKEN FOR DISALLOWANCE U/S 40(A)(IA) OF THE ACT IN SO FAR AS THE SAME CONTRACTORS AS PER THE CHART NOTED BY THE AO CANNOT BE SUBJECT TO DISALLOW ANCE WITHOUT IDENTIFYING THE PORTION WHICH EXCEEDED RS.50,000/- AS PER THE INDIV IDUAL PAYMENT WAS NOTED BY THE AO. FURTHER MORE, THE LD. COUNSEL SUBMITTED THAT TH E SARDARS OR MUNSHIS ARE NOT THE CONTRACTORS IN THE STRICT SENSE OF THE WORD CONTRA CT IN SO FAR AS THEY ARE LABOURERS OR MUNSHIS WHO IDENTIFY THE LABOURERS WHO ARE TO BE PA ID OR REIMBURSED FOR THE PURPOSE OF EXECUTING THE WORK OF THE ASSESSEE ON THE BASIS OF WHICH THE ASSESSEE, AS A CONTRACTOR IS TO BE REIMBURSED ON THE CONTRACTEES. FOR THIS PROPOSITION HE RELIED ON VARIOUS JUDGEMENTS AS ENUNCIATED BY THE HONBLE HIG H COURTS AND THE SUPREME COURT THAT MERE REIMBURSEMENT OF PAYMENT FOR EXECUTING TH E WORK CANNOT BE IDENTIFIED FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT WHERE THE CONTRACT WHETHER ORAL OR WRITTEN HAS TO PRE IMPORTED FOR CON SIDERING THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT. HE QUOTED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BIRLA CEMENT WORKS VS CBDT 248 ITR 216, IN SO FA R AS THE LABOURERS OF A LABOUR TEAM CANNOT BE SUBJECT TO DEDUCTION OF TAX AT SOURC E IN SO FAR AS PAYMENTS ARE TO THE ITA NO. 1212/KOL/2011 3 LABOURERS WITHOUT ENTERING INTO THE CONTRACT WITH T HEM IN SO FAR AS A SUM OF RS.50,000/- HAS TO BE CONSIDERED FOR THE INDIVIDUAL PAYEES AND NOT THE CONTRACTOR. SIMILARLY HE SUBMITTED THAT IN ORDER TO BECOME A CO NTRACTOR THE MUNSHIS HAVE TO OBTAIN A LICENSE UNDER THE CONTRACT LABOUR (REGULATION AND ABOLITION)ACT, 1970 ACT IN SO FAR AS HE WAS NOT A CONTRACTOR FOR LABOUR SUPPLIER. HE ALSO RELIED ON THE DECISION OF ITAT KOLKATA BENCH IN THE CASE OF SAMANWAA VS A.C.I.T., CIRCLE-2, BURDWAN REPORTED IN 34 SOT 332 THAT THE DISALLOWANCE OF PAYMENTS TO LABOUR SARDARS WAS HELD TO BE NOT DISALLOWABLE U/S 40(A)(IA) OF THE IT ACT IN SO FAR AS THE REVENUE COULD NOT FURNISH ANY MATERIAL TO SHOW THAT THERE WAS CONTRACT BETWEEN AS SESSEE AND LABOUR SARDARS FOR SUPPLY OF LABOUR. FOR THIS PROPOSITION HE HAS FILED COMPILATION OF THE CASE LAWS AS RELIED UPON ALONG WITH THE GAZETTE NOTIFICATION REG ARDING LICENCING OF CONTRACTORS. 4. THE LD. DR SUPPORTED THE ORDER OF LD. CIT(A), I N SO FAR AS THE LD. CIT(A) HAS CATEGORICALLY CONSIDERED THAT PAYMENTS WITHOUT DEDU CTION OF TAX AT SOURCE WAS RIGHTLY CONSIDERED FOR PART DISALLOWANCE U/S 40(A)(IA) OF T HE IT ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS AVAILABLE ON RECORD. WE ARE INCLINED TO FIND THE SU BMISSION OF THE LD. COUNSEL FOR THE ASSESSEE ARE JUSTIFIED IN SO FAR AS THE LD. CIT(A) HAS NOT IDENTIFIED THE AMOUNT PERTAINING TO THE DISALLOWANCE U./S 40(A)(IA) OF TH E IT ACT FOR THE PURPOSE OF INVOKING THE PROVISION OF SECTION 194C OF THE ACT, THE SAME PURPORTED CONTRACTORS WERE INDICATING THE OPENING BALANCE WHICH THE ASSESSEE O WED TO THEM CONTINUED TO RECEIVE THE PAYMENTS IN THE IMPUGNED ASSESSMENT YEAR WHEN T HE ACTUAL AMOUNT PAID WAS ENUMERATED BY THE AO DURING THE IMPUGNED ASSESSMENT YEAR AMOUNTING TO RS.11,63,339/- WAS CONSIDERED ALLOWABLE U/S 40(A)(I A) OF THE IT ACT WITHOUT DEDUCTING TAX AT SOURCE U/S 194C OF THE ACT BY THE LD. CIT(A) . THEREFORE IT CANNOT BE HELD THAT THE AMOUNT REMAINING UNPAID TO THE CONTRACTORS WOUL D BE SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT WHEN THE AMOUNT OWED TO THEM IS LESS THAN WHAT WAS OWED TO THEM IN THE BEGINNING OF THE YEAR. IN OTHER WORD S SECTION 40(A)(IA) IS CLAIMED AS AN EXPENDITURE UNDER THE MERCANTILE SYSTEM OF ACCOUNTI NG WHEN THE OPENING BALANCE WAS MORE THAN THE AMOUNT NOT DISALLOWED IN SO FAR AS TH E AMOUNT REMAINED PAYABLE. SO THE ITA NO. 1212/KOL/2011 4 ISSUE AS CONSIDERED BY THE AO WAS NOT DEALT WITH IN ACCORDANCE WITH THE PROVISION OF THE INCOME TAX ACT BY THE LD. CIT(A), CLINCHING THE ISSUE IN FAVOUR OF THE APPELLANT THAT THERE WAS NO CAUSE FOR INVOKING THE PROVISION OF SECTION 194C OF THE ACT FOR THE PURPOSE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT. T HE CLAIM MADE BY THE ASSESSEE ON THE TOTAL TURN OVER AMOUNTING TO RS.35,90,188/-WAS WHEN THE LABOUR CHARGES WERE PAID BY THE ASSESSEE WERE CLAIMED AT RS.24,57,947/- WERE CONSIDERED SPECIFICALLY FOR THE SARDARS WHO WERE TO IDENTIFY THE LABOURERS BEIN G PAID LESS THAN RS.50,000/- EACH WAS ACCEPTABLE TO THE AUTHORITIES BELOW. IT CANNOT BE CONSIDERED FOR DISALLOWANCE U/S 40(A)(IA) OF THE ACT TO IDENTIFY THE DEDUCTION OF T AX AT SOURCE U/S 194C OF THE ACT, IN SO FAR AS IT CANNOT BE SAID THAT THE SARDARS ARE TO BE SUBJECTED TO DEDUCTION OF TAX AT SOURCE ONLY ON PART OF THEIR PAYMENTS TO THE LABOURERS WHO M THEY HAVE IDENTIFIED. THE AUTHORITIES BELOW THEREFORE HAVE NOT BEEN ABLE TO E STABLISH THE ISSUE RAISED FOR DISALLOWANCE U/S 40(A)(IA) OF THE ACT, IN SO FAR AS , THE PROVISION OF SECTION 194C DO NOT APPLY TO THE PAYMENTS /EXPENDITURES INCURRED BY THE ASSESSEE. WE HAVE NO HESITATION IN DIRECTING THE AO TO DELETE THE DISALLOWANCE OF R S.8,91,115/- AS WELL WHEN THE CIT(A) HAS PARTLY ALLOWED THE CLAIM OF THE ASSESSEE ON THE DISALLOWANCE BY THE AO U/S 40(A)(IA) AND THE REVENUE SUPPORTS THE ORDER OF THE LD. CIT(A) HAVING FILED NO APPEAL BEFORE THE TRIBUNAL ON THE PART DELETION BY HIM. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE COURT ON 05.04.2013. SD/- SD/- [ .#! $'# , ] [ .., ,, , ] [MAHAVIR SINGH ] [K.K.GUPTA] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (4 4 4 4) )) ) DATE: 05.04.2013. R.G.(.P.S.) ITA NO. 1212/KOL/2011 5 6 1 /$$7 87)9- COPY OF THE ORDER FORWARDED TO: 1. ARISTOCON ENGINEERS CO-OPERATIVE SOCIETY LTD., 541- C, BLOCK-N, NEW ALIPORE, KOLKATA-700053. 2 D.C.I.T., CIRCLE-33, KOLKATA 3 . CIT KOLKATA 4 . CIT(A)-CENTRAL-XX, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 07 /$/ TRUE COPY, 6'/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES