The ITO, Ward-8(4), Surat V. Shri Yogesh M.Patel, Surat

ITA 1447/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89492 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 194C; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1447/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) THE INCOME TAX OFFICER WARD-8(4) SURAT / VS. SHRI YOGESH M.PATEL 7, DHARTI SOCIETY KATARGAM SURAT ./ ./ PAN/GIR NO. : AIHPP 1747 Q ( # / APPELLANT ) .. ( $% # / RESPONDENT ) #& / APPELLANT BY : SHRI NIMESH YADAV, SR.DR $% #'& / RESPONDENT BY : SHRI TUSHAR HEMANI, AR ()'* / DATE OF HEARING 15/04/2015 +,-.'* / DATE OF PRONOUNCEMENT 02/06/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-V, SURAT. (CIT(A) IN SHORT) DATED 28/01/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LAW, T HE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. AT RS.1,44,16,556/- ITA NO.1447/AHD /2011 ITO VS. SHRI YOGESH M.PATEL ASST.YEAR 2007-08 - 2 - AFTER ACCEPTING THE ASSESSEES PLEA THAT SUB CONTRA CTOR IS NOT REQUIRED TO DEDUCT TDS U/S.194C ON PAYMENTS MADE TO SUB- SUB CONTRACTOR DESPITE THE FACT THAT THE WORD SUB SU B CONTRACTOR IS MERELY A GRAPHIC INDICATOR AND NOTHING CONTAINED IN THE ACT PREVENTS THE ASSESSEE TO DEDUCT TDS ON SUCH PAYMENT S. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE A.O. AT RS.1,44,165,556/- AFTER ACCEPTING THE ASSESSEES PL EA THAT PROVISIONS OF SECTION 40(A) (IA) ARE NOT APPLICABLE IN HIS CAS E BECAUSE THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ON T HE EXP. CLAIMED U/S.30-38 OF THE ACT ONLY WHEREAS THE ASSESSEE HAS CLAIMED THE EXP.U/S.28. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE AO AT RS.1,44,16,556/- AFTER HOLDING THAT THE PROVISIONS OF SECTION 28 ARE APPLICABLE IN ASSESSEES CASE INSTEAD OF SECTION 30 -38 AFTER PLACING RELIANCE UPON THE NON JURISDICTIONAL ITAT HYDERABAD DECISION DELIVERED IN THE CASE OF K.SRINIVAS NAIDU VS. ACIT 131 TTJ 17 HYD. FURTHER THE FACTS OF THE INSTANT CASE ARE TOTALLY D IFFERENT FROM THE FACTS OF THIS CASE. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF LD.CIT(A) BE SET ASIDE AND THE AOS ORDER BE RESTORED. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 30/12/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS.1,68,07,463/- BY INVOKING THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS ON TH E LABOUR PAYMENTS. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL; THEREBY THE ADDITION MADE ON AC COUNT OF ITA NO.1447/AHD /2011 ITO VS. SHRI YOGESH M.PATEL ASST.YEAR 2007-08 - 3 - DISALLOWANCE OF LABOUR PAYMENTS BY INVOKING THE PRO VISIONS OF SECTION 40(A)(IA) OF THE ACT WAS DELETED. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 3. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGAI NST THE DELETION OF ADDITION OF RS.1,44,16,556/- MADE ON ACCOUNT OF DIS ALLOWANCE OF THE LABOUR PAYMENTS BY INVOKING THE PROVISIONS OF SECTI ON 194C OF THE ACT, R.W.S.40(A)(IA) OF THE ACT. LD.SR.DR SHRI NIMESH Y ADAV VEHEMENTLY ARGUED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELE TING THE ADDITION. HE SUBMITTED THAT THE ADDITION HAS BEEN DELETED BY THE LD.CIT(A) HOLDING THAT THE PROVISIONS OF SECTION 194C(2) OF THE ACT I S NOT APPLICABLE ON THE ASSESSEE. THEREFORE, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT THE TAX ON SUCH PAYMENTS. HE SUBMITTED THAT THIS FINDING OF T HE LD.CIT(A) IS NOT JUSTIFIED AND AGAINST THE PROVISIONS OF LAW. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THERE IS NO INFIRM ITY IN THE ORDER OF THE LD.CIT(A). HE PLACED RELIANCE ON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. PRASHANT H. S HAH REPORTED AT (2013) 29 TAXMANN.COM 296 (GUJARAT). RELIANCE HAS ALSO BE EN PLACED ON THE DECISION OF THE COORDINATE BENCH (ITAT HYDERABAD BE NCH A) RENDERED IN THE CASE OF K.SRINIVAS NAIDU VS. ASST.CIT REPORT ED AT (2010) 131 TTJ ITA NO.1447/AHD /2011 ITO VS. SHRI YOGESH M.PATEL ASST.YEAR 2007-08 - 4 - 17 (HYD)(UO) :: IN IT APPEAL NO.719 (HYD) OF 2009, DATED 18/12/2009. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE B Y HOLDING AS UNDER:- DECISION: I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBM ISSIONS OF THE APPELLANT. THE A.O. ACTION OF DISALLOWING THE LABO UR PAYMENT CANNOT BE APPROVED DUE TO THE FOLLOWING REASONS: I. FOR THE AY IN CONSIDERATION THE PROVISIONS OF SEC. 194C(2) OF THE ACT CASTED THE RESPONSIBILITY ON THE CONTRAC TOR TO DEDUCT THE TDS ON ANY PAYMENT MADE TO ANY SUB-CONTR ACTOR. THERE ARE NO PROVISIONS IN THE RELEVANT SECTION WHI CH CAST RESPONSIBILITY ON THE SUB-CONTRACTOR TO DEDUCT TDS ON ANY PAYMENT MADE TO ANY PERSON TO WHOM THE SUB-CONTRACT OR 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-CONTRACTO R. THE ORDER PASSED BY THE A.O. CANNOT BE HELD TO BE A SPE AKING ORDER BECAUSE HE HAS NOT COMMENTED ANYTHING UPON TH E SUBMISSIONS MADE BY THE APPELLANT DURING THE ASSESS MENT PROCEEDINGS ESPECIALLY ABOUT THE APPLICABILITY OF P ROVISIONS OF SECTION 194C(2). SO FAR AS OWN LABOUR PAYMENT IS CONCERNED, THE PROV ISIONS OF SEC.194C CANNOT BE INVOKED AT ALL BECAUSE SUCH P AYMENT ITA NO.1447/AHD /2011 ITO VS. SHRI YOGESH M.PATEL ASST.YEAR 2007-08 - 5 - CAN NEVER BE IMAGINED AS PAYMENT OUT OF CONTRACTUAL OBLIGATIONS. EVEN OTHERWISE ALSO NONE OF THE PAYME NTS IS IN EXCESS OF THE PRESCRIBED LIMIT FOR DEDUCTION OF TAX . II. THERE IS A FORCE IN SUBMISSIONS OF THE APPELLANT T HAT DIRECT EXPENSES LIKE LABOUR CHARGES ARE COVERED BY PROVISI ON OF SEC. 28(I) NOT BY PROVISIONS OF SEC.40(A)(IA). THI S VIEW HAS BEEN CONFIRMED IN THE CASE OF K. SHRINIVAS NAIDU VS . ACIT 131 TTJ 17 HY.BENCH. IN VIEW OF THE ABOVE POSITION OF LAW AND FACTS THE ADDITION ON ACCOUNT OF DISALLOWANCE OF LABOUR PAYMENT IS HER EBY DELETED AND THE GROUND OF APPEAL IS ALLOWED. 4.1. WE FIND THAT THE AO IN PARA-5.3 OF HIS ORDER H AS OBSERVED THAT THE ASSESSEE WAS AWARDED THE CONTRACT FORM VARIOUS COMP ANIES 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 A SSESSEE HAD TO DEDUCT TAX AT SOURCE EQUAL TO @1% OF SUCH SUM AS PAID TO T HE LABOUR CONTRACTORS FOR CARRYING OUT THE WORK. THE ASSESSEE AS PER ORD ER-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 CONTEN TION 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 ALSO PLACED RELIANCE ON THE JUDGEMENT OF HONBLE GUJARAT HIGH C OURT RENDERED IN THE CASE OF CIT VS. PRASHANT H.SHAH. THE HONBLE GUJAR AT HIGH COURT IN THE ITA NO.1447/AHD /2011 ITO VS. SHRI YOGESH M.PATEL ASST.YEAR 2007-08 - 6 - 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 CONTRA CTOR DURING THE COURSE OF EXECUTION OF THE WORK. IN THE PRESENT CASE, SUC H VITAL REQUIREMENT OF RELATIONSHIP OF A CONTRACTOR AND SUB-CONTRACTOR BET WEEN THE ASSESSEE AND THE TRANSPORTERS WAS MISSING. THE HONBLE HIGH C OURT FURTHER HELD THAT THEREFORE THE TRIBUNAL WAS PERFECTLY JUSTIFIED IN H OLDING THAT LIABILITY TO DEDUCT TAX AT SOURCE IN THE PRESENT CASE DO NOT ARI SE. IN THE CASE IN HAND, THE UNDISPUTED FACT IS THAT THE CASE OF THE ASSESSE E IS NOT A CONTRACTOR BUT A SUB-CONTRACTOR. BEFORE THE AO, THE ASSESSEE DE MONSTRATED BY SUBMITTING THAT GRASIM INDUSTRIES LTD. WAS THE CONT RACTEE 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 SUBMI SSION 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.1,6 8,07,463/-, 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 PAYMEN TS 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 ITA NO.1447/AHD /2011 ITO VS. SHRI YOGESH M.PATEL ASST.YEAR 2007-08 - 7 - REQUIRED TO DEDUCT THE TAX ON THE PAYMENT MADE TO T HE SUB-CONTRACTOR. IN THE CASE IN HAND, THE UNDISPUTED FACT IS THAT THE A SSESSEE HAS MADE THE PAYMENTS TOWARDS LABOUR CHARGES AS A SUB-CONTRACTOR . MOREOVER, THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD SUGG ESTING THAT PAYMENTS DEBITED AS LABOUR EXPENSES WERE MADE AS PE R SUBSISTING CONTRACT BETWEEN THE ASSESSEE AND LABOUR CONTRACTOR S. IN THE ABSENCE OF SUCH MATERIAL, WE DO NOT SEE ANY REASON TO INTERFER E WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND RAI SED IN THE REVENUES APPEAL IS REJECTED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON TUESDAY, THE 2 ND DAY OF JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 02/ 06 /2015 2*..,(.../ T.C. NAIR, SR. PS ITA NO.1447/AHD /2011 ITO VS. SHRI YOGESH M.PATEL ASST.YEAR 2007-08 - 8 - !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-V, SURAT 5. 7(8$45 , *45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<) / GUARD FILE. ! / BY ORDER, %7$ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION ..6.5.15 (DICTATION-PAD 10+ PAG ES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..18.5.2015 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.02.06.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 02.06.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER