ITO, Ward - 30(3), Kolkata, Kolkata V. Shri Sandeep Ray, Kolkata

ITA 1584/KOL/2011

• Counselvise Citation: 158423514 RSA 2011
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2012
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 21-11-2011
• Court: TRIBUNAL
• Department Lawyers: D J MEHTA
• Assessee Lawyers: S M SURANA
• Keywords: Business income
• Section: 194C

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH C, KOLKATA ( ) BEFORE , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . . , SHRI C.D.RAO, ACCOUNTANT MEMBER / ITA NO.1584/KOL/2011 ! '# / ASSESSMENT YEAR : 2006-07 ( $% / APPELLANT ) I.T.O., WARD-30(3), KOLKATA VS ( &'$% / RESPONDENT ) SRI SANDEEP ROY,KOLKATA (PAN:ADIP 8802 L) $% ( ) / FOR THE APPELLANT: SHRI D.J.MEHTA &'$% ( ) / FOR THE RESPONDENT: SHRI S.M.SURANA * + ( /DATE OF HEARING : 12.03.2012. ,' ( /DATE OF PRONOUNCEMENT : 12.03.2012. - / ORDER . . , PER SHRI C.D.RAO, AM THIS APPEAL BY REVENUE IS ARISING OU T OF THE ORDER OF CIT(A)-XIV, KOLKATA IN APPEAL NO.337/CIT(A)-XIV/08-09 DATED 28.09.2011. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST ORDER OF THE CIT(A) IN DELETING THE ADDITION ON LABOUR CHARGES AT RS.17,13,037/-. F OR THIS THE REVENUE HAS RAISED THE FOLLOWING GROUND:- 1. THAT THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE DISALLOWANCE OF LABOUR CHARGES OF RS.17,13,037/- APPLYING SEC 19 4C(1) ERRONEOUSLY WHEREAS SEC 194C(2) AS OPERATIVE WEF 01/06/02 WAS APPLICABLE I N THIS CASE BECAUSE OF THE FACT THAT THE PAYMENT WAS MADE TO THE SUBCONTRACTORS. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSMENT YEAR INVOLVED IN THIS APPEAL IS 2006-07 AND THE ASSESSEE IS AN INDIVIDUAL. IT IS ALSO A FACT THAT ASSESSEE IS A SERVICE PROVIDER UNDER AN AGREEMENT WITH M/S. 2 GODREJ AND BOYCE LTD. FOR REPAIR AND MAINTENANCE OF VARIOUS PRODUCTS OF GODREJ. IT IS ALSO A FACT THAT THE ASSESSEE IS A CONTRACTOR IN VIEW OF T HE AGREEMENT AND FINDINGS OF THE AO EVEN CIT(A) AFTER DELIBERATION ON THE FACTS NOTED THAT A SSESSEE SUPPLIED ITS OWN MATERIAL AND HAD ENGAGED LABOUR WHENEVER NEEDED FOR REPAIR AND MAINT ENANCE AS PER AGREEMENT ENTERED INTO WITH GODREJ AND BOYCE LTD. ASSESSEE IS NOT A SUB-CO NTRACTOR AND FOR THIS HE RELIED ON THE DECISION OF HONBE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF RAMANAND AND CO. REPORTED IN 163 ITR 702. WE FIND THAT THE ASSESSEE IS A CONTRACTOR AND AN INDIVIDUAL. THE RELEVANT ASSESSMENT YEAR INVOLVED IN THIS APPEAL IS 2006-07 AND THE AO HAS INVOKED PROVISION OF SECTION 194C(1) TO AN INDIVIDUAL. ACCO RDING TO ASSESSEE AND IN VIEW OF THIS FACT THERE IS NO REQUIREMENT IN THE CASE OF INDIVIDUAL T O DEDUCT TAX IN A.Y. 2005-06 BECAUSE SECTION 194C(1) OF THE ACT IS AMENDED W.E.F. 01.06. 2007 AND FROM THIS DATE THE INDIVIDUAL IS OBLIGED TO DEDUCT TAX. ADMITTEDLY, THE POSITION IS THAT IN THE PRESENT CASE ASSESSEE IS AN INDIVIDUAL AND A CONTRACTOR AND NOT A SUB-CONTRACTO R. ONCE THIS IS THE POSITION, IN A.Y. 2005- 06 HE IS NOT OBLIGED TO DEDUCT TAX AND THIS ISSUE H AS BEEN ADJUDICATED BY TRIBUNAL, WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN TH E CASE ACIT VS SMT. KEYA SETH IN ITA NO.842 & 843/K/2010 FOR ASSESSMENT YEARS 2006-07 & 2007-08 VIDE ORDER DATED 11.03.2011, WHEREIN EXACTLY THE SAME ISSUE HAS BEEN DECIDED AS UNDER: 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. IT IS AN ADMITTED POSITION THAT THE ASSESSEE AN INDIVIDUAL CARRYING ON THE BUSINESS OF AYURVEDIC (COSMETIC DIVISION) AND THE CONSULTANC Y ON BEAUTICIAN AND ALSO RELATED THERAPIES. AS CLAIMED BY THE ASSESSEE, WHETHER THE PROVISIONS OF SECTION 194(1) AS EXISTED IN ASSESSMENT YEARS 2006-07 & 2007-08 WILL APPLY TO THE ASSESSEE OR NOT? ADMITTEDLY, ASSESSEE HAS NOT DEDUCTED ANY TDS ON AD VERTISEMENT PAYMENT AND ACCORDING TO HER, PROVISIONS OF SECTION 194C(1) AS EXISTED IN THE RELEVANT ASSESSMENT YEARS WILL NOT OBLITERATE ANY DUTY ON ASSESSEE TO D EDUCT TDS. NOW, WE HAVE TO EXAMINE THIS. THE RELEVANT PROVISIONS OF SECTION 194C(1) & (2) AS EXIST IN ASSESSMENT YEAR 2006- 07 & 2007-08 READS AS UNDER :- (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO A NY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTR ACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING O UT 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 CENTR AL, STATE OR PROVINCIAL ACT ; OR 3 (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 PURPO SE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOW NS AND VILLAGES, OR FOR BOTH ; OR (G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGI STRATION ACT, 1860 (21 OF 1860), OR UNDER ANY LAW CORRESPONDING T O THAT ACT IN FORCE IN ANY PART OF INDIA ; OR (H) ANY TRUST ; OR (I) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY O R UNDER A CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSIT Y GRANTS COMMISSION ACT, 1956 (3 OF 1956), OR (J) ANY FIRM, SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CAS H 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. (2) ANY PERSON (BEING A CONTRACTOR AND NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY) RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE SUB-CONTRACTOR) IN PURSUANCE OF A CONTRACT WITH THE SUB-CONTRACTOR FOR CARRYING OUT, OR FOR THE SUPPLY OF LABOUR FOR CARRYING OUT, THE W HOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR OR FOR SUP PLYING WHETHER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTRACTOR HA S UNDERTAKEN TO SUPPLY SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE SUB-CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVE R IS EARLIER, DEDUCT AN AMOUNT EQUAL TO ONE PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. XXXX XXXX XXXX 4 6. FROM THE ABOVE PROVISIONS OF SECTION 194C(1), IT IS CLEAR THAT THE PAYMENTS MADE BY INDIVIDUAL OR HINDU UNDIVIDED FAMILY DOES N OT COME WITHIN THE AMBIT OF TDS I.E. THE EXPENDITURE INCURRED FOR ADVERTISEM ENT AS INDIVIDUAL AND HUF ARE SPECIFICALLY EXCLUDED IN THE ABOVE PROVISIONS. THE PROVISION OF SUB-SECTION (2) APPLIES ONLY TO PAYMENTS MADE TO SUB-CONTRACTOR S AND NOT TO CONTRACTORS. ACCORDINGLY, ASSESSING OFFICER CAN NOT MADE DISALLO WANCE BY INVOKING PROVISIONS OF SECTION 40A(IA), AS PRESENT ASSESSEE BEING AN INDIVIDUAL IS NOT LIABLE TO DEDUCT TAX IN VIEW OF PROVISIONS OF SECTI ON 194C(1) AS EXISTED IN THE RELEVANT ASSESSMENT YEARS. NO DOUBT, ASSESSEES TUR NOVER EXCEEDS THE MONETARY LIMIT AS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) O F SECTION 44AB AND THE ASSESSEES ACCOUNTS ARE SUBJECT TO AUDIT AND THE AS SESSEE HAS AUDITED HER ACCOUNTS AND FILED TAX AUDIT REPORT ALONG WITH RETU RN OF INCOME. WE FIND THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE IN VIEW OF THE AMENDED PROVISIONS OF SECTION 194C(1) BY THE FINANCE ACT, 2007 WITH EF FECT FROM 01.06.2007 WHEREIN IT IS PROPOSED TO AMEND SUB-SECTION (1) IN SECTION 194C SO AS TO INCLUDE PAYMENTS MADE BY ANY INDIVIDUAL OR HINDU UNDIVIDED FAMILY WHOSE TOTAL SALES / GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PRO FESSION CARRIED ON BY HIM EXCEED MONETARY LIMIT SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OR SECTION 44AB DURING THE FINANCIAL YEAR OR IMMEDIATELY PRECEDING FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTR ACTOR. THIS AMENDMENT TAKES EFFECT FROM 1 ST DAY OF JUNE, 2007 AND IS APPLICABLE FOR AND FROM A SSESSMENT YEAR 2008-09. IN SECTION 194C(1) WITH EFFECT FROM 01.06. 2007, BY THE FINANCE ACT, 2007, CLAUSE AS INSERTED, READS AS UNDER :- (K) ANY INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WH OSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIF IED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANC IAL 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 ACCOUNT OF THE CONTRAC TOR 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 AMO UNT 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 : PROVIDED THAT NO INDIVIDUAL OR A HINDU UNDIVIDED FA MILY SHALL BE LIABLE TO DEDUCT INCOME-TAX ON THE SUM CRE DITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR WHERE SUCH SUM IS CRE DITED OR PAID EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDIVIDUA L OR ANY MEMBER OF HINDU UNDIVIDED FAMILY. 7. WE FIND FROM THE ARGUMENTS OF LD.SR. DR THAT REV ENUE WANT TO INVOKE PROVISIONS OF SUB-SECTION (2) OF SECTION 194C FOR F URTHERANCE OF THIS CASE BUT WE ARE OF THE CONSIDERED VIEW THAT SECTION 194C(2) WIL L APPLY TO THE PAYMENTS MADE TO SUB-CONTRACTORS BY THE CONTRACTOR AND NOT BY THE ASSESSEE. IN THE PRESENT CASE, IT IS AN ADMITTED POSITION THAT THE ASSESSEE HAS MADE PAYMENTS ON ADVERTISEMENT TO THE CONTRACTORS AND NOT TO SUB-CON TRACTORS. FURTHER AS REFERRED BY LD. COUNSEL FOR THE ASSESSEE, THIS PROVISION WAS EXPLAINED BY CBDT CIRCULAR 5 NO.3 OF 2008 DATED 12.03.2008 WHICH IS REPORTED IN (2008)299 ITR 8 (STATUTE) AND THE RELEVANT CIRCULAR AS REPORTED AT PAGE 71, R EADS AS UNDER :- 54. EXPANSION OF SCOPE OF THE PROVISIONS OF SECTIO N 194C. 54.1 THE EXISTING PROVISIONS OF SUB-SECTION (1) OF SECTION 194C PROVIDED FOR DEDUCTION OF INCOME-TAX AT SOURCE FROM ANY SUM CREDITED OR PAID TO THE RESIDENT CONTRACTOR FOR CAR RYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND THE GOVERNMENT, LOCAL AUTHORITIES, STATUTORY CORPORATIO NS, COMPANIES, CO-OPERATIVE SOCIETIES, STATUTORY AUTHORITIES ENGAG ED IN PROVIDING HOUSING ACCOMMODATION, ETC., REGISTERED SOCIETIES, TRUSTS, UNIVERSITIES AND FIRMS. THE RATE OF TDS IS 1% IN RE SPECT OF ADVERTISING CONTRACTS AND 2% IN OTHER CASES. 54.2 THE EXISTING PROVISIONS OF SUB-SECTION (1) OF SECTION 194C DID NOT PROVIDE FOR DEDUCTION OF TAX AT SOURCE ON PAYME NTS MADE BY AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY TO A CONTRAC TOR. 54.3 CONSIDERING THE RISING NUMBER OF CONTRACTS BEI NG AWARDED BY INDIVIDUALS AND HUFS CARRYING ON BUSINESS OR PROFES SION AND THE INCREASING VOLUME OF SUCH PAYMENTS TO CONTRACTORS, IT WAS FELT THAT THERE IS NEED TO REQUIRE SUCH PERSONS TO DEDUCT TAX AT SOURCE FROM PAYMENTS MADE BY THEM TO CONTRACTORS. 54.4 THERE WOULD BE GENUINE DIFFICULTIES IF INDIVID UALS OR HUFS WITH SMALL BUSINESS TURNOVERS OR GROSS RECEIPTS OF PROFESSION ARE REQUIRED TO DEDUCT TAX AT SOURCE. AN EXCEPTION IN S UCH CASES WOULD BE JUSTIFIED. SIMILARLY THE CONTRACTS AWARDED BY AN INDIVIDUAL OR A MEMBER OF HUF OF HUF EXCLUSIVELY FOR PERSONAL PURPO SES MERIT EXCLUSION. 54.5 ACCORDINGLY, THE FINANCE ACT, 2007, HAS SUBSTI TUTED THE SAID SUB-SECTION (1) TO INCLUDE IN ITS AMBIT SUCH I NDIVIDUAL OR A HINDU UNDIVIDED WHOSE TOTAL SALES, GROSS RECEIPTS O R TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON EXCEED THE MO NETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING FINANCIAL YEAR IN WHICH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR. THIS AMENDMENT SHALL NOT APPLY IN RESPECT OF PAYMENTS MADE TO A CO NTRACTOR BY ANY INDIVIDUAL OR A MEMBER OF A HINDU UNDIVIDED FAMILY EXCLUSIVELY FOR THEIR PERSONAL PURPOSES. 54.6 APPLICABILITY - THIS AMENDMENT WILL TAKE EFFEC T FROM THE 1ST DAY OF JUNE, 2007. 8. IN VIEW OF THE ABOVE CLEAR PROVISIONS OF SECTION 194(1) AS EXISTING IN ASSESSMENT YEARS 2006-07 & 2007-08, I.E. RELEVANT A SSESSMENT YEARS IN THE PRESENT APPEALS, IT IS CLEAR THAT THE ASSESSEE IS U NDER NO OBLIGATION TO DEDUCT TDS ON THE EXPENDITURE OF ADVERTISEMENT, AS THE ASS ESSEE BEING AN 6 INDIVIDUAL, AND THE CLAIM OF THE ASSESSEE IS AS PER PROVISIONS OF LAW. ONCE THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS UNDER THE PROVISION OF SECTION 194C(1), THE PROVISIONS OF SECTION 40A(IA) FOR MAKI NG DISALLOWANCE OF EXPENDITURE FOR NON-DEDUCTION OF TDS WILL NOT APPLY . WE FURTHER FIND THAT, IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENSES AR E BOGUS OR UNREASONABLE OR EXCESSIVE BUT THE DISALLOWANCE IS MADE MERELY FO R NON-DEDUCTION OF TDS. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT CIT (A) HAS RIGHTLY DELETED THE DISALLOWANCE AND WE CONFIRM THE SAME. 10. AS THE ISSUE RAISED BY THE ASSESSEE AND REVENUE IS EXACTLY ON SIMILAR FACTS IN THE PRESENT CASE, TAKING A CONSISTENT VIEW, WE A RE OF THE VIEW THAT THE AMENDED PROVISIONS OF SECTION 194C(1) OF THE ACT WI LL NOT APPLY TO THE PRESENT ASSESSMENT YEAR ON THE ASSESSEE. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE DECISION CITED SUPRA, WE DISMISS THE REVENUES GROUND OF APPEAL AND ALLOW THIS GROUND IN FAVOUR OF ASSESSEE. 4. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- , MAHAVIR SINGH, JUDICIAL MEMBER . . , , C.D.RAO, ACCOUNTANT MEMBER. ( ) DATE: 12.03.2012. R.G.(P.S.) - ( &. /.'0 - COPY OF THE ORDER FORWARDED TO: 1. SRI SANDEEP RAY, 73/1B, PALM AVENUE, KOLKATA-70001 9. 2 I.T.O., WARD-30(3), KOLKATA. 3. THE C.I.T. 4. CIT(A)-XIV, KOLKATA. 5. THE CIT(DR), KOLKATA BENCHES, KOLKATA ' . & / TRUE COPY, - * / BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES