Shri Shivgaya Ramkuar Gupta, Pune V. ITO, Ward 9(2), Pune

ITA 1655/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93844 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.1654 AND 1655/PN/2013 (ASSESSMENT YEARS : 2007-08 & 2009-10) SHRI SHIVGAYA RAMKUMAR GUPTA M/S. GUPTA PLAST ENGINEERING, GAT NO.170, GANESH NAGAR, TALAWADE, PUNE 412 114 PAN NO.AFCPG4983R .. APPELLANT VS. DCIT, CIRCLE-9, PUNE .. RESPONDENT APPELLANT BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 25-06-2015 DATE OF PRONOUNCEMENT : 26-06-2015 ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 28-06-2013 OF THE CIT(A)-V, PUNE RELATING TO ASSESSMENT YEARS 2007-08 AND 2009- 10 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE, THESE WERE H EARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP ITA NO.1654/PN/2013 FOR A.Y. 2007-08 AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A JOB WORKER CARRYING OUT PROCESSING OF MATERIAL ON BEHALF O F CUSTOMERS. HE FILED HIS RETURN OF INCOME ON 26-09-2007 D ECLARING TOTAL INCOME OF RS.12,01,558/-. DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE TAX AUD ITOR IN THE FORM NO.3CB AND 3CD HAS REPORTED THAT NO TDS WAS MAD E IN RESPECT OF LABOUR CHARGES OF RS.69,23,135/- DEBITED TO TH E PROFIT AND LOSS ACCOUNT. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO 2 WHY THE ASSESSEE HAS NOT DISALLOWED THE SAME AT THE TIM E OF FILING OF THE RETURN AS THE SAID LABOUR CHARGES DEBITED TO THE PROFIT AND LOSS ACCOUNT IS NOT ALLOWABLE U/S.40(A)(IA). IT WAS ACCEPTED B Y THE ASSESSEE THAT NO TDS WAS MADE IN RESPECT OF THE LABOUR CHARGES AND ALSO THE SAID LABOUR CHARGES WERE NOT DISALLOWED AT T HE TIME OF FILING OF RETURN. THE ASSESSING OFFICER, THEREFORE, DISALLOWED AN AMOUNT OF RS.69,23,135/- TO THE TOTAL INCOME OF THE ASSESS EE U/S.40(A)(IA) OF THE I.T. ACT. (SIMILAR DISALLOWANCE HAS BEEN MAD E BY THE ASSESSING OFFICER AMOUNTING TO RS.43,05,047/- IN A.Y. 200 9- 10). 3. BEFORE CIT(A) IT WAS SUBMITTED THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE AS NO AMOUNT WAS OUTSTANDING AT THE END OF THE YEAR. FOR THE ABOVE PROPOSITION THE ASSESSEE RELIED UPON THE DECISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRI BUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS LTD. REPOR TED IN 145 TTJ 1. HOWEVER, THE LD.CIT(A) FOLLOWING THE DECISION OF TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SIKANDA R KHAN N. TUNVAR ORDER DATED 02-05-2013 AND THE DECISION OF TH E HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPO RT SYNDICATE ORDER DATED 03-04-2013 HELD THAT THE DECISION OF THE SPECIAL BENCH IS NOT THE CORRECT LAW. HE ACCORDINGLY UP HELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S.40(A)(IA). 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALL OWANCE OF RS. 69,23,135/- U/S 40(A)(IA) MADE BY THE LEARNED A.O. O N THE GROUND THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS ON THE LABOUR C HARGES PAID OF RS. 69,23,135/-. 3 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT A. THE PAYMENT OF LABOUR CHARGES BY THE ASSESSEE WERE IN THE NATURE OF SUB CONTRACT PAYMENTS AND HENCE, THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS ON THE SAID PAYMENTS. B. THE ASSESSEE HAD ALLOTTED SUB CONTRACTS TO OTHER PARTI ES AND HENCE, THE ASSESSEE WAS LIABLE TO DEDUCT TDS UNDER THE PROVISION S OF SECTION 194C(2) OF THE ACT. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E DISALLOWANCE U/S 40(A)(IA) WAS NOT JUSTIFIED FOR THE FOLLOWING REASONS A. THE JOB WORK CONTRACTS GIVEN BY THE ASSESSEE TO OTHE R PARTIES DID NOT INVOLVE THE TRANSFER OF ANY OBLIGATIONS OR RISKS AT TACHED TO THE PRINCIPAL CONTRACT RECEIVED BY THE ASSESSEE AND HENCE, THE SAID CONTRACTS WERE NOT IN THE NATURE OF 'SUBCONTRACTS'. B. THE ASSESSEE HAD ENTERED INTO SEPARATE CONTRACTS WITH THE OTHER PARTIES FOR JOB WORK WHICH WERE INDEPENDENT FROM THE PRINCIPAL CONTRACT RECEIVED BY THE ASSESSEE AND HENCE, THE SAID CO NTRACTS WERE NOT IN THE NATURE OF 'SUB CONTRACTS'. C. SINCE THE ASSESSEE HAD NOT ENTERED INTO ANY SUB CO NTRACTS, HE WAS NOT REQUIRED TO DEDUCT TDS U/S. 194C(2) OF THE ACT AND HENCE, THE DISALLOWANCE U/S. 40(A)(IA) IS NOT JUSTIFIED ON THE FA CTS OF THE CASE. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSEE SUBM ITS THE FOLLOWING GROUNDS : 4. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DISALLOWANCE U/S.40(A)(IA) CAN BE MADE ONLY IN RESPECT OF THE AMOU NT PAYABLE AS AT THE YEAR END AND HENCE, EVEN IF, ANY DISALLOWANCE IS TO BE MADE, THE SAME MAY BE RESTRICTED TO THE AMOUNT PAYABLE AS ON 31- 03-2007. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT THE ISSUE REGARDING THE DISALLOWANCE U/S.40(A)(IA) WHEN N O AMOUNT IS PAYABLE AT THE END OF THE YEAR IS DECIDED AGAI NST THE ASSESSEE BY THE DECISIONS OF THE COORDINATE BENCHES OF T HE TRIBUNAL. HOWEVER, REFERRING TO GROUND OF APPEAL NO.3 HE SUBMITTED THAT THE JOB WORK CONTRACTS GIVEN BY THE AS SESSEE TO OTHER PARTIES DID NOT INVOLVE THE TRANSFER OF ANY OBLIGATION S OR RISKS ATTACHED TO THE PRINCIPAL CONTRACT RECEIVED AND THEREFOR E THE SAID 4 CONTRACTS WERE NOT IN THE NATURE OF SUB-CONTRACT AND THEREFORE THE ASSESSEE IS NOT REQUIRED TO DEDUCT TDS U/S.194C(2). 5.1 REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF SHRI PREMPRAKASH VISHWAKARMA VIDE ITA NO.325/PN/2013 ORDER DATED 30-06-2014 HE SUBMITTED TH AT UNDER IDENTICAL CIRCUMSTANCES, THE TRIBUNAL HAS DELETED THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER U/S.40(A)(IA) AND UPHELD BY THE CIT(A). HE SUBMITTED THAT ALTHOUGH THIS ARGUMENT WAS NO T RAISED BEFORE THE LOWER AUTHORITIES, HOWEVER, SINCE THIS IS A LEGAL GROUND AND ASSESSEE DENIES ITS LIABILITY FOR DEDUCTION OF TAX U/S.194 C(2), THEREFORE, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGH T OF THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI PREMPRAKASH VISHWAKARMA (SUPRA). 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND WHILE SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT TH E ARGUMENTS ADVANCED BY THE ASSESSEE WERE NOT TAKEN B EFORE THE LOWER AUTHORITIES. THEREFORE, THE SAME SHOULD NOT BE ACCE PTED AND THE APPEAL FILED BY THE ASSESSEE SHOULD BE DISMISSED. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE H AVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIN D THE ASSESSING OFFICER IN THE INSTANT CASE DISALLOWED AN AMOUNT OF RS.69,23,135/- U/S.40(A)(IA) SINCE THE ASSESSEE HAS NOT DEDUC TED TDS ON THE LABOUR CHARGES PAID OF THE EQUAL AMOUNT. WE FIND THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER ON ACCOUNT OF SUCH DEFAULT IN DEDUCTING TDS FROM THE LABOUR CHARGES PAI D. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE JOB 5 WORK CONTRACTS GIVEN BY THE ASSESSEE TO OTHER PARTIES DID NOT INVOLVE TRANSFER OF ANY OBLIGATIONS OR RISKS ATTACHED TO TH E PRINCIPAL CONTRACT RECEIVED BY THE ASSESSEE AND THEREFORE THE S AID CONTRACTS WERE NOT IN THE NATURE OF SUB CONTRACTS AND THEREFORE THERE IS NO LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT TDS U/S.19 4C(2) OF THE I.T. ACT. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFO RE THE TRIBUNAL IN THE CASE OF PRAMPRAKASH VISHWAKARMA (SUPRA) W HERE IT HAS BEEN OBSERVED AS UNDER : 3.3 NOW, THE ISSUE ARISES IS AS TO WHETHER THE LABOUR CH ARGES PAID BY THE ASSESSEE ARE IN THE NATURE OF CONTRACT AWARDED B Y THE ASSESSEE OR SUB CONTRACT AWARDED. THE CUSTOMER PROVIDES THE RA W MATERIAL TO THE ASSESSEE FOR CARRYING OUT CERTAIN JOB WORK. SINCE THE ASSESSEE DO NOT HAVE CERTAIN MACHINES AND HENCE, THE ASSESSEE IN TU RN, GIVES THE CONTRACT TO OTHER LABOUR CONTRACTORS TO CARRY OUT PA RT OF THE JOB. ULTIMATELY THE ASSESSEE IS LIABLE FOR THE WORK CARRIED OUT BY THEM. THIS IS EVIDENT FROM THE PURCHASE ORDER FROM JINABAKUL FORGE PVT. LTD. FOR WHOM THE ASSESSEE DO THE JOB WORK, WHEREIN IT IS CLE ARLY MENTIONED THAT REJECTION UPTO 1% IS ALLOWED AND REJE CTION MORE THAN 1% WOULD BE TO THE ASSESSEE'S ACCOUNT. WHEN THE ASSESSEE G IVES THE CONTRACT TO THE OTHER LABOUR CONTRACTOR, IT IS A CO NTRACT BETWEEN THE ASSESSEE AND THE LABOUR CONTRACTOR AND THE ORIGINAL CUST OMER IS NOT AT ALL INVOLVED IN THE SAME. IN CASE, THE LABOUR CONTR ACTOR DOES NOT CARRY OUT THE JOB OR DOES A FAULTY JOB, THE ASSESSEE IS LIABLE TO THE ULTIMATE CUSTOMER AND NOT THE LABOUR CONTRACTOR. ACCORDINGLY , THAT THE LABOUR CONTRACT GIVEN BY THE ASSESSEE IS IN THE NATURE OF SEPAR ATE CONTRACT OF WORK AND THEREFORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TD S UNDER THE PROVISIONS OF SECTION 194C. 3.4 THE ASSESSEE IS FULLY RESPONSIBLE FOR EXECUTING THE M AIN CONTRACT AND THE LABOUR CONTRACTOR HAS NO RELATION W ITH THE PRINCIPAL JINABAKUL FORGE PVT. LTD. ONE OF THE MAIN FEATURES FOR A CONTRACT TO QUALIFY AS A SUBCONTRACT IS THAT THE SUBCONTRACTOR SHOUL D BE ELIGIBLE NOT JUST FOR THE REWARDS BUT ALSO RISK ASSOCIATED WITH TH E EXECUTION OF THE MAIN CONTRACT OF THE PRINCIPAL. THE MAIN ELEME NT OF RISK OF THE ALLEGED SUBCONTRACT IS MISSING IN ASSESSEE'S CASE AND THEREFO RE, THE PAYMENTS MADE BY THE ASSESSEE TO VARIOUS LABOUR CONTRACTO RS FOR ABOVE MENTIONED WORKS COULD NOT SAID TO BE AS PAYMENT TO SUBCONTRACTOR. THE PROVISIONS OF SECTION 194C(2) DEALS WITH PAYMENTS TO CONTRACTORS. ACCORDINGLY, IN CASE ANY PERSO N RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT A NY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND SP ECIFIED PERSON SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT 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, DE DUCT TAX AT SOURCE AS STIPULATED UNDER THE PROVISIONS OF SECTION 194(2) OF THE ACT. 3.5 THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DEA LS WITH THE DEDUCTIBILITY OF AMOUNT DEDUCTIBLE AND RELEVANT CLA USE READS AS UNDER: 6 'NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINE SS OR PROFESSION'. (A). IN THE CASE OF ANY ASSESSEE ... (I). (IA) ANY INTEREST, COMMISSION OR BROKERAGE [RENT, ROYA LTY], FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICES PAYAB LE TO A RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUBCON TRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION (HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIE D IN SUB-SECTION (1) OF SECTION 139.' 3.6 THE ASSESSEE HAS IN FACT, ENGAGED VARIOUS LABOUR CON TRACTORS AS DISCUSSED ABOVE FOR WHICH, THE ASSESSEE HIMSELF WAS RESPONSIBL E FOR EXECUTING THE CONTRACT AND THE LABOUR CONTRACTORS HA D NO PRIVACY OF CONTRACT WITH PRINCIPAL CUSTOMER. NO RISK FACTOR WAS A SSOCIATED WITH THE ALLEGED SUBCONTRACT. THE WHOLE CONTROL OF THE W ORK WAS IN THE HANDS OF THE ASSESSEE AND LABOUR CONTRACT WAS EXECUTED UN DER THE FULL CONTROL OF THE ASSESSEE HIMSELF. FOR A CONTRACT TO QUAL IFY AS A SUBCONTRACTOR, THE SUBCONTRACTOR SHOULD SPEND THEIR TIM E AND ENERGY AND ALSO UNDERTAKE THE RISK ATTACHED WITH THE MAIN CO NTRACT. AS THE ELEMENT OF RISK TAKING WAS MISSING, THE CONTRACT COULD NOT BE HELD AS SUBCONTRACT. ACCORDINGLY, THE PAYMENTS MADE TO THE L ABOUR CONTRACTORS ARE NOT IN THE NATURE OF SUB-CONTRACTS AND HENCE, THERE WAS NO OBLIGATION ON THE ASSESSEE TO DEDUCT TDS ON THE SA ID PAYMENTS AND CONSEQUENTLY, NO DISALLOWANCE COULD BE MADE U/S. 4 0(A)(IA) OF THE ACT. 3.7 WE FIND THAT ITAT, PUNE BENCH IN THE CASE OF MR. VIJAY RAMCHANDRA SHIRSTH (SUPRA) HAD OCCASION TO DECIDE THE SAME ISSUE WHICH WAS DEALT AS UNDER: 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE WAS AWARDE D THE CONTRACT ON THE BASIS OF PARTICIPATION IN VARIOUS TEND ERS. FOR EXECUTING THE CONTRACT, THE ASSESSEE HAD TO ENGAGE THE SERVICES OF OUTSIDE PARTIES IN VARIOUS WORKS. TO BE PRECISE, THE A SSESSEE ENGAGED THE SERVICES OF OUTSIDE PARTIES FOR CENTRING, TILING AN D FABRICATION WORK AND TILING WORKS, FOR WHICH PAYMENTS EXCEEDED RS.50,00 0 IN EACH CASE. THE ASSESSEE IS CARRYING ON CIVIL WORK IN INDIVIDUAL CAP ACITY. 5.1. THE PROVISIONS OF SECTION 194C(2), DEALS WITH PAYM ENTS TO CONTRACTORS . ACCORDINGLY, IN CASE ANY PERSON RESPONSIB LE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND SPECIFIED PERSON SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTO R OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DR AFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT TAX AT SOURC E AS STIPULATED UNDER THE PROVISIONS OF SECTION 194(2) OF THE ACT. THE PROVISIONS OF SECTION 40(A)(IA) DEALS WITH THE DEDU CTIBILITY OF AMOUNT DEDUCTIBLE AND RELEVANT CLAUSE READS AS UNDER: NOTWITHSTANDING 7 5.2. THE ISSUE BEFORE US IS WHETHER PAYMENT HAS BEEN MA DE FOR CENTRING, TILING AND FABRICATION WORK AMOUNTS TO PAY MENT TO CONTRACTOR OR SUB-CONTRACTOR SO AS TO INVOKE PROVISIONS OF SECTION 194C (2) FOR THE PURPOSE OF TDS AND ALLOWABILITY OF SAME AS PER PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE FIND FROM THE SAMPLE COPY OF TENDER DOCUMENT OF SAGUNA WHERE IN ONE OF T HE CONDITION BETWEEN THE PRINCIPAL AND THE ASSESSEE IN RESPECT OF THE CONTRACT TO BE EXECUTED IS THAT THE ASSESSEE WAS PROHIBITED TO SUBCONTRA CT ANY PART OF HIS WORK WITHOUT WRITTEN PERMISSION OF ARCHITECT/CO MPANY. THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY SUCH WRITTEN PERMISSION OR OTHER WORK WAS CLAIMED BY THE ASSESSEE. EVEN THE REMAND REPORT IN THIS REGARD WAS CALLED FOR IN A.Y. 2006-07, HOWEVER, THE CIT(A) CONCLUDED BY STATING THAT THE ASSESSEE COULD NOT TAKE SH ELTER OF THIS CLAUSE AND THE PAYMENTS MADE WERE PAYMENTS TOWARDS SUBCONTRACTING. THIS APPROACH OF THE REVENUE IS NOT J USTIFIED BECAUSE THE BURDEN IS ON THE REVENUE TO ESTABLISH THAT THE ASSESSE E, IN FACT, HAS VIOLATED THE TERMS OF CONDITIONS OF SUBCONTRACTING THE CONTRACT GRANTED BY THE PRINCIPAL. THE ASSESSEE HAS IN FACT ENG AGED VARIOUS AGENCIES AS DISCUSSED ABOVE FOR WHICH, THE ASSESSEE ITSELF WA S RESPONSIBLE FOR EXECUTING THE CONTRACT AND ALLEGED AG ENCIES OF SUBCONTRACT HAD NO PRIVACY OF CONTRACT WITH PRINCIPA L. NO RISK FACTOR WAS ASSOCIATED WITH THE ALLEGED SUBCONTRACT. THE WHOLE CONTROL OF THE WORK WAS IN THE HANDS OF THE ASSESSEE AND ALLEGED SUBCONT RACT WORK WAS EXECUTED I.E. CENTRING, TILING AND FABRICATION W ORK UNDER THE FULL CONTROL OF THE ASSESSEE ITSELF. THERE ARE NO SUCH DISCRETI ON WITH ALLEGED SUBCONTRACTOR FOR EXECUTING THE ABOVE WORKS. THEY WE RE EXECUTING THE WORK AS PER REQUIREMENT OF TENDER UNDER FULL CON TROL AND SUPERVISION OF ASSESSEE. THIS VIEW IS FORTIFIED BY THE DEC ISION IN THE CASE OF MYHTRI TRANSPORT CORPORATION VS. ACIT, 124 ITD 40(VISHAKHAPATNAM), WHEREIN THE TRIBUNAL HAS HELD THA T FOR A CONTRACT TO QUALIFY AS A SUBCONTRACTOR, THE SUBCONTRAC TOR SHOULD SPEND THEIR TIME AND ENERGY AND ALSO UNDERTAKE THE RISK ATT ACHED WITH THE MAIN CONTRACT. AS THE ELEMENT OF RISK TAKING WAS MISSIN G, THE CONTRACT COULD NOT BE HELD AS SUBCONTRACT. WHILE PASSING THE ABO VE SAID ORDER, THE TRIBUNAL HAS TAKEN INTO CONSIDERATION THE DECISION REPORTED IN 163 ITR 702 (HIMACHAL). SIMILARLY, IN THE CASE OF R.R. C ARRYING CORPORATION VS. ACIT, 126 TTJ 2240(/CTK), IT HAS BEEN HELD BY THE TRIBUNAL THAT THE AO HAS TO ESTABLISH THAT RELATIONSHIP WAS THAT OF A CONTRACTOR AND SUBCONTRACTOR. THERE WAS NO WRITTEN NOR REAL AGREEME NT TO SUBSTANTIATE THE VIEW TAKEN BY THE AO AND THEREFORE, IT CANNOT BE HELD TO BE A CONTRACT. WE ARE AWARE OF THE FACT THAT THE AGREEMENT CAN BE ORAL BUT THE ESSENCE OF CONTRACT LIES ON THE FACT WHE THER ASSESSEE HAD THE CONTROL OF THE WORK I.E. THE MANNER IN WHICH TH E WORK HAS TO BE DONE. IN CASE IT LIES WITH THE ASSESSEE THEN IT IS NOT THE SUBCONTRACT SO AS TO ATTRACT THE PROVISIONS OF SECTION 194C(2) OF THE ACT AND SUBSEQUENTLY THE RIGOUR OF SECTION 40(A)(IA) WOULD NOT COME INTO PLAY FOR EXECUTING CENTRING, TILING AND FABRICATION THRO UGH DIFFERENT PERSONS. IN INSTANT CASE, THE CONTROL LIES WITH THE ASSE SSEE AND THE ALLEGED SUBCONTRACTOR ARE MERELY EXECUTING THE WORK OF CENTRING AND FABRICATION UNDER THE FULL CONTROL OF THE ASSESSEE ITSEL F. EVEN NOMENCLATURE USED BY PARTIES AS SUBCONTRACT DOES NOT CH ANGE THE REAL SPIRIT OF CONTRACT. UNDER FACTS AND CIRCUMSTANCES, REVE NUE AUTHORITIES WERE NOT JUSTIFIED IN MAKING DISALLOWANCE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. SAME IS DIRECTED TO BE DELETED. SIMILAR DISALLOWANCE HAS BEEN MADE IN THE YEAR 2006-07. FACTS BEING SIMILAR SO FOLLOWING SAME REASONING, DISALLOWANCE IN QUESTION AR E DIRECTED TO BE DELETED. 8 IN VIEW OF ABOVE DISCUSSION, WE FIND THAT IN THE CASE OF VIJAY RAMCHANDRA SHIRSTH (SUPRA), THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY FOLLOWING THE DECISION OF CUTTACK BENCH IN THE CASE OF R.R. CARRYING CORPORATION VS. ACIT, 126 TTJ 2 240(/CTK) AND IN TURN, THE SAME GOT STRENGTH FROM THE DECISION IN THE C ASE OF MYHTRI TRANSPORT CORPORATION VS. ACIT, 124 ITD 40 (VISHAKHAPA TNAM), WHEREIN THE TRIBUNAL HAS HELD THAT FOR A CONTRACT TO QUALIFY AS A SUBCONTRACTOR, THE SUBCONTRACTOR SHOULD SPEND THEIR TIM E AND ENERGY AND ALSO UNDERTAKE THE RISK ATTACHED WITH THE MAIN CO NTRACT. AS THE ELEMENT OF RISK WAS MISSING, THE CONTRACT COULD NOT BE HELD AS SUBCONTRACT. 4. IN THE CASE BEFORE US, THERE IS NO WRITTEN OR REAL AGREEMENT TO SUBSTANTIATE THE VIEW TAKEN BY THE ASSESSING OFFICER AND THEREFORE, IT COULD NOT BE HELD TO BE A CONTRACT. WE ARE AWARE O F THE FACT THAT THE AGREEMENT CAN BE ORAL BUT THE ESSENCE OF CONTRACT LIE S ON THE FACT WHETHER ASSESSEE HAD THE CONTROL OF THE WORK I.E. THE M ANNER IN WHICH THE WORK HAS TO BE DONE. IN CASE IT LIES WITH THE ASSESSE E THEN IT IS NOT THE SUBCONTRACT SO AS TO ATTRACT THE PROVISIONS OF SECTIO N 194C(2) OF THE ACT AND SUBSEQUENTLY THE RIGOUR OF SECTION 40(A)(I A) WOULD NOT COME INTO PLAY FOR EXECUTING WORK OF ROUGHING AND F INISHING OF JOB WORK. UNDER THE FACTS AND CIRCUMSTANCES, THE AUTHORIT IES BELOW WERE NOT JUSTIFIED IN MAKING DISALLOWANCE U/S.40(A)(IA). T HE SAME IS DIRECTED TO BE DELETED. BEFORE PARTING WITH THIS DE CISION WE WANT TO MAKE IT CLEAR THAT THE ALTERNATIVE PLEA TAKEN BY TH E ASSESSEE ON LEGAL ISSUE GOES ACADEMIC. SO, WE ARE NOT ADDRESSING THE SAME. HOWEVER, THE ASSESSEE IS AT LIBERTY TO RAISE THE SAME AS AND WHEN NE ED ARISES. 7.1 SINCE THE ARGUMENT THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX U/S.194C(2) IS ADVANCED BEFORE US FOR THE FIRST TIME AND THE LOWER AUTHORITIES HAVE NO OCCASION TO DECIDE THE ISSUE FRO M THIS ANGLE, THEREFORE, WE IN THE INTEREST OF JUSTICE, DEEM IT PROP ER TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DEC ISION OF THE TRIBUNAL CITED (SUPRA) AND IN ACCORDANCE WITH LAW. NE EDLESS TO SAY THE ASSESSING OFFICER SHALL GIVE DUE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUN D OF APPEAL NO.3 BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. SINCE THE LD. COUNSEL FOR THE ASSESSEE HAS CONCEDED THAT THE ISSUE OF DISALLOWANCE U/S.40(A)(IA) WHEN NO AMOUNT IS PAYABLE AT THE END OF THE YEAR IS AGAINST THE ASSESSEE, THEREFORE, G ROUND OF APPEAL NO.4 BY THE ASSESSEE IS DISMISSED. 9 9. GROUNDS OF APPEAL NO. 1, 2 & 5 BEING GENERAL IN NATURE ARE DISMISSED. ITA NO.1655/PN/2013 (A.Y. 2009-10) : 10 THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALL OWANCE OF RS.43,05,047/- U/S 40(A)(IA) MADE BY THE LEARNED A.O. ON THE GROUND THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS ON THE LAB OUR CHARGES PAID OF RS. 43,05,047/-. 2. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DISALLOWANCE U/S.40(A)(IA) CAN BE MADE ONLY IN RESPECT OF THE AMOU NT PAYABLE AS AT THE YEAR END AND HENCE THE SAME MAY BE RESTRICTED TO THE AMOUNT PAYABLE AS ON 31-03-2009. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 11. FACTS IN BRIEF ARE THAT THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.43,05,047/- U/S.40(A)(IA) FOR NON-DEDUCTION OF TAX , THE DETAILS OF WHICH ARE AS UNDER : 1. LABOUR CHARGES RS.42,35,766/- 2. ACCOUNT WRITING CHARGES RS. 24,000/- 3. AUDIT FEES RS. 45,281/- -------------------- TOTAL RS.43,05,047/- -------------------- IN APPEAL THE LD.CIT(A) UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER, THE ASSESSE E IS IN APPEAL BEFORE US. 12. AFTER HEARING BOTH THE SIDES, WE FIND THE AMOUNT OF RS.42,35,766/-DISALLOWED U/S.40(A)(IA) ARE IDENTICAL TO THE FACTS IN ITA NO.1654/PN/2013. FOLLOWING THE REASONS STATED WHILE 10 DECIDING THE SAID APPEAL WE RESTORE THE ISSUE OF DISALLOWANC E U/S.40(A)(IA) ON ACCOUNT OF LABOUR CHARGES PAID AT RS.42,35,766 /- WITHOUT DEDUCTING TDS TO THE FILE OF THE ASSESSING OFFICER FO R FRESH ADJUDICATION IN THE LIGHT OF THE DIRECTIONS GIVEN THEREIN. 13. SO FAR AS THE DISALLOWANCE U/S.40(A)(IA) ON ACCOUNT OF NO N DEDUCTION OF TAX FROM ACCOUNT WRITING CHARGES RS.24,000/- AND AUDIT FEES RS.45,281/- NOTHING WAS BROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE SO AS TO TAKE A CONTRARY VIEW. THEREFORE, THE ORDER OF THE CIT(A) UPHOLDING THE DISALLOWANCE U/S.40(A)(IA) ON ACCOUNT OF ACCOUNT WRITING CHARGES AND AUDIT FEES IS UPHELD. GROUNDS RAISED BY THE ASSESSEE ARE ACCORDING LY PARTLY ALLOWED. 14. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26-06-2015. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED: 26 TH JUNE, 2015 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-V, PUNE 4. CIT-V, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE