M/s. A & R Enterprise, North 24 Parganas V. ITO, Ward - 51(1), Kolkata, Kolkata

ITA 1723/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83056 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 06-09-2010
• Court: TRIBUNAL
• Department Lawyers: RAJEMDRA PRASAD
• Assessee Lawyers: DIPAK KAR
• Section: 143(3); 133(6); 194C

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.1723/KOL/2010 #$ %&/ ASSESSMENT YEAR: 2006-07 M/S. A & R ENTERPRISE VS. I.T.O. WARD 51(1), K OLKATA T.N.BANERJEE ROAD, SUKCHAR, 24 PGS.(N), PIN 743 179 (PAN NO. AAIFA 9485 D) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 14.08.2014 DATE OF PRONOUNCEMENT: 28.08.2014 FOR THE RESPONDENT: SHRI RAJEMDRA PRASAD, JCIT, SR -DR FOR THE APPELLANT: SHRI DIPAK KAR, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THESE APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXII, KOLKATA IN APPEAL NO. 223/CIT(A)-XXXII/08-09/WD-51(1)/KOL DATED 18.05 .2010. ASSESSMENT WAS FRAMED BY ITO, WARD-51(1), KOLKATA U/S. 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORD ER DATED 31.12.2008. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF LABOUR CHARGES BY ASSESSING OFFICER FOR NON-DEDUCTION OF TDS U/S.194C OF THE ACT, BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS:- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C.I.T.(APPEALS)-XXXII, ERRED IN LAW AND WAS NOT JUSTIFIED IN HOLDING THAT THE ASSES SING OFFICER WAS FULLY JUSTIFIED IN DISALLOWING THE SUM OF RS.12,43,540/- AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND UP-HOLDING THE DISALLOWANCE MADE BY THE LD. ASSESSING OFFICER THUS IN EFFECT CONFIRMING THE IMPUGNED ASSESSMENT ORDER WHEREBY THE LD. ASSESSING OFFICER ARBITRARILY MADE ADDITION UNDER SECTION 40(A)(IA) OF A SUM OF RS.12,43,540/- AND AS SUCH TH E IMPUGNED ORDER IS BAD IN LAW AND LIABLE TO BE QUASHED.. 2. FOR THAT WHILE PASSING THE IMPUGNED ORDER THE LD . C.I.T.(APPEALS) DID NOT GIVE PROPER AND JUDICIOUS CONSIDERATION TO THE WRITTEN SUBMISSION O F THE APPELLANT AND THAT HE WAS WRONG IN STATING IN HIS ORDER THAT THE A/R CLAIMED THAT THE PERFORMANCE OF WORK AS PER ASSESSEES SPECIFICATION WAS NOT A WORKS CONTRACT AND HE ALSO WRONGLY RELIED ON CIRCULAR NO.681 2 ITA NO.1723/K/2010, M/S A & R ENTERPRISE AY 2 006-07 DATED 08.03.1994 ISSUED BY THE CBDT IGNORING THE LE GAL POSITION THAT THE CIRCULAR OF THE CBDDT CANNOT OVERRIDE THE PROVISIONS OF THE ACT AND IN ANY EVENT THE SAID CIRCULAR IS NOT APPLICABLE IN THE INSTANT CASE AND AS SUCH THE IMPU GNED ORDER IS BAD IN LAW AND LIABLE TO BE QUASHED. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE-FIRM IS E NGAGED IN THE MANUFACTURING OF BAKELITE MOLDING ITEMS. THE ASSESSING OFFICER DURING THE COU RSE OF ASSESSMENT PROCEEDINGS NOTICED THAT ASSESSEE HAS DEBITED A SUM OF RS.12,43,540/- UNDER THE HEAD LABOUR CHARGES TO PAY TO SIX PARTIES. THE ASSESSEE FURNISHED LIST OF PARTIES TO WHOM LABOUR CHARGES WERE PAID AND CONSEQUENTLY NOTICE U/S. 133(6) OF THE ACT WAS ISSU ED TO ALL SIX PARTIES OUT OF WHICH NOTICES OF FOUR PARTIES RETURNED UNSERVED WITH THE COMMENT NO T KNOWN AND REMAINING TWO PARTIES CONFIRMED RECEIPT OF LABOUR CHARGES. ACCORDING TO A O, ASSESSEE FAILED TO DEDUCT TDS UNDER THE PROVISIONS OF SEC. 194C OF THE ACT FOR PAYMENT OF L ABOUR CHARGES. HENCE, HE REQUIRED THE ASSESSEE TO EXPLAIN. THE ASSESSEE EXPLAINED VIDE LE TTER DATED 22-12-2008 AND THE REPLY IS AS UNDER:- (A) THAT BEING A SMALL TRADERS WE ARE NEITHER A CO NTRACTOR NOR A JOB WORKER. (B) THAT WE HAVE PAID THE AMOUNT TO THE MANUFACT URER OF BAKELITE MOLDING ITEMS. THAT THE PROVISIONS OF SEC. 194C NOT APPLY9 TO THE PAYMENT MADE TO THE MANUFACTURER. (D) THAT WE ARE ENTERED INTO AGREEMENT VERBALLY W ITH VARIOUS MANUFACTURERS TO WHO MANUFACTURE THE SAID ITEMS ACCORDING TO SPECIFICATI ONS DRAWINGS AND DESIGNS BY US. IT IS SIMPLY A TRANSACTION BETWEEN THE TRADER AND MANUFAC TURER. THIS IS NOT A WORKS CONTRACT. THE AO WAS OF THE OPINION THAT THE ASSESSEE FAILED TO DEDUCT TDS, HENCE ENTIRE LABOUR CHARGES ARE TO BE DISALLOWED IN VIEW OF THE PROVISIONS OF S EC. 40(A)(IA) OF THE ACT. ACCORDINGLY, HE MADE DISALLOWANCE. AGGRIEVED, ASSESSEE PREFERRED AP PEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND SUBMISSIONS OF THE A/R. THE A/R OF THE ASSESSEE HAD SUBMITTED DURING THE COURSE OF APPELLA TE PROCEEDINGS THAT THE ASSESSEE HAD PURCHASED RAW MATERIAL FROM THE MARKET AND SUPPLIED THE SAME TO OTHER PERSONS TO PERFORM THE JOB AS PER ASSESSEES SPECIFICATIONS AND REQUIREMEN TS. THOSE PERSONS RETURNED THE FINISHED PRODUCTS TO THE ASSESSEE AFTER PERFORMING SUCH JOB. FOR PERFORMING SUCH WORK THE ASSESSEE PAID LABOUR CHARGES TO THOSE PERSONS. THE A/R CLAIMED TH AT THE PERFORMANCE OF WORK AS PER ASSESSEES SPECIFICATIONS WAS NOT A WORKS CONTRACT THEREFORE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE TO THIS CASE. IN THIS CONNECTION REF ERENCE MAY BE MADE TO CIRCULAR NO. 681 DATED 08.03.1994 ISSUED BY THE CBDT. IN THE SAID CIRCULAR THE CBDT HAS CLARIFIED THAT THE PROCESSING OF GOODS SUPPLIED BY THE GOVERNMENT OR ANY OTHER SP ECIFIED PERSONS WHERE THE OWNERSHIP THE SUCH GOODS REMAINS AT ALL TIME WITH THE GOVERNMENT OR SUCH PERSONS WOULD FALL WITHIN THE SCOPE OF SECTION 194C OF THE ACT. THE CIRCULAR ALSO CLARI FIED THAT THE SAME POSITION WILL PREVAIL IN RESPECT OF THE CONTRACT FOR FABRICATION OF ANY ARTI CLE OR THING WHERE MATERIALS ARE SUPPLIED BY THE GOVERNMENT OR ANY OTHER SPECIFIED PERSONS AND T HE FABRICATION WORK IS DONE BY THE CONTRACTOR. THUS, WHERE THE GOODS ARE SUPPLIED BY A NY PERSONS TO ANOTHER PERSON FOR DOING A PARTICULARS JOB ON SUCH GOODS, IT WILL BE CONSIDERE D TO BE COVERED WITHIN THE MEANING OF WORK . 3 ITA NO.1723/K/2010, M/S A & R ENTERPRISE AY 2 006-07 AS IN THE INSTANT CASE, AS HAS BEEN CLARIFIED BY T HE A/R OF THE ASSESSEE, THE ASSESSEE HAD SUPPLIED THE MATERIAL TO OTHER PERSONS TO PERFORM J OB ON SUCH MATERIAL AND THOSE PERSONS RETURNED GOODS TO THE ASSESSEE AFTER PERFORMANCE OF THE JOB, SUCH A SITUATION CLEARLY FALL WITHIN THE AMBIT OF SECTION 194C, AS CLARIFIED BY CIRCULAR 681 AS STATED ABOVE. SINCE THE ASSESSEE HAD FAILED TO DEDUCT TAX FROM THE PAYMENTS MADE BY IT T HOSE PERSONS, THE ASSESSEE HAD FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 194C, THEREFO RE, THE AO WAS FULLY JUSTIFIED IN DISALLOWING THE SAID AMOUNT AS PER THE PROVISIONS OF SECTION 40 (A)(IA) OF THE ACT. THEREFORE, THE DISALLOWANCE OF THE SUM OF RS.12,43,540/- MADE BY THE AO IS UPHELD. AGGRIEVED, ASSESSEE NOW IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ONLY ISSUE BEFORE US IS WHETHER THERE IS A CONTRACT FOR HIRING OF LABOURS OR NOT? ADMITTEDLY, THE ASSESSEE HAS DEBITED LABOUR EX PENSES PAID TO SIX LABOUR CONTRACTORS. DEFINITELY, ONCE THE HIRING IS MADE, THE CONTRACT E XISTS, AS TO WHETHER VERBAL OR WRITTEN. ONCE THERE IS A VERBAL CONTRACT THE PROVISION OF SECTION 194C WILL APPLY AND ONCE PROVISIONS OF SECTION 194C APPLY THE PROVISIONS OF 40(A)(IA) OF T HE ACT WILL APPLY. FOR THIS PROPOSITION, WE ARE RELYING ON THE CASE LAW OF THE COORDINATE BENCH IN THE CASE OF ITO VS. MGB TRANSPORT IN ITA NO. 2280/KOL/2010 FOR AY 2007-08 DATED 15 TH MARCH, 2013, WHEREIN IT IS OBSERVED AS UNDER: WE FIND THAT THIS ISSUE IS COVERED AGAINST THE AS SESSEE BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT. J. RAMA VS.- CIT (2010) 236 CTR (KAR.) 105, WHEREIN IT IS HELD T HAT LAW DOES NOT STIPULATE THE EXISTENCE OF A WRITTEN CONTRACT AS A CONDITION PRECEDENT FOR INVOKING THE PROVISIONS OF SECTION 194C OF THE ACT WITH RESPECT TO PAYMENT OF TDS. HONBLE KARNATAKA HIGH COURT CONCL UDED AS UNDER :- IN ORDER TO PROVIDE VEHICLES TO A CUSTOMER AS PER AGREEMENT, ASSESSEE USED TO HIRE VEHICLES FROM OTHERS AND HIRING OF VEH ICLES BY THE ASSESSEE IS IN THE NATURE OF TRANSPORT CONTRACT AND HENCE, T HE DISALLOWANCE UNDER SECTION 40(A)(IA) WAS JUSTIFIED WHEN NO TAX WAS DED UCTED AT SOURCE FROM PAYMENTS MADE TO THOSE PERSONS. FURTHER, FOLLOWING SMT. J. RAMAS CASE OF HONBLE K ARNATAKA HIGH COURT (SUPRA), WE HAVE TAKEN A DECISION DATED 17.02.2012 OF ITAT, KOLKATA BENCH IN ITA NO. 199/KOL/2010 IN THE CASE OF DCIT, CIRCLE-9 VS.- KAMAL MUKHERJEE & CO. (SHIPPING) (P.) LTD., WHEREIN IT IS HELD AS UNDER :- (FROM HEAD NOTES) .UNDOUBTEDLY, THESE DECISIONS DO INDICATE THAT TH ERE IS A WORKMAN EMPLOYER RELATIONSHIP BETWEEN THE DOCK WORKERS AND THE STEVEDORES LIKE ASSESSEE WHEN THEY EMPLOY THOSE WORKERS, BUT BE THA T AS IT MAY, THE FACT REMAINS THAT THE ASSESSEE HAS MADE PAYMENTS TO THE CDLB FOR SUPPLY OF LABOUR, EVEN WHEN THIS LABOUR MAY BE TREATED AS EMP LOYED BY THE ASSESSEE FOR ALL PRACTICAL PURPOSES, THE PROVISIONS OF SECTION 194C ARE CLEARLY ATTRACTED. IN SUCH A SITUATION, I.E. WHEN L ABOUR HIRED BY THE ASSESSEE THROUGH CDLB IS CONSIDERED TO BE IN ASSESS EES EMPLOYMENT, THE PAYMENTS MADE TO CDLB CANNOT BE TREATED AS PAYM ENTS FOR ANY WORK, BUT NEVERTHELESS THESE PAYMENTS COULD STILL BE COVE RED BY THE PROVISIONS 4 ITA NO.1723/K/2010, M/S A & R ENTERPRISE AY 2 006-07 OF SECTION 194C BECAUSE THESE ARE PAYMENTS MADE FOR SUPPLY OF LABOUR WHICH ARE SPECIFICALLY COVERED BY SECTION 194C(1). CDLB IS AN AGENT OF THE STEVEDORES LIKE THE ASSESSEE IN THE SENSE THAT THE LABOUR IS RECRUITED BY THE ASSESSEE THROUGH CDLB, BUT WHEN THIS FACT DO ES NOT AFFECT THE NATURE OF PAYMENT BY THE ASSESSEE TO THE CDLB WHICH IS ADMITTEDLY IN THE NATURE OF PAYMENT FOR SUPPLY OF LABOUR. THE REASONI NG ADOPTED BY THE COMMISSIONER (APPEALS), THOUGH SOMEWHAT IMPRESSIVE AT FIRST GLANCE, IS FALLACIOUS. THERE IS NO CAUSE AND EFFECT RELATIONSH IP BETWEEN WORKERS ASSIGNED BY THE CDLB HAVING EMPLOYER WORKMAN RELATI ONSHIP WITH THE ASSESSEE, AND THE PAYMENTS BEING MADE BY THE ASSESS EE TO CDLB BEING NOT IN THE NATURE OF PAYMENT FOR SUPPLY OF LABOUR . IN THE PRESENT CASE BEFORE US, THE ASSESSEE HAD SUP PLIED THE MATERIAL TO OTHER PERSONS TO PERFORM JOB ON SUCH MATERIAL AND THOSE PERSONS RETURNED GOO DS TO THE ASSESSEE AFTER PERFORMANCE OF THE JOB, IN SUCH A SITUATION THE LABOUR PAYMENTS MADE B Y ASSESSEE CLEARLY FALL WITHIN THE AMBIT OF SECTION 194COF THE ACT, BECAUSE IT CONSTITUTES CONT RACT WHETHER, VERBAL OR WRITTEN, AS THE CASE MAY BE. IN VIEW OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF REVEN UE. RESPECTFULLY FOLLOWING THE ABOVE CITED CASE LAW, WE DISMISS THIS APPEAL OF ASSESSEE. 5. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. 6. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 /08/ 2014 . SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28TH AUGUST, 2014 ,- #./ 0 JD.(SR.P.S.) 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT M/S A & R ENTERPRISE, T.N.BANERJEE RD., 2. SUKCHAR, 24 PGS.(N), PIN. 743 179 *+() / RESPONDENT ITO WD-51(1), BAMBOO VILLA, 169, AJC BOSE RD. KOLKATA 700 014 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #