Smt. Sarwani Bano, Kolkata V. ITO, Ward -42(4), Kolkata, Kolkata

ITA 188/KOL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7940 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 28-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2011
• Court: TRIBUNAL
• Department Lawyers: K K DAS
• Assessee Lawyers: LEENA RACHH
• Keywords: Business income
• Section: 143(3); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND ! ! ! ! , '# ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SANJAY ARORA, AM] $ $ $ $ / I.T.A NO. 188/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2006-07 SARWANI BANO VS. INCOME-TAX OFFICER, WD-42(4) , KOLKATA. (PAN: AEBPB4377C) (*+ /APPELLANT ) (,-*+/ RESPONDENT ) FOR THE APPELLANT: SMT. LEENA RACHH FOR THE RESPONDENT: SHRI K. K. DAS DATE OF HEARING: 07.08.2012 DATE OF PRONOUNCEMENT: 07.08.2012 '. / ORDER IMMEDIATELY UPON CONCLUSION OF HEARING OF THIS APPE AL ON 7 TH AUGUST, 2012, THE BENCH PASSED THE FOLLOWING ORDER: 7 TH AUGUST, 2012 APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT. DETAILED ORDER WILL FOLLOW. PER BENCH: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XII, KOLKATA IN APPEAL NO. 259/CIT(A)-XII/42(4)/08-09 DATED 22.12.2010. ASSESS MENT WAS FRAMED BY ITO, WARD-42(4), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 24.12. 2008. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF JOB WORK CHARGES PAIDWITHOUT DEDUCT ION OFTAX U/S. 194C(1) OF THE ACT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF TH E ACT. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE HOW FAR THE APPELLATE AUTHORITY IS CORRECT IN UPHOLDING THE DEVISION OF T HE ASSESSING OFFICER IN INVOKING THE DISALLOWANCE OF PAYMENT TO WORKERS U/S. 40(A)(IA) F OR NON-DEDUCTING THE TAX AT SOURCE UNDER SECTION 194C OF THE I. T. ACT, 1961. 2 ITA 188/K/2011 SARWANI BANO A.Y. 06-07 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS MADE DISALLOWANCE OF RS.72,80,730/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AS THE ASSESSEE FAILED TO DEDU CT TDS ON THE ABOVE PAYMENT U/S. 194C(1) OF THE ACT AS THE ASSESSEE IS A JOB WORKER. THE FACTS ARE THAT THE ASSESSEE CARRIED THE BUSINESS OF EMBROIDERIES WORK ON SAREES UNDER THE NAME AND STYL E OF M/S. NICE EMBROIDERY. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE P&L ACCOUNT THAT THE ASSESSEE PAID A SUM OF RS.72,92,350/- ON ACCOUNT OF LABOUR C HARGES TO VARIOUS JOB WORKERS FOR EMBROIDERY WORK FROM M/S. GOURISARIA SAREE KENDRA A MOUNTING TO RS.78,56,200/-. AS THE ASSESSEE HAS NOT DEDUCTED TDS ON THIS JOB WORK PAID TO LABOURERS I.E. CASUAL WORKERS THE ASSESSEE BEING AN INDIVIDUAL, THIS IS AN ADMITTED F ACT AND ASSESSMENT PERTAINS TO AY 2006-07 WHETHER THE ASSESSEE IS OBLIGED TO DEDUCT TDS U/S. 194C(1) OF THE ACT FOR JOB WORK CHARGES PAID TO CASUAL WORKERS OR NOT. WE FIND THAT THIS I SSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION IN THE CASE OF 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. WE FIND THAT IN THE CASE OF SMT. KEYA SETH CITED SUPRA, WHE REIN 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 INDIVIDUA L CARRYING ON THE BUSINESS OF AYURVEDIC (COSMETIC DIVISION) AND THE CONSULTANCY ON BEAUTICI AN 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? ADMITTED LY, ASSESSEE HAS NOT DEDUCTED ANY TDS ON ADVERTISEMENT PAYMENT AND ACCORDING TO HER, PROVISI ONS OF SECTION 194C(1) AS EXISTED IN THE RELEVANT ASSESSMENT YEARS WILL NOT OBLITERATE ANY D UTY ON ASSESSEE TO DEDUCT 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 CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE O F 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 (D) ANY COMPANY, OR (E) ANY CO-OPERATIVE SOCIETY ; OR 3 ITA 188/K/2011 SARWANI BANO A.Y. 06-07 (F) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER ANY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYI NG THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNIN G, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, OR FO R BOTH ; OR (G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGI STRATION ACT, 1860 (21 OF 1860), OR UNDER ANY LAW CORRESPONDING TO THAT AC T 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 UNIVERSITY 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 CASH OR BY ISSUE OF A CH EQUE 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 WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CON TRACTOR OR FOR SUPPLYING WHETHER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTR ACTOR HAS 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 ISS UE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMO UNT EQUAL TO ONE PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. XXXX XXXX XXXX 6. FROM THE ABOVE PROVISIONS OF SECTION 194C(1), IT IS CLEAR THAT THE PAYMENTS MADE BY INDIVIDUAL OR HINDU UNDIVIDED FAMILY DOES NOT COME WITHIN THE AMBIT OF TDS I.E. THE EXPENDITURE INCURRED FOR ADVERTISEMENT AS INDIVIDUAL AND HUF ARE SPECIFI CALLY EXCLUDED IN THE ABOVE PROVISIONS. THE PROVISION OF SUB-SECTION (2) APPLIES ONLY TO PAYMEN TS MADE TO SUB-CONTRACTORS AND NOT TO CONTRACTORS. ACCORDINGLY, ASSESSING OFFICER CAN NOT MADE DISALLOWANCE BY INVOKING PROVISIONS OF SECTION 40A(IA), AS PRESENT ASSESSEE BEING AN INDIV IDUAL IS NOT LIABLE TO DEDUCT TAX IN VIEW OF PROVISIONS OF SECTION 194C(1) AS EXISTED IN THE REL EVANT ASSESSMENT YEARS. NO DOUBT, ASSESSEES TURNOVER EXCEEDS THE MONETARY LIMIT AS SPECIFIED UN DER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB AND THE ASSESSEES ACCOUNTS ARE SUBJECT TO AUDIT AN D THE ASSESSEE HAS AUDITED HER ACCOUNTS AND FILED TAX AUDIT REPORT ALONG WITH RETURN OF INCOME. WE FIND THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE IN VIEW OF THE AMENDED PROVISIONS OF S ECTION 194C(1) BY THE FINANCE ACT, 2007 WITH EFFECT FROM 01.06.2007 WHEREIN IT IS PROPOSED TO A MEND SUB-SECTION (1) IN SECTION 194C SO AS TO 4 ITA 188/K/2011 SARWANI BANO A.Y. 06-07 INCLUDE PAYMENTS MADE BY ANY INDIVIDUAL OR HINDU UN DIVIDED FAMILY WHOSE TOTAL SALES / GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSIO N 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 CREDI TED OR PAID TO THE ACCOUNT OF THE CONTRACTOR. 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 0 1.06.2007, 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 PROFESSIO N CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUS E (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANC IAL YEAR IN WHICH SUCH 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 CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTH ER 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 : PROVIDED THAT NO INDIVIDUAL OR A HINDU UNDIVIDED FA MILY SHALL BE LIABLE TO DEDUCT INCOME-TAX ON THE SUM CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR WHERE SUCH SUM IS CREDITED OR PAID EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDIVIDUAL 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 FURTHERANCE OF THIS CASE BU T WE ARE OF THE CONSIDERED VIEW THAT SECTION 194C(2) WILL APPLY TO THE PAYMENTS MADE TO SUB-CONT RACTORS BY THE CONTRACTOR AND NOT BY THE ASSESSEE. IN THE PRESENT CASE, IT IS AN ADMITTED PO SITION 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 C BDT CIRCULAR 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, READS 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 CRED ITED OR PAID TO THE RESIDENT CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUP PLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CO NTRACTOR AND THE GOVERNMENT, LOCAL AUTHORITIES, STATUTORY CORPORATIO NS, COMPANIES, CO-OPERATIVE SOCIETIES, STATUTORY AUTHORITIES ENGAGED IN PROVIDI NG HOUSING ACCOMMODATION, ETC., REGISTERED SOCIETIES, TRUSTS, UNIVERSITIES AN D FIRMS. THE RATE OF TDS IS 1% IN RESPECT OF ADVERTISING CONTRACTS AND 2% IN OTHER CA SES. 54.2 THE EXISTING PROVISIONS OF SUB-SECTION (1) OF SECTION 194C DID NOT PROVIDE FOR DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE BY AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY TO A CONTRACTOR. 54.3 CONSIDERING THE RISING NUMBER OF CONTRACTS BEI NG AWARDED BY INDIVIDUALS AND HUFS CARRYING ON BUSINESS OR PROFESSION 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. 5 ITA 188/K/2011 SARWANI BANO A.Y. 06-07 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 SUCH CASES WOULD BE JUSTIFI ED. SIMILARLY THE CONTRACTS AWARDED BY AN INDIVIDUAL OR A MEMBER OF HUF OF HUF EXCLUSIVELY FOR PERSONAL PURPOSES MERIT EXCLUSION. 54.5 ACCORDINGLY, THE FINANCE ACT, 2007, HAS SUBSTI TUTED THE SAID SUB-SECTION (1) TO INCLUDE IN ITS AMBIT SUCH INDIVIDUAL OR A HI NDU UNDIVIDED WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PRO FESSION CARRIED ON EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUS E (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 AMEN DMENT SHALL NOT APPLY IN RESPECT OF PAYMENTS MADE TO A CONTRACTOR BY ANY IND IVIDUAL OR A MEMBER OF A HINDU UNDIVIDED FAMILY EXCLUSIVELY FOR THEIR PERSON AL 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 ASSESSMENT YEARS IN THE PR ESENT APPEALS, IT IS CLEAR THAT THE ASSESSEE IS UNDER NO OBLIGATION TO DEDUCT TDS ON THE EXPENDITUR E OF ADVERTISEMENT, AS THE ASSESSEE BEING AN 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 MAKING DISALLOWANCE OF EXPENDITURE FOR NON-DEDUCTION OF TD S WILL NOT APPLY. WE FURTHER FIND THAT, IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENSES ARE BOGUS OR UNREASONABLE OR EXCESSIVE BUT THE DISALLOWANCE IS MADE MERELY FOR NON-DEDUCTION OF TD S. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE AN D WE CONFIRM THE SAME. 4. AS THE ISSUE RAISED BY THE ASSESSEE IS EXACTLY O N SIMILAR FACTS IN THE PRESENT CASE, TAKING A CONSISTENT VIEW, WE ARE OF THE VIEW THAT THE AMEN DED PROVISIONS OF SECTION 194C(1) OF THE ACT WILL NOT APPLY TO THE PRESENT ASSESSMENT YEAR ON TH E ASSESSEE. ACCORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 5. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 6. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- ! ! ! ! , '# , (SANJAY ARORA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( /# /# /# /#) )) ) DATED: 7TH AUGUST, 2012 01 %2 3 JD.(SR.P.S.) 6 ITA 188/K/2011 SARWANI BANO A.Y. 06-07 '. 4 ,5 6'5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT SMT. SARWANI BANO, 57, NARKELDANGA NORT H ROAD, KOLKATA-700 011. 2 ,-*+ / RESPONDENT ITO, WARD-42(4), KOLKATA. 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA. 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, '.%@/ BY ORDER, /ASSTT. REGISTRAR .