I.T.O Wd - 48(4),kolkata., Kolkata V. M/s Dey Engineering Works., Howrah

ITA 1891/KOL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87707 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2012
• Court: TRIBUNAL
• Department Lawyers: SANJAY ACIT
• Assessee Lawyers: DEBABRATA GHOSH
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM ] I.T.A NO. 1891 /KOL/201 2 ASSESSMENT YEAR : 200 6 - 0 7 INCOME - TAX OFFICER, WD - 48(4), KOLKATA. VS. M/S. DEY ENGINEERING (PAN: AAEFD3328A) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 25 .0 2 .2015 DATE OF PRONOUNCEMENT: 27 .02 .2015 FOR THE APPELLANT: SHRI SANJAY, ACIT FOR THE RESPONDENT: S HRI DEBABRATA GHOSH, ADVOCATE ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT (A) - X X X , KOLKATA IN APPEAL NO. 122 / CIT(A) - X X X/ WD - 48(4)/2010 - 11 DATED 30 . 0 8 .201 2 . THE A SSESSMENT W AS FRAMED BY ITO, WARD - 48(4), KOLKATA U/S. 254/251/ 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR AY 200 6 - 0 7 VIDE HIS ORDER DATED 24 . 09 .20 1 0 . 2. O NLY ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO BEING PROCESSING CHARGES PAID WITHOUT DEDUCTION OF TDS U/S. 194C OF THE ACT THEREBY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING TWO GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.13,52,052/ - MADE U/S. 40(A)(IA) ON ACCOUNT OF PROCESSING CHARGES ALLOWED WITHOUT TDS . 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A), WHILE DELETING THE DISALLOWANCE AS MENTIONED IN GROUND NO. 1 AS ABOVE, FAILED TO APPRECIATE THE CBDT S CIRCULAR NO. 681 DATED 08.03.1 994. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED BEFORE THE AO THAT LABOUR CHARGES PAID TO PARTIES ARE NOT COMING WITHIN THE AMBIT OF CONTRACT, HENCE HE RELIED ON THE CBDT CIRCULAR NO. 681 DATED 08.03.1994 AND THE CONTRACT F OR PROCESSING OF GOODS , TO THE 2 ITA NO. 1891 /K/201 2 DEY ENGINEERING , AY 200 6 - 0 7 PARTIES, SUPPLIED BY THE ASSESSEE. THE AO NOTED THAT THE ASSESSEE ADMITTED THAT THE PROCESSING OF WORK WAS PLACED TO VARIOUS PARTIES ORALLY BUT OWNERSHIP OF MATERIAL REMAINED WITH THEM, HENCE, NO TDS WAS DEDUCTED U/S. 194C OF THE ACT. ACCORDING TO THE ASSESSEE, THERE WAS NO CONTRACT BUT THE AO MADE DISALLOWANCE FOR VIOLATION OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AS THE ASSESSEE FAILED TO DEDUCT TDS U/S. 19 4C OF THE ACT BY OBSERVING AS UNDER: IN VIEW OF THE SAME THE FACT THAT THE ASSESSEE FIRM HAS VIOLATED THE PROVISION OF SECTION 194C OF THE INCOME TAX ACT, 1961 BY NOT DEDUCTING STATUTORY TAX AT SOURCE FROM PAYMENT FOR SUPPLY OF LABOUR JOB TO 7 (SEVEN) PARTIES CANNOT BE IGNORED. THE SAID 7 (SEVEN) PARTIES TO WHOM IT HAD PAID BY CROSSING THE MONETARY LIMIT OF RS.50,000/ - DURING THE YEAR ARE AS UNDER: SL. NO. NAME OF THE PARTY AMOUNT PAID 1. 2. 3. 4. 5. 6. 7. M/S. B. K. ENGINEERING M/S. MA KHEAPTASWARI ENTERPRISE M/S. MAHAPRABHU ENTERPRISE M/S. PACHAL FORGING & ENTERPRISE M/S. RAMKRISHNA ENGINEERING WORKS M/S. MA KALI ENGINEERING WORKS M/S. SARDA ENGINEERING WORKS TOTAL : RS. 53,721/ - RS. 54,135/ - RS. 69,423/ - RS. 77,910/ - RS. 1,35,335/ - RS. 1,63,691/ - RS. 7,97,637/ - RS.13,52,052 AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ACCEPTED THE PLEA OF THE ASSESSEE THAT THERE IS NO CONTRACT BETWEEN THE PARTIES IN VIEW OF THE FACT THAT THE MATER IAL WAS SUPPLIED BY THE ASSESSEE. HE OBSERVED IN PARA 3.1 AS UNDER: IT HAS BEEN CLARIFIED BY THE APPELLANT THAT THERE WAS NO CONTRACT BETWEEN THE APPELLANT AND THE PARTIES TO WHOM PAYMENT WAS MADE FOR SUPPLY OF LABOUR AND THE PAYMENT WAS NOT MADE TO A NY CONTRACTOR AS DESCRIBE IN SECTION 194C.THERE IS ALSO NOTHING ON RECORD TO SUGGEST THAT THESE PARTIES WERE TAKING ON WHOLE OR PART OF THE CONTRACTUAL OBLIGATION AND RESPONSIBILITY OF THE APPELLANT IN RESPECT OF ANY WORK ASSIGNED TO IT BY ITS CLIENT. THE A.O. HAS NOT BROUGHT ANY MATERIAL FACTS OR EVIDENCE ON RECORD TO SHOW THAT THERE WAS A FORMAL CONTRACT BETWEEN THE APPELLANT AND THE SUPPLIERS WITHIN MEANING OF SECTION 194C. THEREFORE, THERE WAS NO CONTRACTUAL OBLIGATION IN THE NATURE OF A SUB - CONTRACT O R BY PLACING SUCH OBLIGATION ON THESE PARTIES FOR MANUFACTURE AND SUPPLY OF MATERIAL BY THE APPELLANT. IT IS THEREFORE CLEAR THAT THE PAYMENTS IN DISPUTE ARE NOT COVERED U/S.194C ON THE BASIS OF WHICH DISALLOWANCE CAN BE MADE U/S. 40(A)(IA). ACCORDINGLY, I N VIEW OF THE TOTALITY OF CIRCUMSTANCES AND THE DECISION OF THE HON'BLE HIGH COURTS CITED ABOVE, IT IS HELD THAT NO DISALLOWANCE OF THE SAME COULD BE MADE U/S. 40(A)(IA) AND THE DISALLOWANCE MADE BY THE A.O. OF RS.13,52,052/ - IS DELETED. WE FIND THAT THESE PROCESSING CHARGES ARE LABOUR PAYMENTS TO VARIOUS PARTIES AS NOTED BY AO AND REPRODUCED BY US ABOVE. THE LABOUR CHARGES/PROCESSING CHARGES PAID TO 3 ITA NO. 1891 /K/201 2 DEY ENGINEERING , AY 200 6 - 0 7 VARIOUS PARTIES ARE EXCEEDING THE PRESCRIBED LIMIT AS PRESCRIBED U/S. 194C(5) OF THE ACT. THE ASSESSEE ADMITTED THAT HE HAS PAID PROCESSING CHARGES TO THE ABOVE STATED PARTIES EXCEEDING THE PRESCRIBED LIMIT BUT ACCORDING TO HIM, THERE IS NO CONTRACT BETWEEN THEM. IN VIEW OF THE ABOVE FACTS, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THIS COORDINATE BENCH IN THE CASE OF DCIT VS. KAMAL MUKHERJEE & CO. (SHIPPING) (P) LTD. ITA NO. 199/KOL/2010, WHEREIN IT IS HELD AS UNDER: (FROM HEAD NOTES) .UNDOUBTEDLY, THESE DECISIONS DO INDICATE THAT THERE IS A WORKMAN EMPLOYER RELATIONSHIP BETWEEN THE DOCK WORKERS AND THE STEVEDORES LIKE ASSESSEE WHEN THEY EMPLOY THOSE WORKERS, BUT BE THAT 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 TREAT ED AS EMPLOYED BY THE ASSESSEE FOR ALL PRACTICAL PURPOSES, THE PROVISIONS OF SECTION 194C ARE CLEARLY ATTRACTED. IN SUCH A SITUATION, I.E. WHEN LABOUR HIRED BY THE ASSESSEE THROUGH CDLB IS CONSIDERED TO BE IN ASSESSEE S EMPLOYMENT, THE PAYMENTS MADE TO CDL B CANNOT BE TREATED AS PAYMENTS FOR ANY WORK, BUT NEVERTHELESS THESE PAYMENTS COULD STILL BE COVERED BY THE PROVISIONS 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 DOES NOT AFFECT THE NATURE OF PAYMENT BY THE ASSESSEE TO THE CDLB WHICH IS ADMITTEDLY IN THE NATURE OF PAYMENT FOR SUPPLY OF LABO UR. THE REASONING ADOPTED BY THE COMMISSIONER (APPEALS), THOUGH SOMEWHAT IMPRESSIVE AT FIRST GLANCE, IS FALLACIOUS. THERE IS NO CAUSE AND EFFECT RELATIONSHIP BETWEEN WORKERS ASSIGNED BY THE CDLB HAVING EMPLOYER WORKMAN RELATIONSHIP WITH THE ASSESSEE, AND T HE PAYMENTS BEING MADE BY THE ASSESSEE TO CDLB BEING NOT IN THE NATURE OF PAYMENT FOR SUPPLY OF LABOUR . 4. SINCE THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL, WHAT WAS BEFORE US IN KAMAL MUKHJERJEE & CO. (SHIPPING) (P.) LTD. (SUPRA) AND ALSO THAT IN THE CASE OF SMT. J. RAMA OF HON BLE KARNATAKA HIGH COURT (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE VIEW THAT EVEN ORAL CONTRACT IS SUFFICIENT AND ADMITTEDLY THE ASSESSEE HAS TAKEN THE DUMPERS ON HIRE AND HE HAS PAID CHARGES FOR THE SAME. R ESPECTFULLY FOLLOWING THE SAME, WE CONFIRM THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND REVERSE THE ORDER OF CIT(APPEALS). HOWEVER, AS REGARD TO ALTERNATIVE ARGUMENTS MADE BY LD. COUNSEL FOR THE ASSESSEE REGARDING APPLICABILITY OF THE DECISION OF ITA T, SPECIAL BENCH, VISHAKHAPATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (VISAKHAPATNAM) (SB) REPORTED IN (2012) 136 ITD 23 (SB), WHEREIN IT IS HELD THAT THE DISALLOWANCE WILL BE RESTRICTED TO THE AMOUNT PAYABLE AT THE END OF YEAR AND NO T ON THE AMOUNT ALREADY PAID DURING 4 ITA NO. 1891 /K/201 2 DEY ENGINEERING , AY 200 6 - 0 7 THE RELEVANT YEAR. LD. COUNSEL FOR THE ASSESSEE BEFORE US STATED THAT THIS PAYMENT WAS MADE WITHIN THE DUE DATE AND NOTHING REMAINS PAYABLE AND HE RELIED ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF M ERILYN SHIPPING & TRANSPORTS VS. ADDL. CIT (VISAKHAPATNAM) (SB) REPORTED IN (2012) 136 ITD 23 (SB), WHEREIN IT IS HELD THAT THE TDS IS TO BE DEDUCTED ONLY IN RELATION TO PAYMENTS WHICH REMAINS PAYABLE AT THE END OF THE YEAR I.E. 31 ST MARCH OF THE RELEVANT FINANCIAL YEAR. IT WAS POINTED OUT TO LD. COUNSEL THAT THE OPERATION OF THE ORDER OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), IS STAYED BY HON BLE ANDHRA PRADESH HIGH COURT IN I.T.T.A.M. P. NO.908 OF 2012 IN I.T.T.A. NO.384 OF 2012 WHEREIN HON BLE HIGH COURT OBSERVED, INTERIM SUSPENSION. NOTICE. VIDE DATED 8 TH OCTOBER, 2012. 5. ON THIS, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT EFFECT OF THE ORDER STAYING A PENDING APPEAL BEFORE ANY HIGH COURT DOES NOT AMOUNT TO ANY DECLARATION OF LAW BUT IS ONLY BINDING UPON THE PARTIES TO THAT PROCEEDINGS AND SUCH INTERIM ORDER DOES NOT DESTROY THE BINDING EFFECT OF THE PRINCIPALS AS LAID DOWN IN THE ORDER AS A PRECEDENT BECAUSE THE INTERIM ORDER H AD NO OCCASION TO LAY DOWN ANY PROPOSITION OF LAW. FOR THIS PROPOSITION, HE RELIED ON THE CASE LAW OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF PIJUSH KANTI CHOWDHURY VS. STATE OF WEST BENGAL & ORS (2007) 2 CALLT 577 DATED 14 TH MAY, 2007 WHEREIN, AT PARA 10 AND 13, IT HAS BEEN HELD AS UNDER: 10. AFTER HEARING THE LEARNED COUNSEL FOR THE PARTIES AND AFTER GOING THROUGH THE AFORESAID PROVISION WE FIND THAT THE SUPREME COURT BY THOSE INTERIM ORDERS HAS NO DOUBT STAYED THE OPERATION OF THE ORDER OF THE DIVI SION BENCH OF THIS COURT BY DIRECTING THE PARTIES TO MAINTAIN STATUS QUO AND AT THE SAME TIME, EVEN RESTRAINED THE STATE FROM INDUCTING THIRD PARTIES ON THE LANDS WHICH WERE THE SUBJECT - MATTERS BEFORE THE APEX COURT. SUCH INTERIM ORDER IS BINDING UPON THE PARTIES TO THE PROCEEDINGS BUT THE LAW IS EQUALLY SETTLED THAT BY MERE PASSING OF AN INTERIM ORDER STAYING THE OPERATION OF A JUDGMENT WITH CERTAIN FURTHER CONDITIONS, THE EXISTENCE OF THE SAID JUDGMENT IS NOT WIPED OUT AND AT THE SAME TIME, FOR SUCH INTER IM ORDERS INTER PARTIES, THE AUTHORITY OF A DECISION AS A PRECEDENT IS NEVER UNDERMINED. UNLESS A DECISION IS SET ASIDE BY THE SUPERIOR COURT, THE SAID DECISION REMAINS BINDING AS A PRECEDENT THOUGH MAY NOT BE BINDING UPON THE PARTIES TO THE PROCEEDINGS WH ERE THE SUPERIOR COURT HAS GRANTED INTERIM ORDER. MOREOVER, ONCE A PROVISION HAS BEEN DECLARED ULTRA VIRES THE CONSTITUTION OF INDIA, THE STATE CANNOT INVOKE THE SAID ULTRA VIRES PROCEEDING AGAINST THE CITIZENS OF THE COUNTRY SIMPLY BECAUSE AN INTERIM ORDE R OF STAY OF OPERATION ORDER DECLARING THE PROVISION AS ULTRA VIRES HAS BEEN PASSED IN AN APPEAL AGAINST SUCH ORDER. THE OBJECT OF GRANTING INTERIM ORDER I TO SEE THAT THE RELIEF CLAIMED IN THE APPEAL MAY NOT BECOME INAPPROPRIATE OR THE APPEAL DOES NOT BE COME INFRUCTUOUS FOR NOT GRANTING SUCH INTERIM ORDER; BUT BY MERE GRANT OF INTERIM STAY, THE EFFECT OF A BINDING PRECEDENT IS NOT DESTABILIZED. OVER AND ABOVE, THE INTERIM ORDERS OF THE STAY GRANTED BY THE SUPREME COURT CLEARLY INDICATE THAT THE SAID COURT NEVER INTENDED THAT NOTWITHSTANDING THE DECISION OF THE HIGH COURT DECLARING A PART OF THE PROVISIONS OF VESTING AS ULTRA VIRES THE STATE WOULD NEVERTHELESS BE FREE TO PROCEED WITH THE PROCESS OF VESTING DURING THE PENDENCY O THE PROCEEDINGS BEFORE THE SU PREME COURT AND THAT IS WHY STATUS 5 ITA NO. 1891 /K/201 2 DEY ENGINEERING , AY 200 6 - 0 7 QUO AS REGARDS POSSESSION HAS BEEN MAINTAINED AND EVEN, THE STATE HAS BEEN RESTRAINED FROM CREATING ANY THIRD PARTY INTEREST IN THE LANDS IN QUESTION. 13. THEREFORE, THE EFFECT OF THE ORDER OF STAY IN A PENDING APPEAL BE FORE THE APEX COURT DOES NOT AMOUNT TO ANY DECLARATION OF LAW BUT IS ONLY BINDING UPON THE PARTIES TO THE SAID PROCEEDINGS AND AT THE SAME TIME, SUCH INTERIM ORDER DOES NOT DESTROY THE BINDING EFFECT OF THE JUDGMENT OF THE HIGH COURT AS A PRECEDENT BECAUSE WHILE GRANTING THE INTERIM ORDER, THE APEX COURT HAD NO OCCASION TO LAY DOWN ANY PROPOSITION OF LAW INCONSISTENT WITH THE ONE DECLARED BY THE HIGH COURT WHICH IS IMPUGNED. 6. EVEN, HON BLE SUPREME COURT IN THE CASE SHREE CHAMUND MOPEDS LTD. VS. CHURCH OF SOUTH INDIA TRUST ASSOCIATION, MADRAS, AIR 1992 SC 1439, 1444 H AS ANALYSED THE DIFFERENCE BETWEEN STAY OF OPERATION OF AN ORDER AND QUASHING OF AN ORDER AND HELD THAT STAY OF ORDER OF AN APPELLATE AUTHORITY / COURT BY A HIGHER COURT MEANS THAT THE ORDER PASSED BY THE APPELLATE AUTHORITY / LOWER COURT STILL CONTINUES TO EXIST IN LAW INSPITE OF THE STAY AND ITS EXISTENCE IS NOT DESTROYED. BUT WHERE THE ORDER OF THE APPELLATE / LOWER COURT IS QUASHED AND THE MATTER IS REMANDED BACK, IT MEANS THAT THE APPEAL DISPOSED OF BY THE SAID ORDER OF THE APPELLATE AUTHORITY/LOWER COURT WOULD BE RESTORED AND IT CAN BE SAID TO BE PENDING BEFORE THE SAID AUTHORITY/LOWER COURT. 7. IN VIEW OF THE ABOVE, PARTICULARLY THE DECISION OF THE HON BLE JURISDICTIONAL HIG H COURT IN THE CASE OF PIJUSH KANTI CHOWDHURY (SUPRA), AS ALSO IN OBEDIENCE TO DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF SHREE CHAMUND MOPEDS LTD. (SUPRA), WE ARE OF THE VIEW THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) STILL HOLDS GROUND AND ACCORDINGLY, TDS PROVISIONS WILL APPLY, FOR THE PURPOSE OF INVOCATION OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, ONLY ON THE AMOUNTS REMAINED PAYABLE AT THE END OF FINANCIAL YEAR AND NO T ON THE PAID AMOUNTS. HENCE, WE DIRECT THE AO TO RECOMPUTE THE DISALLOWANCE ACCORDINGLY. APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. AS THE ISSUE IS COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF REVENUE AND WHEN THIS WAS CONFRONTE D, LD. COUNSEL FOR ASSESSEE COULD NOT ARGUE ON THIS POINT. HENCE, THIS ISSUE OF REVENUE S APPEAL IS ALLOWED. 4 . IN THE RESULT, APPEAL OF REVENUE IS ALLOWED. 5 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.02.2015 SD/ - SD/ - ( SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 27 TH FEBRUARY , 201 5 JD.(SR.P.S.) 6 ITA NO. 1891 /K/201 2 DEY ENGINEERING , AY 200 6 - 0 7 COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT ITO, WARD - 48(4), KOLKATA . 2 RESPONDENT M/S. DEY ENGINEERING, 69, ICHAPUR ROAD, KADAMTALA, HOWRAH - 711101 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .