Jalaram Traders, Sangli V. Income-tax Officer,

ITA 1923/PUN/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85255 (ITAT-PUNE)
• Duration Of Justice: 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 28-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Section: 194C

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1923/PN/2014 (ASSESSMENT YEAR 2008-09) M/S. JALARAM TRADERS, PROP.SURESHKUMAR HARILAL THAKKAR, G-4, TRADERS COMPLEX, MARKET YARD, SANGLI .. APPELLANT PAN NO.AAHPT5418N VS. ITO, WARD-1(2), SANGLI .. RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE DEPARTMENT BY : SHRI MAZHAR AKRAM DATE OF HEARING : 24-11-2014 DATE OF PRONOUNCEMENT : 25-11-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 01-07-2014 OF THE CIT(A) KOLHAPUR RELATING TO ASSESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 25-09- 2008 DECLARING TOTAL INCOME OF RS.1,89,510/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT AN AMO UNT OF RS. 1,79,310/- WAS PAID TO SANGLI MIRAJ KAMGAR M ATHADI BOARD AS LABOUR CHARGES. ACCORDING TO THE AO, THE ASSESSEE WAS LIABLE TO MAKE TDS UNDER SECTION 194C( 1) OF THE I.T. ACT AND HE HAS FAILED TO DO SO. HE, THERE FORE, 2 ASKED THE ASSESSEE TO EXPLAIN THE REASON FOR THE SA ME. IT WAS REPLIED THAT THE CHARGES INCLUDE HAMALI PAID TO MATHADI BOARD, LEVY PAID TO MATHADI BOARD AND OTHER HAMALI WHICH INCLUDES SUNDRY HAMALI, TRANSPORT CHARGES AND OCTRO I EXPENSES. MATHADI BOARD IS CONSTITUTED BY VIRTUE OF NOTIFICATION ISSUED BY INDUSTRIES, ENERGY AND LABOU R DEPARTMENT OF GOVERNMENT OF MAHARASHTRA BY GOVERNME NT ORDINANCE DATED 13/07/1984 WHICH IS CALLED AS MAHARASHTRA MATHADI HAMALI AND OTHER WORKERS (REGULATION OF EMPLOYMENT AND WELFARE) ACT, 1969. B Y VIRTUE OF CLAUSE 14 OF THE SCHEME IT IS MANDATORY F OR ALL THE CATEGORY OF BUSINESS TO OBTAIN REGISTRATION OF EXIS TING AND NEW WORKERS. AS PER CLAUSE 9 OF THE SCHEME THE MATH ADI BOARD, THROUGH ITS SECRETARY IS LIABLE FOR PAYMENT TO EACH REGISTERED WORKER OF ALL THE EARNING LAWFULLY MADE BY THEM. IT WAS SUBMITTED THAT PROVISIONS OF SECTION 194C AR E NOT APPLICABLE IN RESPECT OF PAYMENTS MADE TO MATHADI B OARD. 3. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. ACCORDING TO HIM, THE STATUS OF THE MATHADI BOARD IS THAT OF BODY OF INDI VIDUALS. IT IS ACTING AS AN INTERMEDIARY BETWEEN THE BUSINES SMAN AND REGISTERED WORKERS. THUS, THE TRANSACTION BETWE EN THE WORKERS AND THE MATHADI BOARD IS A TYPE OF WRITTEN CONTRACT FOR SUPPLY OF LABOURS. THERE IS NO PROVISION UNDER THE INCOME-TAX ACT WHICH EXEMPTS THE MATHADI BOARD FROM MAKING TDS FROM PAYMENTS. AS PER CBDT CIRCULAR NO. 4/2002, TDS IS NOT REQUIRED TO BE DEDUCTED IN RESPE CT OF PAYMENTS MADE TO INSTITUTIONS WHOSE INCOME IS EXEMP T 3 UNDER SECTION 10. NAMES OF THESE INSTITUTIONS ARE MENTIONED IN THE SAID CIRCULAR AND MATHADI BOARD IS NOT COVERED UNDER ANY OTHER CATEGORIES MENTIONED THEREI N. THEREFORE, THE ASSESSING OFFICER WAS OF THE OPINION THAT DUE TO NON-COMPLIANCE TO PROVISIONS OF SECTION 194C , THE PAYMENT OF LABOUR CHARGES HAS TO BE DISALLOWED UNDE R SECTION 40(A)(IA). 4. BEFORE CIT(A) THE ASSESSEE STRONGLY CHALLENGED T HE ORDER OF THE AO. IT WAS FURTHER SUBMITTED THAT PRO VISIONS OF SECTION 40(A)(IA) APPLIES TO PAYMENTS WHICH ARE PAYABLE AND NOT IN RESPECT OF AMOUNTS WHICH HAVE BEEN PAID. HOWEVER, THE LD.CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE AC TION OF THE AO BY OBSERVING AS UNDER: 5. ON ABOVE FACTS IT IS APPARENT THAT APPELLANT HA S NOT MADE TDS FROM LABOUR PAYMENT MADE TO MATHADI BOARD. THE PLEA IS THAT SINCE MATHADI BOARD HAS BEEN CONSTITUTED UNDER AN ACT OF THE MAHARASHTRA GOVERNMENT, THE PAYMENT IN QUESTION IS A PAYMENT UNDER LAW AND, THEREFORE, NO TDS PROVISIONS WILL BE APPLICABLE. THIS ARGUMENT IS MISPLACED. AS HAS BEEN OBSERVED BY THE ASSESSING OFFICER THE APPELLANT IS NOT AMONG THE INSTITUTIONS COVERED BY CBDT CIRCULAR NO. 4/2002. THEREFORE, APPELLANT WAS UNDER LEGAL OBLIGATION TO MAKE TDS FROM THE PAYMENT. HAVING FAILED TO DO SO, ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE PAYMENT. REGARDING ASSESSEE'S CLAIM THAT SINCE THE PAYMENT WAS ALREADY MADE AND WAS NO MORE PAYABLE SECTION 40(A)(IA) IS NOT APPLICABLE, IT IS SUFFICIENT TO ME NTION THAT THIS VIEW HAD EMERGED FROM THE DECISION OF ITAT SPECIAL BENCH, VISHAKAPATNAM IN THE CASE OF MERYLIN SHIPPING AND TRANSPORT V/S ACIT 146 TTJ 1, HOWEVER, THE DECISION HAS BEEN SUSPENDED BY HONOURABLE HIGH COURT, CALCUTTA AND THEREAFTER SEVERAL CONTRARY DECISIONS HAVE COME. THEREFORE, GROUNDS TAKEN BY THE APPELLANT ARE REJECTED AND ADDITION IS SUSTAINED. 4 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.1,79,310/- U/S 40(A)( IA) IN RESPECT OF LABOUR CHARGES PAID TO SANGLI MIRAJ K AMGAR MATHADI BOARD. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N NOT APPRECIATING THAT THE IN VIEW OF THE DECISION OF HO N PUNE ITAT IN CASE OF GOKULDAS VIRJIBHAI & CO V ITO (139 ITD 284) AS ALSO CBDT CIRCULAR NO.4/2002, THE PAYMENTS TO MATHADI BOARD ARE NOT COVERED U/S 194C AND NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA). 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE U/S 40(A)(IA) IN RESPEC T OF THE AMOUNTS WHICH ARE PAID AND NOT PAYABLE AND IN V IEW OF THE DECISION OF SPECIAL BENCH IN CASE OF MERILYN SNIPPING AND TRANSPORT V ACIT AS ALSO DECISION OF ALLAHABAD HIGH COURT IN CASE OF VECTOR SHIPPING THE DISALLOWANCE IS NOT JUSTIFIED. 4. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR SUBSTITUTE ANY GROUND OF APPEAL AT THE TIME OF HEAR ING. 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET F ILED A COPY OF THE DECISION OF THE PUNE BENCH OF THE TRI BUNAL IN THE CASE OF GOKULDAS VIRJIBHAI & CO., VS. ITO R EPORTED IN 139 ITD 284 (PUNE). REFERRING TO THE SAID DECIS ION, SHE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISIO N HAS HELD THAT PROVISIONS OF SECTION 194C HAS NO APPLICA TION WHEN ASSESSEE REMITS PAYMENT IN RESPECT OF WAGES PAYABLE TO WORKERS OR LABOURERS ENGAGED THROUGH MATHADI BOARD. SHE ACCORDINGLY SUBMITTED THAT THIS IS A COVERED MATTER IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE PUNE BENCH OF THE TRIBUNAL. 5 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WE FIND THE ISSUE STANDS DECIDED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE B ENCH OF THE TRIBUNAL IN THE CASE OF GOKULDAS VIRJIBHAI & CO . (SUPRA) WHERE IT HAS BEEN HELD THAT PROVISIONS OF SECTION 1 94C HAS NO APPLICATION WHEN ASSESSEE REMITS PAYMENT IN RESP ECT OF WAGES PAYABLE TO WORKERS OR LABOURERS ENGAGED THROU GH MATHADI BOARD. THE RELEVANT OBSERVATION OF THE TRI BUNAL AT PARA 11 AND 12 READS AS UNDER : 11. IN SUM AND SUBSTANCE, THE PERSON WHO IS CARRYI NG ON HIS BUSINESS IN THE NOTIFIED AREA AND ALSO CARRYING ON THE SCHEDULED EMPLOYMENT, IT IS MANDATORY FOR HIM TO GE T REGISTERED UNDER THE MAHARASHTRA MATHADI SCHEME AND ALSO TO EMPLOY ONLY THE REGISTERED WORKERS ALLOTTED BY THE BOARD. SEVERE PENALTIES ARE PROVIDED FOR CONTRAVENTION FOR NOT COMPLYING WITH THE SCHEME. TH E BOARD IS NOT THE LABOUR SUPPLIER BUT A BODY CORPORA TE FOR IMPLEMENTING THE SCHEME FRAMED BY THE GOVERNMENT UNDER THE MAHARASHTRA MATHADI ACT. THE ASSESSEE IS REGISTERED UNDER THE MAHARASHTRA MATHADI ACT AS PER PROVISIONS OF THE SCHEME FRAMED AND BOTH THE ASSESS EES ARE UNDER OBLIGATION TO ENGAGE THE LABOURERS OR WORKERS FOR CARRYING OUT WORK IN THEIR BUSINESS THROUGH THE BOARD ONLY, WHICH THEY ARE LEGALLY BOUND TO DO. 12. THE MANDATE OF SEC. 194C IS THAT THE RELATIONSH IP OF THE PERSON PAYING ANY SUM TO THE PERSON CARRYING OU T ANY WORK INCLUDING THE SUPPLY OF LABOUR SHOULD BE IN HE NATURE OF THE PRINCIPAL TO CONTRACTOR. AFTER ANXIOUSLY EXA MINING THE PROVISIONS OF MAHARASHTRA MATHADI ACT AND SCHEM E FRAMED UNDER IT, WE ARE OF THE OPINION THAT THERE I S NO CONTRACTUAL RELATIONSHIP AS A PRINCIPAL AND CONTRAC TOR BETWEEN THESE ASSESSEES AND MATHADI BOARD, BUT, IN FACT, IN PURSUANCE OF THE PROVISIONS OF THE ACT AS WELL AS THE SCHEME, BOTH THESE ASSESSEES ARE BOUND TO ENGAGE THE LABOURERS OR THE WORKERS THROUGH THE MATHADI BOARD. IN OUR OPINION, THE INTERPRETATION GIVEN BY BOTH THE AUTHORITIES BELOW TO THE PROVISIONS OF THE MAHARASH TRA MATHADI ACT IS TOTALLY MISPLACED AS SEC. 194C HAS NO APPLICATION WHEN THESE ASSESSEES REMITS THE PAYMENT IN RESPECT OF THE WAGES PAYABLE TO THE WORKERS OR LABOURERS ENGAGED THROUGH THE MATHADI BOARD. WE, THEREFORE, H OLD THAT THE DISALLOWANCE MADE BY THE A.O. EVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT IS NOT JUST IFIED. 6 WE, ACCORDINGLY, DELETE THE SAME IN BOTH THE CASES AND THE RESPECTIVE GROUNDS TAKEN BY BOTH THE ASSESSEES ARE ALLOWED. 8.1 SINCE THE FACTS OF THE INSTANT CASE ARE IDENTIC AL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL, THEREFOR E, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOT ICE BY THE LD. DEPARTMENTAL REPRESENTATIVE AGAINST THE DEC ISION OF THE TRIBUNAL, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE A ND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 25-11-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 25 TH NOVEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A), KOLHAPUR 4. CIT, KOLHAPUR 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE