M/s. Mulchandbhai Mafatlal Patel, Sangli V. Income-tax Officer,

ITA 1924/PUN/2014

• Counselvise Citation: 192424514 RSA 2014
• 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. 1924/PN/2014 (ASSESSMENT YEAR 2008-09) M/S. MULCHANDBHAI MAFATLAL PATEL, PLOT NO.64, HUKKERI BUILDING, 2 ND LANE, MARKET YARD, SANGLI. PAN NO. AACFM 9775E .. APPELLANT 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 08-08-2014 OF THE CIT(A) KOLHAPUR RELATING TO ASSESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF TRADIN G IN JAGGERY, HALDI AND KISMISS ETC., IN THE MART YARD, SANGLI WHICH COMES UNDER MARKET COMMITTEE OF SANGLI. IT F ILED ITS RETURN OF INCOME ON 29-08-2008 DECLARING TOTAL INCO ME OF RS.51,250/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE AO NOTED THAT THE ASSESSEE HAS NOT DEDUCTED TDS U/S.194C(1) ON LABOUR CHARGES OF RS.3,84,671.26 PAI D TO 2 SANGLI MIRAJ KAMGAR MATHADI BOARD. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. IT WAS EXPLAINED THA T IT IS WORKING IN MARKET YARD, SANGLI WHICH COMES UNDER MA RKET COMMITTEE OF SANGLI. THE PAYMENT IS REQUIRED TO BE MADE TO MATHADI BOARD WHICH HAS BEEN CONSTITUTED UNDER MAHARASHTRA MATHADI HAMAL AND OTHER MANUAL WORKERS (REGULATION OF EMPLOYMENT AND WELFARE) ACT, 1969. ASSESSEE RELIED ON CIRCULAR NO. 502 DATED 27/01/199 8 AS PER WHICH PROGRAMME UNDER THE NREP AND RLEGP ARE EXECUTED WITH THE PARTICIPATION OF THE PEOPLE AND T HERE IS NO CONTRACT BETWEEN VILLAGE COMMITTEE AND THE STATE GOVERNMENT. SINCE THERE IS NO CONTRACT, THE PROVISI ONS OF SECTION 194C ARE NOT ATTRACTED. AS PER ASSESSEE, TH E PRESENT PAYMENT IS ALSO LIKE THE PAYMENTS MADE UNDE R NREP AND RLEGP. IT WAS ALSO CONTENDED THAT SECTION 40(A)(IA) IS APPLICABLE WHERE THE AMOUNT IS PAYABLE HOWEVER, IN THE PRESENT CASE, THE AMOUNT HAS BEEN P AID. 3. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ABOVE EXPLANATION OF THE ASSESSEE. HE WENT THROUGH THE NOTIFICATION ISSUED BY STATE GOVERNMENT AND AFTER EXAMINING THE FUNCTIONS OF THE MATHADI BOARD, CAME TO THE CONCLUSION THAT STATUS OF THE MATHADI BOARD IS THAT OF BODY OF INDIVIDUALS. MATHADI BOARD WAS ACTING AS INTERME DIARY BETWEEN BUSINESSMEN AND REGISTERED WORKERS. MATHADI BOARD HAS NOT OBTAINED ANY EXEMPTION UNDER SECTION 194C. THE ASSESSING OFFICER FURTHER NOTED THAT KOLHAPUR D ISTRICT MATHADI AND UNPROTECTED LABOUR BOARD HAS DULY OBTAI NED 3 EXEMPTION UNDER SECTION 197/ 194C OF THE ACT. MOREO VER, CIRCULAR NO. 4/2002 DATED 16/07/2002 OF CBDT LISTS THE INSTITUTIONS, PAYMENT TO WHICH DOES NOT REQUIRE MAK ING OF TDS. MATHADI BOARD IS NOT ONE OF THOSE INSTITUTIONS . THE ASSESSING OFFICER ACCORDINGLY DISALLOWED THE AMOUNT . 4. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER: 7. ON ABOVE FACTS IT IS APPARENT THAT APPELLANT HAS NO T MADE TDS FROM LABOUR PAYMENT MADE TO MATHADI BOARD. THE PLEA IS THAT SINCE MATHADI BOARD HAS BEEN CONST ITUTED UNDER AN ACT OF THE MAHARASHTRA GOVERNMENT, THE PAYMENT IN QUESTION IS A PAYMENT UNDER LAW AND, THEREFORE, NO TDS PROVISIONS WILL BE APPLICABLE. TH IS 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, ASSES SING OFFICER WAS JUSTIFIED IN DISALLOWING THE PAYMENT. REGARDING ASSESSEES CLAIM THAT SINCE THE PAYMENT W AS ALREADY MADE AND WAS NO MORE PAYABLE SECTION 40(A)( IA) IS NOT APPLICABLE, IT IS SUFFICIENT TO MENTION THAT THIS VIEW HAD EMERGED FROM THE DECISION OF ITAT SPECIAL BENCH , VISHAKAPATNAM IN THE CASE OF MERYLIN SHIPPING AND TRANSPORT VS. ACIT 146 TTJ 1, HOWEVER, THE DECISION HAS BEEN SUSPENDED BY HONOURABLE HIGH COURT, CALCUTTA A ND THEREAFTER SEVERAL CONTRARY DECISIONS HAVE COME. THEREFORE, GROUND TAKEN BY THE APPELLANT IS REJECTE D AND ADDITION IS SUSTAINED. 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.3,84,671/- 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). 4 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 TRIBU NAL IN THE CASE OF GOKULDAS VIRJIBHAI & CO., VS. ITO REPO RTED IN 139 ITD 284 (PUNE). REFERRING TO THE SAID DECISION , HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S HELD THAT PROVISIONS OF SECTION 194C HAS NO APPLICATION 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 DECISION OF THE PUNE BENCH OF THE TRIBUNAL. 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 5 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. 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. 6 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