Assistant Commissioner of Income-tax, V. M/s. Prathmesh Construction, Sangli

ITA 212/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93974 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 31-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEERAJ KUMAR JAIN
• Section: 143(3); 194C

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE ! ' , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM ITA NO.212/PN/2014 ASSESSMENT YEAR : 2010-11 THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2, SANGLI. .. APPELLANT VS. M/S PRATHMESH CONSTRUCTION, PLOT 44, MIDC, MIRAJ, DIST.- SANGLI PAN: AAFFP2620Q ... RESPONDENT / DEPARTMENT BY : SHRI DEERAJ KUMAR JAIN / APPELLANT BY : SHRI M.K. KULKARNI / DATE OF HEARING : 23.07.2015 / DATE OF PRONOUNCEMENT: 29.07.2015 % / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A), KOLHAPUR DATED 28.11.2013 RELATING TO ASSESSMENT YEAR 2010-1 1 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE ONLY ISSUE ARISING FROM THE REVENUES APPEAL FOR OUR CONSIDERATION IS APPLICABILITY OF SECTION 194C R.W.S. 40(A)(IA) OF T HE ACT FOR PAYMENT OF LABOUR CHARGES OF RS.1,38,76,761/-. 3. THE BRIEF FACTS AS EMERGING FROM THE ORDERS OF T HE AUTHORITIES BELOW ARE NARRATED AS FOLLOWS. THE ASSESSEE IS A PARTNERSHIP FIRM DOING BUSINESS OF CIVIL CONSTRUCTION AND OTHER RELATED ACTIVITIES. THE MAJ OR COMPONENTS OF RECEIPTS ARISE 2 ITA NO.212/PN/2014 FROM GOVERNMENT CONTRACTS. FOR THE RELEVANT ASSESS MENT YEAR 2010-11, THE ASSESSEE INTER-ALIA PAID IMPUGNED AMOUNT OF RS.1,38,76,761/- TOWARDS L ABOUR CHARGES. THE PAYMENTS HAVE BEEN MADE TO 34 PERSONS ON VARIOUS OCCASIONS LISTED IN PARA 3 OF THE ASSESSMENT ORDER TOWARDS LABOUR CH ARGES ON WHICH NO TAX WAS DEDUCTED AT SOURCE ON PAYMENTS. THE ASSESSING OFFI CER INVOKED SECTION 194C OF THE ACT AND HELD THAT THE ASSESSEE FIRM WAS UNDER S TATUTORY OBLIGATION TO DEDUCT TDS AT THE RATE AS CONTEMPLATED UNDER SECTION 194C OF THE ACT. ACCORDINGLY, HE PROCEEDED TO DISALLOW THE IMPUGNED AMOUNT AS INADMI SSIBLE EXPENSES IN VIEW OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 5. AS STATED BY LD. AUTHORIZED REPRESENTATIVE FOR T HE ASSESSEE, IT WAS POINTED OUT TO THE CIT(A) THAT THE CONDITIONS PRECEDENT FOR INVOKING SECTION 194C IS NOT SATISFIED IN THE PRESENT CASE. IT WAS THE CASE OF THE ASSESSEE THAT FOR INVOKING SECTION 194C, THE PAYMENT SHOULD BE MADE FOR CARRYI NG OUT ANY WORK IN PURSUANCE OF A CONTRACT ETC.. IN THE PRESENT CASE, THE ASSES SEE DOES NOT HAVE ANY CONTRACT WITH THE PERSON TO WHOM THE IMPUGNED AMOUNT WAS PAI D. THE PAYMENT HAS BEEN MADE TOWARDS LABOUR CHARGES FOR FURTHER DISTRIBUTIO N AMONG LABOURERS AND THE INDIVIDUAL PAYMENT TO LABOURERS IS LESS THAN THRESH OLD LIMIT FOR DEDUCTION OF TDS. IN THE ABSENCE OF ANY SHIFT IN THE RESPONSIBILITY FROM THE ASSESSEE TO SUCH LABOUR SARDARS (THEKEDARS), A CONTRACT FOR SUPPLY OF LAB OUR OR MATERIAL ETC. CANNOT BE INFERRED. THE RISK AND RESPONSIBILITY IN RELATION TO THE CARRYING OUT OF WORK FROM THE LABOURERS CONTINUES TO BE SHOULDERED BY THE ASSESSE E. HENCE, THE INGREDIENTS OF SECTION 194C OF THE ACT ARE NOT PRESENT. CONSEQUEN TLY, DISALLOWANCE BY INVOKING SECTION 40(A)(IA) OF THE ACT IS NOT CALLED FOR. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER FOR DELETION OF DISALLOWANCE. 3 ITA NO.212/PN/2014 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE CONTENDED THAT WHEN THE PAYMENT HAS BEEN MADE TO THE SO CALLED LABOUR SARDARS, IT IS IMPLIED THAT SOME SERVICES HAVE BEEN RENDERED BY HIM. THE CONTR ACT BETWEEN THE ASSESSEE AND THESE 34 PARTIES TO WHOM THE PAYMENT HAS BEEN M ADE IS IMPLICIT. IT IS NOT NECESSARY THAT THE CONTRACT SHOULD ALWAYS BE IN WRI TING. THE CONTRACT CAN BE EITHER ORAL OR WRITTEN. ACCORDINGLY, THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRONGLY CONTENDED THAT THE LD. CIT(A) HAS WRONGLY INTERPRETED THE PROVISIONS OF SECTION 194C OF THE ACT AND URGED FOR CANCELLATION OF RELIEF GRANTED BY HIM. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE FURTHER RELIED UPON THE RATIO LAID DOWN BY THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF JINTAN CLINICAL THERMOMETER VS. ITO REPORTED IN (1991) 38 ITD 105 ( AHD.) AND THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ASSOCIATED CEMENT CO. LTD. VS. CIT REPORTED IN (1993) 67 TAXMANN.COM 346 (SC) IN SUPPORT OF THE CASE OF THE REVENUE. 8. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE VEHEMENTLY SUPPORTED THE ORDER OF THE CIT(A). HE REITERATED THAT THE PA YMENTS HAVE BEEN ROUTED THROUGH LABOUR SARDARS/THEKEDARS IN THE CAPACITY OF FACILIT ATORS ONLY. THE RISK AND RESPONSIBILITIES ANNEXED TO THE ENGAGEMENT AND PERF ORMANCE OF LABOUR WORK CONTINUES WITH THE ASSESSEE ONLY, THEREFORE, THERE IS NO CONTRACT EITHER ORAL OR IN WRITING BETWEEN THE ASSESSEE AND THESE 34 RECIPIENT S. HE SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MAHENDRA RAGHUNATH PATIL VS. ITO REPORTED IN (2015) 54 TAXMANN.COM 168 (PUNE TRIB.) (COPY IN FILE). IN MAHENDRA RAGHUNATH PATIL VS. ITO (SUPRA) ALSO THE ASSESSEE CONTRACTOR HAD BEEN GIVEN CERTAIN WORK ORDERS BY ITS 4 ITA NO.212/PN/2014 VENDOR PARTY AND IN ORDER TO EXECUTE THE SAID WORK ORDERS, IT HAD ENGAGED VARIOUS LABOURERS THROUGH JAMADARS FOR CARRYING OUT WORK. IT WAS HELD BY THE TRIBUNAL THAT MERELY BECAUSE SERVICES OF THE LABOURERS THROUGH JA MADARS WERE UTILIZED BY THE ASSESSEE, IT DID NOT ESTABLISH THAT THERE WAS AN UN DERSTANDING FOR TRANSFER OF RESPONSIBILITIES THROUGH SAID PERSONS TO CARRY OUT ANY PART OF JOB WORK, WHICH WAS SOLE RESPONSIBILITY OF THE ASSESSEE CONTRACTOR. IN THE ABSENCE OF ANY UNDERSTANDING OR CONTRACT BETWEEN THE PARTIES, THERE IS NO REQUIR EMENT TO DEDUCT TAX AT SOURCE OUT OF SUCH PAYMENTS. THE BONAFIDES OF LABOUR EXPENDIT URE IS NOT IN QUESTION. HE ACCORDINGLY, URGED THAT THE ORDER OF THE CIT(A) SHO ULD NOT BE DISTURBED. 9. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW AND THE FACTS AND MATERIAL PLACED BEFORE US. THE EXPLANATION OFFERED BY THE ASSESSEE APPEARS PLAUSIBLE. FOR APPLICATION OF PRO VISIONS OF SECTION 194C(2) OF THE ACT, WHAT IS NECESSARY IS A RELATIONSHIP BETWEEN TH E CONTRACTOR AND SUB-CONTRACTOR AND NOT MERELY BY HIRING OF AN AGENCY BY THE CONTRA CTOR DURING THE COURSE OF EXECUTION OF WORK. IN THE PRESENT CASE, SUCH VITAL REQUIREMENT OF RELATIONSHIP OF A CONTRACTOR AND SUB-CONTRACTOR BETWEEN THE ASSESSEE AND THE THEKEDARS IS MISSING. THEREFORE, IN OUR OPINION, THE LIABILITY TO DEDUCT TAX AT SOURCE DOES NOT ARISE. THE VIEW OF OURS IS IN LINE WITH THE DECISION OF THE PU NE BENCH OF THE TRIBUNAL IN THE CASE OF MAHENDRA RAGHUNATH PATIL VS. ITO (SUPRA) . THE RELIANCE PLACED BY THE REVENUE IN THE CASE OF JINTAN CLINICAL THERMOMETER VS. ITO (SUPRA) IS MISPLACED. IN THAT CASE, THE RESPECTIVE PARTIES HAD DONE JOB W ORK FOR THE ASSESSEE COMPANY AND THE PAYMENT WAS MADE FOR THE ABOVE JOB WORK. I T WAS FOUND THAT THERE WAS AN IMPLIED CONTRACT FOR CARRYING OUT JOB WORK ON STIPU LATED TERMS AND CONDITIONS AND ON THOSE FACTS THE APPLICABILITY OF SECTION 194C WAS F OUND SUSTAINABLE. THE OTHER DECISION RELIED UPON BY THE LD. DEPARTMENTAL REPRES ENTATIVE FOR THE REVENUE IN THE CASE OF ASSOCIATED CEMENT CO. LTD. VS. CIT (SUPRA) ALSO APPEARS TO BE OF NO ASSISTANCE. IN THAT CASE, IT WAS HELD BY THE HONB LE SUPREME COURT THAT ONCE THE 5 ITA NO.212/PN/2014 SECTION IS RIGHTLY INVOKED, TAX HAS TO BE DEDUCTED AT SOURCE ON THE GROSS AMOUNT OF PAYMENT AND NOT MERELY ON THE INCOME COMPONENT THER EIN. THE ISSUE IN THE PRESENT CASE IS THE APPLICABILITY OF THE IMPUGNED S ECTION ITSELF AND NOT THE QUANTIFICATION OF THE TAX DEDUCTIBLE AMOUNT. RESPE CTFULLY FOLLOWING THE DECISION RENDERED BY THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF MAHENDRA RAGHUNATH PATIL VS. ITO (SUPRA) AND IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROU GHT TO OUR NOTICE TO TAKE A CONTRARY VIEW, WE ARE NOT INCLINED TO ACCEPT THE ARGUMENT OF THE REVENUE. THE GROUNDS RAISED BY THE REVENUE ARE ACC ORDINGLY DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 29 TH DAY OF JULY, 2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) # / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE ; DATED : 29 TH JULY, 2015. %&'#()!*!+( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. %, / BY ORDER , ' # //TRUE COPY// $%& # '( / SR. PRIVATE SECRETARY ) '*, / ITAT, PUNE