Smt. Daxaben Shirrishbhai Parmar, Surat V. The Income tax Officer,Ward-3(4), Surat

ITA 3087/AHD/2009

• Counselvise Citation: 308720514 RSA 2009
• Duration Of Justice: 2 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHYAM PRASADSR D R
• Assessee Lawyers: R N VEPARI
• Keywords: Non-deduction of tax
• Section: 194C

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.3087/AHD/2009 ( & ' & ' & ' & ' / / / / ASSESSMENT YEAR : 2006-07) DAXABEN SHIRISHBHAI PARMAR 3, GURUKRUPA SOCIETY GHODDOD ROAD SURAT & & & & / VS. THE INCOME TAX OFFICER WARD-3(4) SURAT ( '# ./)* ./ PAN/GIR NO. : ACBPP 9535 E ( (+ / // / APPELLANT ) .. ( ,-(+/ RESPONDENT ) (+ . '/ APPELLANT BY : SHRI R.N.VEPARI, A.R. ,-(+ / . ' / RESPONDENT BY : SHRI SHYAM PRASAD, SR.D.R. &0 / #/ // / DATE OF HEARING : 23/5/2012 12' / # / DATE OF PRONOUNCEMENT : 31/5/12 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II, SURAT DATED 24/08/2009 AND THE SUBSTANTIVE GROUND PRESSED BEFO RE US IS AS UNDER:- (I) DISALLOWANCE U/S.40(A)(IA) OF RS.57,50,856/-FOR FAILURE TO DEDUCT TAX:- ITA NO. 3087/AHD/2009 DAXABEN SHIRISHBHAI PARMAR VS. ITO ASST.YEAR - 2006-07 - 2 - (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE OF AFOREMENTIONED AMOUNT. (2) THE APPELLANT SUBMITS THAT SINCE THERE WAS NO L IABILITY ON HER TO DEDUCT TAX U/S.194C OF THE ACT, THERE WAS NO QUESTI ON OF DISALLOWANCE AS MADE BY ASSESSING OFFICER AND CONFI RMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 29. 12.2008 WERE THAT THE ASSESSEE IN AN INDIVIDUAL CAPACITY IS CARRYING OUT JOB WORK. THE ASSESSEE HAS ALSO MADE PAYMENT TO LABOURERS. IT WAS NOTICED THAT PAYMENTS MADE TO LABOURERS HAVE EXCEEDED RS.50,000/-, HOWEVER, NO TAX WAS DEDUCTED U/S.194C OF THE I.T.ACT. A PARTY-WISE DETAILS OF P AYMENT WAS PLACED ON RECORD BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAS GIVEN A CHART TO ELABORATE ITS POSITION IN THE CHAIN OF CONTRACT WOR K AS FOLLOWS:- RELIANCE ENGINEERING ASSOCIATES PVT.LTD. PRINCIPAL LIABILITY TO DEDUCT @ @% B.K.PARMAR CONSTRUCTIONS PVT.LTD. CONTRACTOR LIABILITY TO DEDUCT @ 2% DAXABEN PARMAR (MALAV ENTERPRISE) SUB CONTRACTOR NO PROVISION IN THE ACT PRESCRIBING ANY DEDUCTION BY THE SUB CONTRACTOR FURTHER LABOUR JOBS ITA NO. 3087/AHD/2009 DAXABEN SHIRISHBHAI PARMAR VS. ITO ASST.YEAR - 2006-07 - 3 - 2.1. ON THE BASIS OF THE SAID CHAIN OF CONTRACT, IT WAS CONTENDED BEFORE THE ASSESSING OFFICER THAT THE PROVISIONS OF TDS WE RE NOT ATTRACTED IN THE CASE OF SUB-CONTRACTOR. THE EXPLANATION OF THE ASS ESSEE WAS THAT THE ASSESSEE HAS NOT ACTED AS A CONTRACTOR OF M/S.B.K.P ARMAR CONSTRUCTION PVT.LTD. THE SAID COMPANY ITSELF IS CONTRACTOR FOR CARRYING OUT ERECTION WORK OF TELECOMMUNICATION TOWERS. THE SAID COMPANY HAD ASSIGNED A SUB-CONTRACT JOB TO THE ASSESSEE. ON THAT GROUND, SINCE THE ASSESSEE IS A SUB-CONTRACTOR, THEREFORE, THE PROVISIONS OF SUB-CL AUSE(2) OF SECTION 194C WAS NOT TO BE APPLIED. THIS CONTENTION OF THE ASSE SSEE WAS REJECTED BY THE ASSESSING OFFICER. RELYING UPON THE PROVISIONS OF SECTION 194C, THE ASSESSING OFFICER HAS CONCLUDED THAT DUE TO NON-DED UCTION OF TAX THE PROVISIONS OF SECTION 40(A)(IA) WERE ATTRACTED=, HE NCE IN THE RESULT, THE AMOUNT WAS DISALLOWED. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE ACTION OF THE ASSESSING OF FICER CONFIRMED. 3. AT THE OUTSET, WE HAVE BEEN INFORMED THAT THIS I SSUE IS NOW COVERED BY FEW DECISIONS OF THIS TRIBUNAL. FROM TH E SIDE OF THE ASSESSEE, LD.AR MR.R.N.VEPARI APPEARED AND PLACED RELIANCE ON THOSE ORDERS OF THE TRIBUNAL. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE LD.DR MR.SHYAM PRASAD APPEARED AND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. FACTS OF THE CASE HAVE REVEALED THAT RELIANCE ENGINEERING ASSOCIATES (P) LTD. WAS THE PRINCIPLE WHO HAD GIVEN CONTRACT TO ONE M/S.B.K.PARMAR CONSTRUCTION PVT.LTD . THE SAID COMPANY IN TURN HAD GIVEN SUB-CONTRACT TO THE ASSESSEE. IT WAS INFORMED THAT AS PER THE PROVISIONS OF THE ACT, THE RELIANCE ENGINEE RING ASSOCIATES (P) LTD. WAS REQUIRED TO DEDUCT THE TAX @ 2% AS PER THE PROVISIONS OF SECTION ITA NO. 3087/AHD/2009 DAXABEN SHIRISHBHAI PARMAR VS. ITO ASST.YEAR - 2006-07 - 4 - 194C OF THE I.T.ACT FROM THE PAYMENTS MADE TO M/S. B.K.PARMAR CONSTRUCTION PVT.LTD. LIKEWISE, AS PER THE PROVISI ONS OF SECTION 194C, M/S.B.K.PARMAR CONSTRUCTION CO.WAS REQUIRED TO DEDU CT TAX @ 1% FROM THE PAYMENTS MADE TO THE ASSESSEE. THE ASSESSEE A SUB-CONTRACTOR OF A CONTRACTOR WAS NOT REQUIRED TO DEDUCT THE TAX FROM THE PAYMENTS MADE TO LABOURERS. THIS ISSUE WAS CONSIDERED BY THE ITAT AHMEDABAD BENCH C IN THE CASES, NAMELY, (I) THE DY.CIT VS. MUTRU JABHAI HANIFBHAI KHANUSIYA IN ITA NO.1856/AHD/2009 FOR A.Y. 2006-07, ORDER DATED 31/10/2011 AND SHRI PRASHANT H.SHAH VS. ACIT IN ITA NO.17/AHD/2011 FOR A.Y. 2007-08, ORDER DATED 08/07/2011. THE RELE VANT PORTION (FROM ITA NO.17/AHD/2011 IN THE CASE OF SH.PRASHANT H.S HAH VS.ACIT) IS REPRODUCED BELOW:- 8. IN THE CONTEXT OF ABOVE CLARIFICATION ISSUED BY THE CBDT, IF WE EXAMINE THE ISSUE IN HAND, THEN IN TERMS OF THE PROVISIONS OF SECTION 194C(2) OF THE ACT CONDITIONS TO BE SATISFI ED ARE (I) THAT THE ASSESSEE SHOULD BE A CONTRACTOR, (II) THAT THE ASSESSEE SHOULD ENTER INTO A CONTRACT WITH A SUB-CONTRACTOR, (III) THAT THE SUB-CONTRACTOR SHOULD CARRY OUT ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR AND (IV) THAT THE PAYMENT SHOULD BE MADE FOR THE WORK DONE. IN A CASE, WHEN A CONTRACT IS ASSIGNED, GENERALLY THE CLAUSES ARE STRINGENT THAT THE CONTRACTOR IS TO BE RESPONSIBLE FOR ALL THE ACTS AND DEFAULTS COMMITTED. IN THE PRESENT CASE AS WEL L, WHEN THE M/S.A.N.S. CONSTRUCTION LTD. HAD GRANTED SUB-CONTRA CT DATED 30/1/2006 TO M/S.SAKHI CONSTRUCTION,( PROP. APPELLA NT) THEN VIDE CLAUSE (1) THE ASSESSEE WAS TO DEPLOY HIS OWN RESOU RCES IN TERMS OF MANPOWER & MACHINERY. FURTHER VIDE CLAUSE (2) ASSES SEE HAD UNDERTAKEN THE RESPONSIBILITY OF ANY LEGAL OR FINAN CIAL LIABILITY. THE ASSESSEE HAS INDEMNIFIED THE FIRST PARTY, I.E. M/S.A.N.S. CONSTRUCTION LTD. AGAINST ANY LEGAL OR FINANCIAL LI ABILITY IF ARISE IN FUTURE PERTAINING TO THE SAID CONTRACT. ASSESSEE WAS MADE SOLELY RESPONSIBLE FOR THE EXECUTION OF THE JOB. THESE C LAUSES, THEREFORE, SUGGESTED THAT THE ASSESSEE WAS WHOLLY AND EXCLUSI VELY RESPONSIBLE FOR THE ACTS AS ALSO FOR THE DEFAULTS, IF COMMITTED. ON THE OTHER HAND, THE LORRY OWNERS OR THE TRANSPORTER S WHO HAD BEEN ITA NO. 3087/AHD/2009 DAXABEN SHIRISHBHAI PARMAR VS. ITO ASST.YEAR - 2006-07 - 5 - GIVEN TRANSPORTATION CHARGES HAVE NOT BEEN FASTE NED WITH ANY OF THE ABOVE LIABILITIES, MEANING THEREBY THE TRAN SPORTERS WERE NOT THE PART OF THE SAID AGREEMENT AND THE ASSESSEE HAD AN INDEPENDENT ARRANGEMENT WITH THEM. IN OTHER WORDS, PECULIARITY OF THIS CASE IS THAT THE SUB-CONTRACT WHICH WAS ASS IGNED TO THIS ASSESSEE WAS NOT FURTHER SUB-CONTRACTED TO THE LOR RY OWNERS. IN A SUB-CONTRACT, A PRUDENT CONTRACTOR GENERALLY INCL UDE THE CLAUSES OF LIABILITY WHICH WERE UNDERTAKEN BY HIM WHILE ACC EPTING THE EXECUTION OF THE WORK FROM THE MAIN CONTRACTOR. W E MAY LIKE TO CLARIFY THAT A CONDITION OF PASSING OF THE LIABILI TY CAN NOT EXHAUSTIVE AND CAN NOT BE SAID TO BE THE ONLY CRI TERIA TO DECIDE WHETHER THERE WAS AN EXISTENCE OF CONTRACT OR SUB-C ONTRACT. THE CATALOG OF CRITERION MUST INCLUDE CERTAIN OTHER CL AUSES AS WELL, YET IN THIS CASE THIS CRITERIA CAN BE DETERMINATIVE CO NSIDERING THE NATURE OF WORK ASSIGNED BY THE ASSESSEE TO TRANSPOR TERS. IT IS NOT THE CASE OF THE A.O. THAT HE HAPPENED TO BE IN POSS ESSION OF SOME MATERIAL TO ALLEGE THAT THERE EXISTED A SPECIFIC CO NTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS. WHETHER THE GOODS WE RE TRANSPORTED IN PURSUANCE OF ANY SUB-CONTRACT SO AS TO APPLY TH E PROVISIONS OF SEC.194C(2)? NOTHING HAS BEEN BROUGHT ON RECORD. S O IT WAS NOT ESTABLISHED THAT THE LORRY OWNERS HAVE UNDERTAKEN A NY PART OF THE IMPUGNED SUB-CONTRACT WHICH WAS FOUND TO BE RISK AS SOCIATED VIDELICET THIS ASSESSEE. WE, THEREFORE, CONCLUDE T HAT IN THE ABSENCE OF TRANSFER OR PASS-OVER OF ANY CONTRACTUAL RESPONS IBILITY TO TRANSPORTERS AS A SUB-CONTRACTOR, THE ASSESSEE BEIN G AN INDIVIDUAL WAS NOT RESPONSIBLE FOR THE DEDUCTION OF TAX AT SOU RCE AS PRESCRIBED U/S.194C(2) OF THE IT ACT. CONSEQUENCE THEREUPON THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT WERE INCORR ECTLY INVOKED, HENCE THE VIEW TAKEN BY THE AUTHORITIES BELOW ARE H EREBY REVERSED. GROUND IS ALLOWED. 4. IN THE LIGHT OF THE PRECEDENCE CITED HEREINABOVE AND CONSIDERING THE FACTUAL MATRIX OF THE CASE, WE HEREBY HOLD THAT THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. 194C(2) WERE NOT APPLICABL E FOR THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DIRECT TO DELETE THE DISALLOWANCE. RESULTANTLY, THIS GROUND IS ALLOWED. ITA NO. 3087/AHD/2009 DAXABEN SHIRISHBHAI PARMAR VS. ITO ASST.YEAR - 2006-07 - 6 - 5. IN THE RESULT, THE APPEAL OF THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD; DATED 31/ 5 /2012 ..&, .&../ T.C. NAIR, SR. PS '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-II, SURAT 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION23/5/12 (DICTATION-PAD PGS 1 TO 7 ATTACHED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.5.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S31/5/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31/5/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER