ACIT, New Delhi V. Sh. Laxmipathy Ramabhat Kadiyali, New Delhi

ITA 3199/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74150 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 21-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Section: 194C

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI G. D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI A. T. VARKEY, JUDICIAL MEMBER I TA NO. 3199 /DEL/ 2012 (ASSESSMENT YEAR: 2007 - 08 ) ACIT, CIRCLE - 24(1), ROOM NO. 238 - B, 2 ND FLOOR, C.R. BUILDING, I.P. ESTATE, NEW DELHI VS. LAXMIPATHY RAMABHAT KADIYALI, B - 2/2217, VASANT KUNJ, NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. N. BHATIA, SR. DR RESPONDENT BY: K.V. S. R. KRISHNA, ADV. O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - X II , NEW DELHI DATED 24. 04.2012 , FOR THE ASSESSMENT YEAR 2007 - 08 . 2. THE GROUNDS RAISED BY THE REVENUE ARE AS FOLLOWS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONAL OF RS. 14,94,975/ - MADE U/S 40(A)(IA) OF THE I.T. ACT ON ACCOUNT NON - DEDUCTION OF TDS ON THE PAYMENT FOR REIMBURSEMENT OF WAGES OF TEMPORARY WORKERS. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF THE HEARING OF THE APPEAL. 3. APROPOS DELETION OF ADDITION OF RS. 14,94,975/ - U/S 40(A)(IA) OF THE INCOME - TAX ACT (HEREIN AFTER THE ACT) ON ACCOUNT OF NON - DEDUCTION OF TDS ON THE PAYMENT FOR REIMBURSEMENT OF WAGES OF TEMPORARY WORKERS. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A HIGHWAY ENGINEERING CONSULTANT WHO IS EM PANELLED WITH THE MINISTRY OF ROAD TRANSPORT & HIGHWAYS AND WHO HAS BEEN DESIGNING HIGHWAYS FOR NHAI, STATE GOVERNMENTS AND SOME PRIVATE ENTREPRENEURS AND IS OPERATING AS A SOLE PROPRIETORSHIP IN THE NAME OF DR. L.R. KHADIYALI & ASSOCIATES. THE ASSESSEE HA S CLAIMED AN EXPENSE OF RS. 16,28,593/ - WHICH WAS DULY REFLECTED IN THE PROFIT AND LOSS ACCOUNT , UNDER THE HEADING FIELD & SURVEY WAGES (TEMPORARY WORKERS) AND THE ASSESSEE ENCLOSED THE DETAILS OF THE SAME BEFORE THE ASSESSING OFFICER AT THE TIME OF HEARIN G . HOWEVER, THE ASSESSING PAGE NO. 2 OFFICER HAS MADE A DISALLOWANCE OF RS. 14,94,975/ - ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TDS ON SUCH PAYMENT MADE TO THE PAYEE . AGGRIEVED BY THE SAID DISALLOWANCE THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A), WHO WAS OF THE VIEW THAT THE PAYMENT MADE TO TEMPORARY WORKERS IN RESPECT OF WAGES DOES NOT COME WITHIN THE AMBIT OF SECTION 194C OF THE ACT AND ALLOWED THE SAME. A GGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE REVENUE IS BEFORE US. 5. THE LD DR CONTENDED THAT THE ASSESSEE HAD NEITHER MADE THE PAYMENT DIRECTLY TO THE TEMPORARY LABOURER S NOR HAS KEPT ANY RECORDS OF SUCH PAYMENT TO THE LABOURERS; AND THE SAID PAYMENT WAS MADE BY DIFFERENT PERSONS FOR FURTHER REIMBURSEMENT OF THE WAGES AND SUCH TYPE OF PAYMENT IS IN FACT CONTRACTUAL IN NATURE AND FALLS WITHIN THE AMBIT OF PROVISIONS OF SECTION 194C OF THE ACT. THEREFORE, ACCORDING TO THE DR THE ASSESSEE SHOULD HAVE DED UCT ED TDS ON SUCH PAYMENT, AND AS HE DID NOT DO SO ; THE LD ASSESSING OFFICER HAS RIGHTLY DISALLOWED RS. 14,94,975/ - U/S 40(A)(IA) OF THE ACT AND MADE THE SAID ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. ON THE OTHER HAND LD AR SUBMITTED THAT THE ASSESSIN G OFFICER HAS NOT APPRECIATED THE FACTS OF THE CASE AND THE NATURE OF THE PROFESSIONAL WORK CARRIED ON BY THE ASSESSEE HAS NOT BEEN UNDERSTOOD PROPERLY BY THE ASSESSING OFFICER AND THEREFORE HE HAS ERRED IN DECIDING SO. THE LD AR SUBMITTED THAT SINCE THE ASSESSEE IS A HIGHWAY ENGINEERING CONSULTANT HE HAS TO EXECUT E THE PROJECTS TAKEN BY HIM , FOR THAT HE HAS RECRUITED ENGIN EERS /PROFESSIONAL AND THEY ARE EMPLOYED UNDER HIM AND FOR THE SALARY DRAWN BY THE SAID EMPLOYEES , T DS IS DULY DEDUC T ED U/S 194J OF THE ACT. HOWEVER, WHEN THE ENGINEERS EMPLOYED UNDER HIM HAS TO VISIT THE PROJECT SITE TO EXECUT E THE TASK ASSIGNED TO THEM , THEY ENGAGE FROM THE LOCAL AREAS, TEMPORARY EMPLOYEES/ LABOURER S (SKILLED AS WELL AS UNSKILLED) , ENUMERATORS, HELPERS FOR COLLECTING DATA OF THE TRAFFIC VOLUME, FOR MOVING THE INSTRUMENTS FROM PLACE TO PLACE, AND FOR DIGGING WORK AT THE PROJECT SITE. THESE EXPENSES INCURRED FOR ENGAGING CASUAL LABOURER S ARE DEFRAYED BY THE ENGINEERS EMPLOYED BY THE A SSESSEE WHICH ARE MAINLY OF THE NATURE OF DAILY WAGES PAID TO THESE TEMPORARY WORKERS OF THE LOCAL AREA. THESE EXPENSES DEFRAYED BY THE ENGINEERS AND PROFESSIONAL S EMPLOYED UNDER HIM ARE LATER ON REIMBURSED BY THE ASSESSEE ON ACTUAL BASIS WHEN THEY SUBMIT THE DETAILS OF THE EXPENSES INCURRED BY THEM ON HIS BEHALF . THEREFORE, ACCORDING TO THE LD AR THE ASSESSING OFFICER ERRED IN ASSUMING THAT IT IS A CONTRACTUAL PAYMENT BY THE ASSESSEE TO HIS OWN EMPLOYEES IS WRONG AND PAGE NO. 3 SINCE , THERE IS NO SUCH CONTRACT EXIST ING BETWEEN THE TEMPORARY LABO U RERS AND ENGINEERS EMPLOYED UNDER THE ASSESSEE , THE DECISION OF THE ASSESSING OFFICER IS WRONG AND ILLEGAL . ACCORDING TO THE LD AR , THE ASSESSING OFFICER FAILED TO APPRECIATE THE FACTS OF THE MATTER IN THE CORRECT PERSPECTIVE AND THEREFORE ERRED IN HIS DECISION, AND THE LD CIT(A) HAS RIGHTLY CORRECTED THE MISTAKE AND THEREFORE HE PLEA D ED THAT THE ORDER OF THE LD CIT(A) NEED NOT BE INTERFERED WITH. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RECORDS. ON A PERUSAL OF THE RECORDS SUBMITTED, WE FIND THAT THE PAYMENT S DEFRAYED TO TEMPORARY WORKERS WAS RANGING FROM RS. 100 TO RS. 200 PER DAY. FROM THE DETAILS SUBMITTED WE FIND THAT THE EXPENSES IN QUESTION WERE INCURRED AT THE PROJECT SITE. THE LD CIT(A) HAS COME TO A FINDING THAT THE REIMBURSEMENT OF EXPENSES TO THE EMPLOYEES/ ENGINEERS OF THE ASSESSEE WAS NOT PAYMENT TO THE CONTRACTORS. THIS FINDING OF FACT IS SUPPORTED BY EVIDENCE. THE ASSESSEE HAD ENCLOSED COMPLETE DETAILS OF EACH PAYMENT (REIMBURSEMENTS) MADE TO ENGINEERS/CONSULTANTS SHOWING THE DATE OF PAYMENT, ADDRESS OF ENGINEERS/CONSULTANTS (EMPLOYEES) , DETAILS OF THE PROJECT RELATED TO WHICH EXPENSES WERE INCURRED, DETAILS OF PAYMENT MADE, ( I.E. CHEQUE NUMBER , AND NAME OF THE BANK ) , AND THE PURPOSE FOR WHICH EXPENDITURE WERE INCURRED. HOWEVER, THE ASSESSING OFFICER HAS NOT APPRECIATED THE FACT THAT THESE REIMBURSEMENTS WERE MADE TO THE EMPLOYEES OF THE ASSESSEE FOR THE EXPENSES THEY HAVE INCURRED FOR THE WAGES DEFRAYED TO THE LOCAL WO RKERS AT THE PROJECT SITE AND THAT THE PAYMENT WAS NOT MADE TO ANY CONTRACTORS. MOREOVER, THE ASSESSEE HAD ALSO ENCLOSED THE CONFIRMATION FROM HIS EMPLOYEES/ENGINEERS/ CONSULTANTS THAT THEY HAVE RECEIVED CONSULTANCY FEES FOR THEIR SERVICES ON WHICH TDS WAS DULY DEDUCTED U/S 194J AND THEY ALSO CONFIRMED THAT THEY WERE ALSO REIMBURSED FOR THE ACTUAL EXPENSES INCURRED AT THE PROJECT SITE S BY THEM ON BEHALF OF THE ASSESSEE AS AFORE - STATED . THEREFORE, AS A MATTER OF F ACT IT CANNOT BE DISPUTED THAT THE PAYMENT WERE IN THE NATURE OF REIMBURSEMENT OF EXPENSES MADE TO THE EMPLOYEES/ CONSULTANTS/ ENGINEERS FOR EXPENSES INCURRED BY THEM ON ACCOUNT OF DEFRAYING WAGES OF TEMPORARY WORKERS AT THE PROJECT SITE AND THEREFORE DOES NOT QUALIFY FOR DISALLOWANCE AS RULED BY T HE ASSESSING OFFICER . 7. THE REASONS GIVEN BY THE LD CIT(A) IS AS FOLLOWS: - THE PAYMENT MENTIONED BY THE ASSESSING OFFICER DOES NOT FALL IN ANY OF THE CATEGORIES MENTIONED IN THE TERM WORK U/S 194C. AS EXPLAINED ABOVE, EVEN GOING BY THE ASSESSING OFFIC ERS VERSION THAT THE PAYMENT IS MADE TO PAGE NO. 4 CONTRACTOR, THE TYPE OF WORK SPECIFIED UNDER THE EXPLANATION TO SEC. 194C DOES NOT COVER THE TYPE OF PAYMENT MADE BY THE ASSESSEE AND HENCE SEC. 40(A)(IA) CANNOT BE ATTRACTED. HENCE, EVEN APPLYING THE LEGAL POSITION TO THE FACTS OF THE APPELLANTS CASE THE ASSESSING OFFICER CANNOT DISALLOW THE EXPENSES UNDER THE GARB OF SEC. 40(A)(IA) OF THE INCOME TAX ACT 1961. WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTED THAT THE PAYMENT MADE TO TEMPORARY WORKERS IN RESPECT OF WAGES DOES NOT EXCEEDS RS. 20,000/ - (SINGLE PAYMENT) OR RS. 50,000/ - (IN AGGREGATE DURING THE YEAR). THEREFORE ALSO THE PAYMENTS ARE NOT COMING WITHIN THE AMBIT OF SECTION 194C OF THE INCOME TAX ACT, 1961. HENCE, THERE IS NO CASE FOR ANY DISALLOWANCE. PLEASE NOTE THAT THE ASSESSING OFFICER HAS HIMSELF ALLOWED CASES OF PAYMENT OF RS. 50,000/ - OR BELOW. THEREFORE DISALLOWANCE MADE BY A O OF RS. 14,94,975/ - DESERVES TO BE DELETED AS IT IS NOT HIT BY THE PROVISIONS OF SEC. 40(A)(IA) OF THE INCOME TAX ACT 19 61. 8 . IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE REIMBURSEMENT MADE TO HIS EMPLOYEES (ENGINEER/PROFESSIONAL) FOR THE EXPENDITURE INCURRED BY THEM ON ACCOUNT OF DEFRAYING WAGERS OF TEMPORARY/ CASUAL LABOURERS DOES NOT FALL IN ANY OF THE CATEGORIE S MENTIONED IN THE TERM WORK U/S 194C. THEREFORE WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD CIT(A) AND WE CONFIRM THE ORDER OF THE LD CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 9 . IN THE RESULT GROUND S OF THE REVENUE FAILS AND THE ORDER OF THE LD CIT(A) IS CONFIRMED. ORDER P RONOUNCED IN THE OPEN COURT ON 3 1 . 01 . 2014 . - S D / - - S D / - ( G. D. AGARWAL) (A. T. VARKEY) HONBLE VICE PRESIDENT JUDICIAL MEMBER DATED 3 1 / 01 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI