SHIVAJIRAO BAJIRAO GHODKE, MUMBAI V. DCIT CIR 3, THANE

ITA 450/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49340 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 14-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2010
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Assessee Lawyers: KISHORE K PADDAR
• Keywords: Competent authority
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI T.R. SOOD (A M) I.T.A.NO.450/MUM/2010 (A.Y. 2006-07) SHRI SHIVAJIRAO BAJIRAO GHODKE, 3, KRISHNA PREM, KOPRI, THANE (E)-400 603. VS. DY. COMMR. OF INCOME-TAX, CIRCLE-3, MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI KISHORE K. PADDAR. RESPONDENT BY SHRI S ANJIV DUTT. O R D E R PER T.S. SOOD, AM : IN THIS APPEAL, VARIOUS GROUNDS ARE RAISED, BUT TH E ONLY DISPUTE IS REGARDING ADDITION OF RS.2,65,83,000/- ON ACCOUNT O F PAYMENTS MADE TO SUB- CONTRACTOR WITHOUT DEDUCTING TAX. 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING THE ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS GI VEN A SUB-CONTRACT FOR A SUM OF RS.2,65,83,000/- ON WHICH NO TAX HAS BEEN DEDUCT ED. SINCE THE ASSESSMENT HAS BEEN COMPLETED U/S.144 FOR NON-FILING OF DETAIL S, THE AO OBSERVED THAT THIS EXPENDITURE COULD NOT BE ALLOWED BECAUSE TAX WAS NO T DEDUCTED IN VIEW OF SEC. 40(A)(I). 3. BEFORE THE LD. CIT(A), IT WAS MAINLY SUBMITTED T HAT SUB-CONTRACTOR, M/S. SHREEPAD BUILDERS, HAD ALREADY MADE A PAYMENT OF RS .9,00,000/- WHICH IS MORE THAN THE AMOUNT OF TDS. THEREFORE, SEC. 40(A)(IA) W AS NOT ATTRACTED. HOWEVER, THE CIT(A) DID NOT AGREE WITH THIS CONTENTION AND C ONFIRMED THE ADDITION. ITA NO.450/M/10 SHIVAJIRAO BAJIRAO GHODKE 2 4. BEFORE, THE LD. COUNSEL OF THE ASSESSEE SUBMITTE D THAT SEC. 194C HAS UNDERGONE MANY AMENDMENTS AND CLAUSE (K) WAS ADDED TO SEC. 194C(1) BY THE FINANCE ACT, 2007, W.E.F. 01-06-2007. CLAUSE (K) PR OVIDES FOR DEDUCTION OF TAX EVEN BY INDIVIDUALS AND HUF WHOSE GROSS TURNOVER EX CEEDS THE MONEY LIMIT SPECIFIED IN SEC. 44AB. SINCE THIS PROVISION WAS IN TRODUCED ONLY FROM 01-06-2007, THE PROVISION FOR DEDUCTING TAX WAS NOT APPLICABLE TO THE ASSESSEE AND CONSEQUENTLY NO ADDITION SHOULD HAVE BEEN MADE U/S. 40(A)(I). IN ANY CASE, THE SUB-CONTRACTOR, M/S. SHREEPAD BUILDERS, HAD ALREAD Y PAID A SUM OF RS.9,00,000/- AS ITS TAX LIABILITY AND, THEREFORE, NO ADDITION WA S JUSTIFIED. 5. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT S EC. 194C IS APPLICABLE TO THE ASSESSEE AND HE REFERRED TO THE PROVISIONS OF S UB-SEC. (2) WHICH WAS INSERTED BY FINANCE ACT, 2002, W.E.F. 01-06-2002. HE FURTHER SUBMITTED THAT THERE IS NO FORCE IN THE ARGUMENT THAT SINCE SUB-CONTRACTOR HAS ALREADY PAID TAX, THEREFORE, THE PROVISIONS OF SEC. 40(A)(IA) WERE NOT APPLICABL E IN VIEW OF THE DECISION OF MADRAS HIGH COURT IN THE CASE OF TUBE INVESTMENTS O F INDIA LTD. VS. ACIT (325 ITR 610). IN THIS CASE, THE ARGUMENT THAT THE OTHER PARTY HAS PAID TAX WAS REJECTED BY THE COURT. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DEYS MEDICAL (U.P) (P)LTD. VS . UNION OF INDIA & ORS (316 ITR 445). SIMILARLY, THE COCHIN BENCH OF TRIBUNAL IN TH E CASE OF DIVYA BUSINESS SYSTEMS (P) LTD. VS. ACIT (43 SOT 155) HELD THAT TH E ARGUMENT THAT THERE WAS NO LOSS TO THE REVENUE COULD NOT BE TAKEN TO DEFEAT THE SUBSTANTIVE PROVISION OF LAW. 6. IN THE REJOINDER, THE LD. COUNSEL OF THE ASSESSE E SUBMITTED THAT, NO DOUBT, SUB-SEC. (2) WAS INTRODUCED W.E.F. 01-06-2002, BUT THE SAME IS APPLICABLE ONLY TO SUB-CONTRACTOR. SINCE THE ASSESSEE IS NOT A CONTRAC TOR, THEREFORE, THERE IS NO QUESTION OF A SUB-CONTRACTOR AND IN THIS REGARD HE FILED A COPY OF RETURN SHOWING ITA NO.450/M/10 SHIVAJIRAO BAJIRAO GHODKE 3 THAT THE ASSESSEE HAS NOT CLAIMED ANY TDS. HAD THE ASSESSEE BEEN A CONTRACTOR, DEFINITELY, SOME TDS WOULD HAVE BEEN DEDUCTED. THE LD. D.R. FURTHER RESPONDED TO THIS BY SAYING THAT THE ASSESSEE HAS TAKEN THE A CTIVITY OF CONSTRUCTION FROM THE COMPETENT AUTHORITY AND, THEREFORE, THE ASSESSEE MU ST BE A CONTRACTOR. NO AGREEMENT OR ANY OTHER EVIDENCE HAS BEEN PRODUCED T O SHOW THAT THE ASSESSEE IS NOT A CONTRACTOR. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND THAT IN THE ASSESSMENT ORDER THE NATURE OF BUSINESS OF THE ASSE SSEE HAS BEEN SHOWN AS BUILDER & DEVELOPER/TRANSPORTER. IN PARA-3 OF THE A SSESSMENT ORDER, IT IS FURTHER MENTIONED THAT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDER & DEVELOPER AS WELL AS TRANSPORTER. FROM THE ACKNOWLE DGEMENT OF RETURN AND COMPUTATION, IT IS CLEAR THAT NO TDS HAS BEEN CLAIM ED BY THE ASSESSEE. HAD THE ASSESSEE BEEN A CONTRACTOR, DEFINITELY, SOME TDS WO ULD HAVE BEEN THERE. THEREFORE, IT IS A CLEAR CASE WHERE THE ASSESSEE IS ONLY A BUILDER & DEVELOPER. FURTHER, THE ASSESSEE HAS DEFINITELY ASSIGNED SOME OF THE WORK TO M/S. SHREEPAD BUILDERS, WHO HAVE BEEN DESCRIBED AS SUB-CONTRACT, BUT A SUB-CONTRACTOR WOULD COME INTO THE PICTURE ONLY WHEN THERE IS A CONTRACT OR. ADMITTEDLY, THE ASSESSEE HAS NOT DEDUCTED ANY TDS FROM M/S. SHREEPAD BUILDER S. WE FURTHER FIND THAT CLAUSE (K) WAS INTRODUCED IN SEC. 194C(1) WHICH WAS AMENDED BY FINANCE ACT, 2007, W.E.F. 01-06-2007. CLAUSE (K) READS AS UANDER : (K) ANY INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, W HOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY L IMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANC IAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT O F THE CONTRACTOR. FROM THE ABOVE, IT IS CLEAR THAT TAX WAS REQUIRED T O BE DEDUCTED EVEN BY INDIVIDUALS AND HUF WHOSE TURNOVER EXCEEDS THE MONE TARY LIMITS SPECIFIED IN ITA NO.450/M/10 SHIVAJIRAO BAJIRAO GHODKE 4 SEC. 44AB. HOWEVER, THIS PROVISION CAME INTO EXISTE NCE FROM 01-06-2007 AND, THEREFORE, IS CLEARLY NOT APPLICABLE IN ASSTT. YEAR 2006-07, WITH WHICH WE ARE CONCERNED. FURTHER, SUB-SECTION (2) OF SEC. 194C RE ADS AS UNDER : (2) ANY PERSON (BEING A CONTRACTOR AND NOT BEING A N INDIVIDUAL OR A HINDU UNDIVIDED FAMILY) RESPONSIBLE ;FOR PAYING ANY SUM TO ANY RESIDENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE SUB-CONTRACTOR) IN PURSUANCE OF A CONTRACT WITH THE SUB-CONTRACTOR FOR CARRYING OUT, OR FOR TH E SUPPLY OF LABOUR FOR CARRYING OUT, THE WHOLE OR ANY PART OF T HE WOK UNDERTAKEN BY THE CONTRACTOR OR FOR SUPPLYING WHETH ER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTRACTOR HAS UNDER TAKEN TO SUPPLY SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE SUB-CONTRACTOR OR AT THE TIME OF PAYMENT THE REOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTH ER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO ONE PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN : PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FA MILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUS E (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE SUB-CONTRACTOR, SHALL BE LIABLE TO D EDUCT INCOME-AX UNDER THIS SUB-SECTION. A PLAIN READING OF THE CLAUSE CLEARLY SHOWS THAT TH IS SUB-SECTION IS APPLICABLE WHEN A CONTRACTOR MAKES A PAYMENT TO A SUB-CONTRACT OR. THE PROVISO TO THIS SECTION, NO DOUBT, WAS INSERTED W.E.F. 01-06-2002 W HICH PROVIDES THAT IN CASE OF INDIVIDUALS OR HUF, TAX IS DEDUCTIBLE IF THE MON ETARY LIMIT EXCEEDS THE SUM PROVIDED IN SEC. 44AB. HOWEVER, AT THE SAME TIME, T HIS SECTION IS APPLICABLE ONLY WHEN A CONTRACTOR MAKES PAYMENT TO A SUB-CONTR ACTOR, WHICH IS NOT THE CASE BEFORE US. AS OBSERVED ABOVE, THE ASSESSEE IS NOT A CONTRACTOR AND, THEREFORE, THE ASSESSEE WOULD BE COVERED BY CLAUSE (K) OF SUB-SEC. (1) AND NOT BY SUB-SEC.(2). SINCE CLAUSE (K) WAS INTRODUCED ONLY W.E.F. 01-06-2007, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TA X AND HENCE ADDITION U/S.40(A)(I) COULD NOT HAVE BEEN MADE. ITA NO.450/M/10 SHIVAJIRAO BAJIRAO GHODKE 5 8. WE ARE NOT DEALING WITH THE OTHER ARGUMENTS RELA TING TO THE ISSUE THAT THE OTHER PARTY HAS ALREADY PAID MORE TAX IN VIEW O F THE ABOVE FINDING THAT THE PROVISIONS OF SEC. 194C(1) CLAUSE (K) WERE NOT APPL ICABLE TO THE ASSESSEE. 9. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE TH E ORDER OF LD. CIT(A) AND DELETE THE ADDITION. 10. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED ON THE 24TH DAY OF JUNE, 20 11. SD/- SD/- (D.K. AGARWAL) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 24TH JUNE , 20110. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-I,THANE. 4 CIT-II,MUMBAI. 5.DR,I BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.450/M/10 SHIVAJIRAO BAJIRAO GHODKE 6 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 14-06-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 15-06-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER