Dy.Commissioner of Income Tax, Circle-14(2), Hyderabad V. Greater Hyderabad Municipal Corporation, Hyderabad

ITA 509/HYD/2014

• Counselvise Citation: 50922514 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Section: 194C; 201(1)

Judgement Text

ITA NOS 506 TO 513 OF 2014 GHMC HYDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NOS. 506 & 507/HYD/2014 (ASSESSMENT YEARS: 2009-10 TO 2010-11) DY. CIT, CIRCLE 14(2) HYDERABAD VS. GREATER MUNICIPAL CORPORATION, CENTRAL ZONE HYDERABAD (APPELLANT) (RESPONDENT) ITA NOS. 508 & 509/HYD/2014 (ASSESSMENT YEARS: 2009-10 TO 2010-11) DY. CIT, CIRCLE 14(2) HYDERABAD VS. GREATER MUNICIPAL CORPORATION, WEST ZONE HYDERABAD (APPELLANT) (RESPONDENT) ITA NOS. 510 & 511/HYD/2014 (ASSESSMENT YEARS: 2009-10 TO 2010-11) DY. CIT, CIRCLE 14(2) HYDERABAD VS. GREATER MUNICIPAL CORPORATION, SOUTH ZONE HYDERABAD (APPELLANT) (RESPONDENT) ITA NO. 512/HYD/2014 (ASSESSMENT YEAR: 2010-11) DY. CIT, CIRCLE 14(2) HYDERABAD VS. GREATER MUNICIPAL CORPORATION, NORTH ZONE HYDERABAD (APPELLANT) (RESPONDENT) NO. 513/HYD/2014 (ASSESSMENT YEAR: 2010-11) DY. CIT, CIRCLE 14(2) HYDERABAD VS. GREATER MUNICIPAL CORPORATION, EAST ZONE HYDERABAD (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RAJAT MITRA, DR FOR ASSESSEE : SHRI S. RAMA RAO, ADVOCATE DATE OF HEARING : 23.04.2015 ITA NOS 506 TO 513 OF 2014 GHMC HYDERABAD PAGE 2 OF 5 DATE OF PRONOUNCEMENT : 24.04.2015 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THESE ARE THE REVENUE APPEALS FOR THE A.YS 2009-10 AND 2010-11 RESPECTIVELY AGAINST THE ORDER OF THE CIT(A ), VIJAYAWADA, DATED 20.12.2013, IN DELETING THE DEMAND RAISED BY THE AO U/S 201 AND 201(1A) OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MUNICIPAL CORPORATION. THE ASSESSEE WAS DEDUCTING THE TDS U/S 194C IN RESPECT OF ALL CONTRACT PAYMENTS AS PER THE RATES A PPLICABLE. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE G HMC MUNICIPAL COMMISSIONER ISSUED A CIRCULAR ON 12.11.2 008 DIRECTING THE DDOS OF ALL THE ZONES TO DEDUCT THE T DS ONLY ON THE CONTRACT MARGIN OF THE CONTRACTORS AND NOT ON THE G ROSS BILLS PAID TO THE SANITATION CONTRACTORS. IN VIEW OF THE CIRCU LAR, THE DDOS HAVE NOT DEDUCTED THE TDS ON THE AMOUNTS PAID TO TH E SANITATION CONTRACTORS. DURING THE INSPECTION CONDU CTED BY THE TDS OFFICERS ON THE GHMC, THESE PARTICULARS WERE NO TICED. THE AO HELD THAT AS PER THE PROVISIONS OF SECTION 194C OF THE I.T. ACT, THE TDS HAS TO BE DEDUCTED ON THE GROSS AMOUNTS PAI D TO THE CONTRACTORS AND NOT ON THE PROFIT MARGIN OF THE CON TRACTORS. ASSESSEE WAS THEREFORE, REQUESTED TO FURNISH THE DE TAILS OF THE GROSS AMOUNT PAID TO THE SANITATION CONTRACTORS ON WHICH THE TDS IS NOT DEDUCTED OR THE TDS IS DEDUCTED AT A LOW ER RATE. ACCORDINGLY THE ASSESSEE FILED DETAILS OF THE AMOUN T ON WHICH THE TDS IS NOT DEDUCTED. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE, AO HELD THAT THE TDS WAS DEDUCTIBLE O N SUCH PAYMENTS AND FOR FAILURE TO DEDUCT THE TDS, ASSESSE E IS IN ITA NOS 506 TO 513 OF 2014 GHMC HYDERABAD PAGE 3 OF 5 ASSESSEE IN DEFAULT U/S 201(1) AND IS ALSO LIABLE TO PAY INTEREST U/S 201(1A) OF THE I.T. ACT. HE ACCORDINGLY BROUGHT THE AMOUNTS TO TAX. 3. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS TO THE CIT (A) AND THE CIT (A) ALLOWED THE SAME HOLDING THAT THE AMOUN TS PAID BY THE ASSESSEE TO THE SANITATION WORKERS IS NOTHING B UT WAGES AND ITS CONTRIBUTION TO EPF AND ESI AND THEREFORE, THE PROVISIONS OF SECTION 194C HAVE NO APPLICATION TO THE FACTS OF TH E CASE. SHE HELD THAT THE RELATIONSHIP IS MORE IN THE NATURE OF EMPLOYEE- EMPLOYER RELATIONSHIP GOVERNED BY SECTION 192 OF TH E ACT. AGAINST THE RELIEF GIVEN BY THE CIT (A), REVENUE IS IN APPE AL BEFORE US. 4. THE LD DR, SUPPORTING THE ORDERS OF THE AO, SUBM ITTED THAT THE GHMC I.E. ASSESSEE HEREIN HAS BEEN OUTSOURCING THE SANITATION WORK AND HAS BEEN AWARDING THE CONTRACTS TO THE SELF HELP GROUPS IN ANDHRA PRADESH AND THEREFORE, THE PA YMENTS MADE TO THE SHGS ARE NOTHING BUT CONTRACT AMOUNT LI ABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT. HE SUBMITTED THAT DUE TO FAILURE OF THE ASSESSEE TO DEDUCT TAX A T SOURCE AND REMIT THE SAME TO THE GOVERNMENT ACCOUNT, ASSESSEE HAS BEEN RIGHTLY TREATED AS ASSESSEE IN DEFAULT U/S 201 AN D IS ALSO LIABLE FOR INTEREST U/S 201(1A) OF THE I.T. ACT. 5. THE LD COUNSEL FOR THE ASSESSEE, ON THE OTHER HA ND, SUBMITTED THAT THE ASSESSEE HAS BEEN ENGAGING THE M EMBERS OF THE SHGS FOR CARRYING OUT SANITATION WORK AND THE P AYMENTS MADE TO THE SHG IS NOTHING BUT THE CONSOLIDATED AMO UNT OF ALL THE WORKERS PUT TOGETHER AND IS NOT A PAYMENT MADE TO ANY CONTRACTOR FOR THE WORK. THE LD COUNSEL FOR THE ASS ESSEE HAS FILED ITA NOS 506 TO 513 OF 2014 GHMC HYDERABAD PAGE 4 OF 5 BEFORE US PAPER BOOK WHICH CONSISTS OF PROCEEDINGS OF THE ASSESSEE ALLOTING THE WORK TO VARIOUS SHGS AND THE BILLS FOR PAYMENT OF WAGES TO THE WORKERS FOR THE MONTHS OF M AY, 2009 TO DEMONSTRATE THAT THE PAYMENTS WERE WAGES ONLY AND A LSO THE ASSESSEES CONTRIBUTION TO EPF AND ESI AND THERE WA S NO PROFIT ELEMENT IN ANY CONTRACT. THE LD COUNSEL FURTHER SUB MITTED THAT THE AO HAD MADE A SIMILAR DISALLOWANCE IN THE CASE OF MUNICIPALITY AT MAHABOOBNAGAR AND ON FURTHER APPEAL TO THE CIT (A), THE CIT (A) HAD CALLED FOR A REMAND REPORT FRO M THE AO WHO IN THE REMAND REPORT ACCEPTED THAT THE PAYMENTS MAD E TO THE SHGS WAS NOT LIABLE TO TDS PROVISIONS, BASED ON WHI CH THE CIT (A), HAD GRANTED RELIEF TO THE ASSESSEE THEREIN. HE SUBMITTED THAT THE REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST TH E SAID ORDER OF THE CIT (A) AND THEREFORE, THE ORDERS OF THE CIT (A) BEFORE US NEED TO BE CONFIRMED BY FOLLOWING THE PRINCIPLES OF UNIFORMITY. 6. HAVING HEARD THE RIVAL CONTENTIONS AND THE RELEV ANT MATERIAL ON RECORD, WE FIND THAT THE MAIN ISSUE IS AS TO WHETHER THE SHGS CAN BE CALLED AS CONTRACTORS. THE GHMC HAS ENGAGED AND ISSUED THE POCEEDINGS IN FAVOUR OF THE SHGS BY LOTS AND WORK HAS BEEN ALLOTTED PER UNIT BY FIXING THE WAGES PER PERSON AND ALSO SPECIFYING THE NUMBER OF WORKERS TO BE ENG AGED FOR EACH UNIT AND PER SHIFT. THE WORKING HOURS OF THE WORKER S AS WELL AS THE SHIFTS ARE ALSO SPECIFIED IN THE NOTIFICATION. FROM THE BILLS PAID TO THE SHGS ALSO, IT IS SEEN THAT THE PAYMENT IS MADE ON THE BASIS OF NUMBER OF MANDAYS AND WAGES PER DAY AND IS NOT A FIXED AMOUNT PER MONTH. THUS, IT IS CLEAR THAT THE ALLOTM ENT OF WORK BY THE ASSESSEE TO THE SHGS IS NOT BY WAY OF CONTRACT BUT IS ENGAGEMENT OF WORKERS FOR A FIXED PERIOD. THE WORK ERS ARE BEING PAID AS PER THE AGREED TERMS AND CONDITIONS AND THE AGGREGATE ITA NOS 506 TO 513 OF 2014 GHMC HYDERABAD PAGE 5 OF 5 AMOUNT IS PAID TO THE GROUP AND NOT TO ANY PARTICUL AR PERSON. THEREFORE, AS RIGHTLY HELD BY THE CIT (A), THERE IS NO CONTRACTOR- CONTRACTEE RELATIONSHIP BUT IS MORE IN THE NATURE O F EMPLOYEE- EMPLOYER RELATIONSHIP AS THE ASSESSEE IS ALSO MAKIN G CONTRIBUTIONS TO THE EPF AND ESI AND AS RIGHTLY POI NTED OUT BY THE LD CIT (A), THE PAYMENTS MADE TO AN INDIVIDUAL IS NOT EXCEEDING THE PRESCRIBED LIMIT U/S 192 OF THE I.T. ACT, THE TDS PROVISIONS ARE NOT APPLICABLE TO THE FACTS OF THE C ASE BEFORE US. IN VIEW OF THE SAME, WE DO NOT SEE ANY REASON TO INTER FERE WITH THE ORDER OF THE CIT (A) IN ALL THESE APPEALS. 7. IN THE RESULT, REVENUE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 2015. S D/ - S D/ - (P.M. JAGTAP) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 24 TH APRIL, 2015. VNODAN/SPS COPY TO: 1. DCIT, CIRCLE 14(2) (TDS), RANGE-14, IT TOWERS, 4 TH FLOOR, B BLOCK HYDERABAD 2. GHMC, CENTRAL ZONE, KHAIRATABAD, HYDERABAD 3. GHMC, WEST ZONE, SERILINGAMPALLY, NEAR MRO OFFICE, SERILINGAMPALLY, HYDERABAD 500019 4. GHMC, SOUTH ZONE, CHARMINAR, HYDERABAD 5. GHMC, NORTH ZONE, EAST MARREDPALLY, SECUNDERABAD 6. GHMC, EAST ZONE, DILSUKHNAGAR, HYDERABAD 7. THE CIT(A), VIJAYAWADA 8. THE CIT ( TDS) HYDERABAD 9. THE DR, ITAT, HYDERABAD 10. GUARD FILE BY ORDER