Shripad Shridhar Bapat, Pune V. ITO,Wd.1(3), Pune

ITA 548/PUN/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5234 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: S N DOSHI
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NOS. 547 & 548/PN/2010 (ASSESSMENT YEARS : 2005-06 & 2006-07) SHRIPAD SHRIDHAR BAPAT, FLAT NO. 4, SINHAGAD ROAD, PUNE 411 051. PAN : AFUPB1636D . APPELLANT VS. INCOME TAX OFFICER, WARD 1(3), PUNE. . RESPONDENT APPELLANT BY : SHRI S. N. DOSHI RESPONDENT BY : SHRI A. K. MODI DATE OF HEARING : 24-09-2013 DATE OF PRONOUNCEMENT : 20-11-2013 ORDER PER G. S. PANNU, AM BOTH THE CAPTIONED APPEALS HAVE BEEN PREFERRED BY T HE SAME ASSESSEE AND ARE DIRECTED AGAINST AN ORDER OF THE COMMISSION ER OF INCOME TAX (APPEALS)-I, PUNE DATED 31.11.2009 WHICH, IN TURN, HAS ARISEN FROM RESPECTIVE ORDERS DATED 05.12.2008 PASSED BY THE ASSESSING OFF ICER, U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ), PERTAINING TO THE ASSESSMENT YEARS 2005-06 AND 2006-07. 2. ORIGINALLY, THE CAPTIONED APPEALS WERE DISPOSED- OFF BY THE TRIBUNAL VIDE ITS ORDER DATED 30.05.2012, AND AFTER BEING APPROAC HED BY THE ASSESSEE BY WAY OF AN APPLICATION U/S 254(2) OF THE ACT POINTIN G OUT THAT CERTAIN GROUNDS RAISED BY THE ASSESSEE REMAINED TO BE ADJUDICATED, THE TRIBUNAL VIDE ITS ORDER DATED 27.09.2012 IN MISCELLANEOUS APPLICATION NO.86 & 87/PN/2012 RECALLED ITS ORDER DATED 30.05.2012 FOR THE LIMITED PURPOSE OF ADJUDICATING THE GROUND OF APPEAL NO. 2 AND NO. 1 IN THE APPEAL FOR ASSESSM ENT YEARS 2005-06 AND ITA NOS. 547 & 548/PN/2010 A.YS. 2005-06 & 2 006-07 2006-07 RESPECTIVELY. THE GROUND OF APPEAL NO.2 IN ITA NO. 547/PN/2010 FOR ASSESSMENT YEAR 2005-06 READS AS UNDER :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND WITHOUT PREJUDICE TO THE ABOVE GROUND THE CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.50,99,998/- MADE U/S 40(A)(IA) O VERLOOKING THE FACT THAT THE APPELLANT CANNOT BE CONSIDERED AS A PERSON LIABLE T O DEDUCT THE TAX U/S 194C. 3. SIMILARLY, THE GROUND OF APPEAL NO.1 IN ITA NO.5 48/PN/2010 FOR ASSESSMENT YEAR 2006-07 READS AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND WITHOUT PREJUDICE TO THE ABOVE GROUND THE CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS.26,80,857/- MADE U/S 40(A)(IA) O VERLOOKING THE FACT THAT THE APPELLANT CANNOT BE CONSIDERED AS A PERSON LIABLE T O DEDUCT THE TAX U/S 194C. 4. ACCORDINGLY, THE CAPTIONED PROCEEDINGS WERE LIST ED FOR HEARING. THE GRIEVANCE OF THE ASSESSEE IN THE AFORESAID TWO GROU NDS OF APPEAL ARISE FROM THE RESPECTIVE ORDERS OF THE CIT(A) DATED 30.11.200 9 WHEREBY ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENDITURE AMOUNTING TO RS. 50,99,998/- AND RS.26,80,857/- RES PECTIVELY FOR ASSESSMENT YEARS 2005-06 AND 2006-07 BY INVOKING SECTION 40(A) (IA) OF THE ACT HAVE BEEN SUSTAINED. 5. THE FACTUAL MATRIX OF THE DISPUTE CAN BE UNDERST OOD AS FOLLOWS. ASSESSEE IS AN INDIVIDUAL, WHO IS STATED TO BE CARR YING ON BUSINESS IN THE NAME AND STYLE OF PROPRIETARY CONCERN, M/S. G. B. ASSOCIATES. THE SAID PROPRIETARY CONCERN OF THE ASSESSEE IS STATED TO BE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND ALSO UNDERTAKING CIVIL SUB-C ONTRACTS FROM MAIN CONTRACTORS. DURING THE ASSESSMENT YEAR 2005-06, T HE ASSESSING OFFICER NOTED THAT ASSESSEE HAD MADE LABOUR CONTRACT PAYMEN TS ON WHICH TOTAL TAX DEDUCTED AT SOURCE (TDS) WAS RS.58,627/- OUT OF WHI CH ONLY RS.5,603/- WAS PAID. ACCORDINGLY, AS PER THE ASSESSING OFFICER IN RELATION TO LABOUR CONTRACT PAYMENTS OF RS.50,99,998/- AS MENTIONED IN PARA 3 O F THE ASSESSMENT ORDER, ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 194 C OF THE ACT AND THEREFORE, ITA NOS. 547 & 548/PN/2010 A.YS. 2005-06 & 2 006-07 BY VIRTUE OF SECTION 40(A)(IA) OF THE ACT, SUCH EXP ENDITURE WAS LIABLE TO BE DISALLOWED. ONE OF THE POINTS RAISED BY THE ASSESS EE BEFORE THE ASSESSING OFFICER WAS THAT ASSESSEE WAS A SUB-CONTRACTOR OF M /S. ARYAN CONSTRUCTION, M/S. MODERN ROAD MAKERS PVT. LTD. AND M/S. PBA INFR ASTRUCTURE LTD., AND SUCH ENTITIES WERE APPOINTED AS CONTRACTORS BY NATI ONAL HIGHWAY ROAD AUTHORITY OF INDIA. ASSESSEE CONTENDED THAT HE HAD DEPLOYED VARIOUS PARTIES TO CARRY OUT CERTAIN WORKS AND IN RELATION TO SUCH PAYEES, ASSESSEE WAS A CONTRACTEE AND THE PAYEES WERE CONTRACTORS. ASSESS EE BEING AN INDIVIDUAL WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE BECAUSE UN DER SUB-SECTION (1) OF SECTION 194C OF THE ACT, CLAUSE (K) WHICH PERTAINED TO INDIVIDUAL OR A HINDU UNDIVIDED FAMILY OR AN ASSOCIATION OF PERSONS OR BO DY OF INDIVIDUALS WHOSE TOTAL SALES, GROSS RECEIPTS OR TURN-OVER FROM THE B USINESS OR PROFESSION EXCEED THE LIMIT SPECIFIED IN CLAUSES (A) OR (B) OF SECTIO N 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH T HE SAME IS CREDITED OR PAID, WAS INTRODUCED FROM 01.06.2007 AND THEREFORE WOULD NOT APPLY TO THE ASSESSEE FOR THE YEARS UNDER CONSIDERATION. THUS, AS PER THE ASSESSEE, IT WAS NOT COVERED U/S 194C(1) OF THE ACT, SINCE IN THE PR ESENT CASE PAYMENTS WERE MADE BY AN INDIVIDUAL. 6. THE ASSESSING OFFICER HOWEVER TOOK THE VIEW THAT THE PAYMENTS WERE MADE BY THE ASSESSEE TO THE PAYEES AS SUB-CONTRACTO RS AND ASSESSEE BEING A CONTRACTOR, THE PROVISIONS OF SECTION 194C(2) READ WITH PROVISO THEREOF MADE THE ASSESSEE LIABLE TO DEDUCT TAX U/S 194C(2) OF TH E ACT. HENCE, THE CORRESPONDING EXPENDITURE BY WAY OF LABOUR CONTRACT PAYMENTS AMOUNTING TO RS.50,99,998/- WAS DISALLOWED BY INVOKING SECTION 4 0(A)(IA) OF THE ACT. FOR SIMILAR REASON DISALLOWANCE OF RS.26,80,857/- HAS B EEN MADE FOR ASSESSMENT YEAR 2006-07, WHICH IS ALSO IN APPEAL BEFORE US. 7. THE CIT(A) CAME TO CONCLUDE THAT THE MAIN PROVIS ION OF SECTION 194C(2) OF THE ACT ITSELF, REQUIRED THE ASSESSEE TO DEDUCT TAX AT SOURCE ON THE ITA NOS. 547 & 548/PN/2010 A.YS. 2005-06 & 2 006-07 IMPUGNED PAYMENTS BECAUSE ACCORDING TO HIM, ASSESSE E WAS A CONTRACTOR AND NOT A SUB-CONTRACTOR AS CLAIMED BY THE ASSESSEE . IN COMING TO SUCH CONCLUSION, THE CIT(A) HELD THAT ASSESSEE HAS ASSIG NED EITHER WHOLLY OR PARTLY THE SAID WORK TO VARIOUS PERSONS AND THEREFORE, ASS ESSEE IS A CONTRACTOR AND THE PAYEES ARE THE SUB-CONTRACTORS. THE CIT(A) CON CLUDED THAT ASSESSEE HAD AWARDED HIS WORK ACCEPTED AS SUB-CONTRACTOR TO SOME OTHER PERSONS AND THEREFORE ASSESSEE WAS TO BE CONSIDERED IN THE STAT US OF A CONTRACTOR. 8. THE LEARNED COUNSEL VEHEMENTLY ARGUED BEFORE US THAT THE CIT(A) HAS ERRONEOUSLY APPLIED THE SAID PROVISION, INASMUCH AS ASSESSEE HAD POINTED OUT THAT HE HAD ACCEPTED THE WORK FROM THE MAIN CONTRAC TORS NAMELY, M/S. ARYAN CONSTRUCTION, M/S. MODERN ROAD MAKERS PVT. LTD. AND M/S. PBA INFRASTRUCTURE LTD., AS A SUB-CONTRACTOR AND THEREFORE IT COULD NO T BE AGAIN HELD THAT ASSESSEE ACTED AS A CONTRACTOR AND SUB-CONTRACTED C ERTAIN WORKS TO THE PAYMENT IN QUESTION. AS PER THE LEARNED COUNSEL, O NCE IT IS ACCEPTED THAT ASSESSEE IS A SUB-CONTRACTOR, HE COULD NOT BE HEL D TO BE A CONTRACTOR AGAIN FOR THE WORK AWARDED BY HIM TO OTHER PERSONS. IN T HIS CONTEXT, IT IS SUBMITTED THAT THE CIT(A) FAILED TO APPRECIATE THE MEANING OF A CONTRACTOR AND A SUB- CONTRACTOR WHICH HAS BEEN EXPLAINED BY THE HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF ITO VS. RAMA NAND & CO. & ORS. , (1987) 163 ITR 702 (HP). AT THE TIME OF HEARING, THE LEARNED COUNSEL ALSO RELIED ON THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. PRASHANT H SHAH, (2013) 29 TAXMANN.COM 296 (GUJARAT). 9. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. OSTENSIBLY, THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT, WHICH IS THE SUBJECT-MATTER OF DISPUTE BEFORE US, HINGES ON THE ASPECT AS TO WHETHER ASSES SEE WAS REQUIRED TO ITA NOS. 547 & 548/PN/2010 A.YS. 2005-06 & 2 006-07 DEDUCT TAX AT SOURCE ON IMPUGNED PAYMENTS IN TERMS OF SECTION 194C OF THE ACT OR NOT. THE ASSESSEE BEFORE US IS AN INDIVIDUA L. SO FAR AS SECTION 194C OF THE ACT AS IT EXISTED FOR THE ASSESSMENT YEARS BEFO RE US I.E. 2005-06 AND 2006-07 ARE CONCERNED, THE PROVISIONS OF SUB-SECTIO N (1) OF SECTION 194C(1) OF THE ACT DOES NOT COVER THE ASSESSEE. SUB-SECTION ( 1) OF SECTION 194C OF THE ACT, AS IS STOOD FOR THE RELEVANT ASSESSMENT YEARS, REQUIRED THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE TO A CONTRACT BETWEEN THE CONTRACTOR AND ENTITIES SPECIFIED IN CLAUSES (A) TO (J) WOULD HAVE TO, AT THE TIME OF CR EDITING SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT IN CASH OR BY CHEQUE OR DRAFT OR ANY OTHER MODE, DEDUCT A SPECIFIED AMOUNT OF TAX AT SOURCE. TILL CLAUSE (K) WAS INTRODUCED IN SUB-SECTION (1) OF SEC TION 194C OF THE ACT W.E.F. 1 ST JUNE, 2007, THE CATEGORY OF INDIVIDUAL, HUF OR AOP WAS NOT INCLUDED AND THUS FOR THE CAPTIONED ASSESSMENT YEARS, ASSESSEE I S NOT COVERED U/S 194C(1) OF THE ACT. 11. SO, HOWEVER THE CASE OF THE REVENUE IS BUILT ON THE BASIS OF THE PROVISIONS OF SUB-SECTION (2) OF SECTION 194C OF TH E ACT. SUB-SECTION (2) OF SECTION 194C OF THE ACT REQUIRES THAT ANY PERSON I. E. A CONTRACTOR RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT SUB-CONTRACTOR I N PURSUANCE OF A CONTRACT WITH THE SUB-CONTRACTOR CARRYING OUT OR FOR SUPPLY OF LABOUR FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CON TRACTOR OR FOR SUPPLYING ANY LABOUR, WHICH THE CONTRACTOR HAD UNDERTAKEN TO SUPPLY HAS TO, AT THE TIME OF CREDITING SUCH SUM TO THE ACCOUNT OF THE SUB-CON TRACTOR, OR AT THE TIME OF PAYMENT IN CASH OR IN ANY OTHER MANNER, DEDUCT TDS AT THE SPECIFIED RATES. PERTINENTLY, FOR APPLICATION OF SUB-SECTION (2) OF SECTION 194C OF THE ACT, THE REQUIREMENT IS THAT THERE IS A CONTRACTOR WHO HAS U NDERTAKEN TO CARRY OUT ANY OF THE SPECIFIED WORKS THROUGH A SUB-CONTRACTOR AND IN PURSUANCE OF EXECUTION OF SUCH WORK, THE PAYMENT IS BEING MADE EITHER IN C ASH OR IN ANY OTHER MANNER OR THE SAME IS BEING CREDITED IN THE ACCOUNT OF THE SUB-CONTRACTOR. IN OTHER ITA NOS. 547 & 548/PN/2010 A.YS. 2005-06 & 2 006-07 WORDS, THE APPLICATION OF SUB-SECTION (2) OF SECTIO N 194C OF THE ACT IS DEPENDENT ON THE AFORESAID REQUIREMENTS BEING COMPL IED WITH. 12. IN OTHER WORDS, IN ORDER TO ESTABLISH AS TO WHE THER THE AFORESAID REQUIREMENT OF SUB-SECTION (2) OF SECTION 194C OF T HE ACT IS FULFILLED, ONE WOULD HAVE TO EXAMINE THE NATURE OF RELATIONSHIP BETWEEN THE ASSESSEE AND THE PAYEES SO AS TO CONCLUDE THAT THE IMPUGNED CASE IS THAT OF A SUB-CONTRACTING. IN THIS CONTEXT, IT BECOMES RELEVANT TO EXAMINE THE RESPONSIBILITIES AND OBLIGATIONS OF THE ASSESSEE VIS--VIS THOSE OF THE PAYEES IN QUESTION FOR THE PURPOSE OF EXECUTION OF WORK. NOTABLY, IN THE PRES ENT CASE, ASSESSEE ALSO CLAIMS TO HAVE ACCEPTED THE WORK AS A SUB-CONTRACT OR FROM THE MAIN CONTRACTORS NAMELY, M/S. ARYAN CONSTRUCTION, M/S. M ODERN ROAD MAKERS PVT. LTD. AND M/S. PBA INFRASTRUCTURE LTD.. IT HAS BEEN ASSERTED BY THE ASSESSEE THAT THE AFORESAID THREE CONCERNS WERE THE CONTRACT ORS APPOINTED BY THE NATIONAL HIGHWAY ROAD AUTHORITY OF INDIA. THE CLAI M IS THAT IN THE COURSE OF EXECUTION OF WORKS UNDERTAKEN AS SUB-CONTRACTOR, TH E ASSESSEE IN HIS INDIVIDUAL CAPACITY EMPLOYED VARIOUS PARTIES TO CAR RY OUT CERTAIN WORKS WHICH HE WAS REQUIRED TO CARRY OUT AS A SUB-CONTRACTOR FO R THE MAIN CONTRACTORS. AS PER THE ASSESSEE, THE PAYEES IN QUESTION ARE NOT SU B-CONTRACTORS SO AS TO REQUIRE THE ASSESSEE TO COMPLY WITH SUB-SECTION (2) OF SECTION 194C OF THE ACT. 13. IN SUM AND SUBSTANCE, IF THE CASE SET-UP BY THE REVENUE IS TO BE TESTED THE SAME HAS TO BE ON THE BASIS OF EXAMINATION OF T HE NATURE OF RELATIONSHIP BETWEEN THE ASSESSEE, THE CONCERNS FROM WHOM HE HAS RECEIVED THE WORK AND ALSO THE PAYEES IN QUESTION WHO HAVE EXECUTED WORK FOR THE ASSESSEE. IT IS ONLY AFTER EXAMINATION OF THE NATURE OF RELATIONSHI PS AS AFORESAID, ONE CAN CONCLUDE WHETHER OR NOT THERE IS A CASE OF SUB-CONT RACTING BETWEEN THE ASSESSEE AND THE PAYEES SO AS TO FALL WITHIN THE PU RVIEW OF SECTION 194C(2) OF THE ACT. IN THE ORDERS OF THE AUTHORITIES BELOW, W E DO NOT FIND ANY SPECIFIC REFERENCES TO THE AGREEMENTS BETWEEN THE ASSESSEE A ND THE PARTIES WHICH ITA NOS. 547 & 548/PN/2010 A.YS. 2005-06 & 2 006-07 WOULD SHOW THE RESPONSIBILITIES AND OBLIGATIONS OF THE DIFFERENT PARTIES TO CONCLUDE AS TO WHETHER OR NOT IT IS CASE OF SUB-CON TRACTING BETWEEN THE ASSESSEE AND THE IMPUGNED PAYEES. THEREFORE, IN OU R CONSIDERED OPINION, THE MATTER DESERVES TO BE SET-ASIDE AND EXAMINED BY THE INCOME-TAX AUTHORITIES AFRESH IN THE AFORESAID LIGHT. 14. AT THE TIME OF HEARING, THE AFORESAID WAS POINT ED OUT FROM THE BENCH, AND IT WAS A CONVERGENCE OPINION BETWEEN THE RIVAL COUNSELS THAT THE MATTER IS REQUIRED TO BE EXAMINED/VERIFIED IN THE AFORESAID L IGHT BEFORE INVOKING SECTION 40(A)(IA) OF THE ACT IN THE PRESENT CASE. SUCH AN EXERCISE IS REQUIRED TO BE CARRIED OUT ON THE BASIS OF THE TERMS OF AGREEMENT BETWEEN ASSESSEE AND THE MAIN CONTRACTORS ON ONE HAND AND BETWEEN THE ASSESS EE AND THE PAYEES ON THE OTHER HAND. 15. IN CONCLUSION, WE SET-ASIDE THE ORDER OF THE CI T(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R THE PURPOSE OF EXAMINING THE MATTER IN VIEW OF OUR AFORESAID DISCUSSION. NEE DLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPOR TUNITY TO PUT-FORTH HIS SUBMISSION AND MATERIAL IN SUPPORT OF HIS STAND AND ONLY THEREAFTER THE ASSESSING OFFICER SHALL ADJUDICATE AS TO WHETHER OR NOT THE PROVISIONS OF SECTION 194C OF THE ACT ARE ATTRACTED TO THE IMPUGN ED PAYMENTS MADE BY THE ASSESSEE TO VARIOUS PARTIES IN QUESTION. IF THE AS SESSING OFFICER COMES TO A CONCLUSION THAT THE PROVISIONS OF SECTION 194C OF T HE ACT ARE NOT ATTRACTED, NO DISALLOWANCE U/S 40(A)(IA) WOULD SURVIVE. IF THE A SSESSING OFFICER COMES TO A CONTRARY CONCLUSION, THEN HE SHALL BE FREE TO PROCE ED IN ACCORDANCE WITH LAW. 16. THEREFORE, IN CONCLUSION, WE HOLD THAT IN SO FA R AS THE CAPTIONED GROUNDS OF APPEAL IN RESPECTIVE APPEALS OF THE ASSE SSEE FOR ASSESSMENT YEAR 2005-06 AND 2006-07 ARE CONCERNED, ASSESSEE SUCCEED S FOR STATISTICAL PURPOSES. ITA NOS. 547 & 548/PN/2010 A.YS. 2005-06 & 2 006-07 17. IN THE RESULT, BOTH THE CAPTIONED APPEALS OF TH E ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 20 TH NOVEMBER, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE