M/s Bhangal Construction Co., Phagwara V. INCOME TAX OFFICER, WARD (1), PHAGWARA

ITA 587/ASR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3325 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 20-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-01-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 12-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMAR
• Assessee Lawyers: Y K SUD
• Keywords: Set aside
• Section: 143(3); 40(a)(ia); 194C; 143(1); 143(2)

Judgement Text

P A G E | 1 ITA NO. 587/ASR/2017, A.Y. 2013-14 M/S BHANGAL CONSTRCUTION CO. VS. ITO. IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH AT JALANDHAR BEFORE SHRI N.K SAINI, VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 587/ASR/2017 ASSESSMENT YEAR: 2013-14 M/S BHANGAL CONSTRUCTION CO., VILLAGE FATEHGARH, PO PANDORI, PHAGWARA. VS. ITO, WARD-1, PHAGWARA. DCIT, CENTRAL-2, JALANDHAR. VS. PAN AAAAT4125G (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI. Y.K. SUD, A.R REVENUE BY: SHRI. M.S. PARMAR, D.R DATE OF HEARING: 15.01.2019 DATE OF PRONOUNCEMENT: 11.03.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT(APPEALS)-2, JALANDHAR, DATE D 17.07.2017, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASS ED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961(FOR S HORT I.T. ACT) FOR A.Y. 2013-14, DATED 28.03.2016. THE ASSESSEE ASSAIL ING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUN DS OF APPEAL:- 1 THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS. 950600/- MADE BY THE AO U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2. THAT CIT(A) WHILE SUSTAINING THE DISALLOWANCE F AILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE TO THE ASSESSEE HENCE DISALLOWANCE MADE BY THE AO U/S 40(A)(IA) COULD NOT HAVE BEEN SUSTAINED. 3. THAT ADHOC DISALLOWANCE OF RS. 100000/- MADE BY THE AO OUT OF THE EXPENSES HAS WRONGLY BEEN SUSTAINED BY THE CIT(A) D ESPITE VARIOUS P A G E | 2 ITA NO. 587/ASR/2017, A.Y. 2013-14 M/S BHANGAL CONSTRCUTION CO. VS. ITO. JUDGMENTS OF VARIOUS HIGHER AUTHORITIES INCLUDING J URISDICTIONAL PB & HARYANA HIGH COURT. 4. THAT THE ORDERS OF THE CIT(A) AND AO ARE AGAINST THE LAW AND FACTS OF THE CASE 2. BRIEFLY STATED, THE ASSESSEE FIRM WHICH IS ENGAG ED IN THE BUSINESS OF A CIVIL CONTRACTOR HAD FILED ITS RETURN OF INCOME FOR A.Y. 2013-14 ON 31.03.2014, DECLARING TOTAL INCOME AT RS . 11,54,100/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROC ESSED AS SUCH UNDER SEC. 143(1) OF THE I.T. ACT. SUBSEQUENTLY, TH E CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE FIRM HAD PAID HIRING C HARGES AGGREGATING TO RS. 9,50,600/- TO THE FOLLOWING PARTIES :- SR. NO. PARTICULARS AMOUNT 1. TAHURA HEAVY LIFTER RS. 2,58,170/ - 2. TAHURA HEAVY LIFTER RS. 2,58,180/ - 3. OM LIFTER RS. 4,34,250/ - TOTAL RS. 9,50,600/ - THE A.O BEING OF THE VIEW THAT THE ASSESSEE HAD DEF AULTED BY NOT DEDUCTING TAX AT SOURCE UNDER SEC. 194C OF THE IT A CT ON THE AFORESAID HIRING CHARGES AGGREGATING TO RS. 9,50,600/-, THUS CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID AMOUNT CLAIM ED AS AN EXPENDITURE MAY NOT BE DISALLOWED UNDER SEC. 40(A)( IA) OF THE IT ACT. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT AS THE PAYMENTS TO THE AFOREMENTIONED PARTIES WERE MADE FOR THE USE OF CRA NE AND WERE NOT IN THE NATURE OF CONTRACTUAL PAYMENTS, HENCE NO OBLIGA TION WAS CAST UPON IT TO DEDUCT TAX AT SOURCE UNDER SEC. 194C IN RESPECT OF THE SAID AMOUNTS. HOWEVER, THE AFORESAID REPLY OF THE ASSESS EE DID NOT FIND P A G E | 3 ITA NO. 587/ASR/2017, A.Y. 2013-14 M/S BHANGAL CONSTRCUTION CO. VS. ITO. FAVOUR WITH THE A.O WHO DISALLOWED THE AFORESAID AM OUNT OF RS. 9,50,600/- UNDER SEC. 40(A)(IA) OF THE IT ACT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). THE ASSESSEE IN THE COURSE OF THE APPELLATE PROCEEDINGS TRIED TO IMPRESS UPON THE CIT(A) THAT AS THE PAYMENTS TO THE AFOREMENTIONED PARTIES WERE NOT IN THE NATURE OF A CONTRACTUAL PAY MENTS, HENCE THERE WAS NO REQUIREMENT ON ITS PART TO DEDUCT TAX AT SOU RCE UNDER SEC. 194C IN RESPECT OF THE SAID PAYMENTS. APART THEREFR OM, IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT AS THE RESPECTIVE PA YEES WERE INCOME TAX ASSESSES AND WERE REGULARLY FILING THEIR RETURN S OF INCOME, HENCE FOR THE SAID REASON ALSO NO DISALLOWANCE OF THE AFO RESAID EXPENDITURE COULD BE MADE UNDER SEC. 40(A)(IA) OF THE IT ACT. H OWEVER, THE CIT(A) HELD A CONVICTION THAT AS THE CRANES WERE TAKEN ON HIRE BY THE ASSESSEE, HENCE IT WAS LIABLE TO DEDUCT TAX AT SOUR CE UNDER SEC. 194C OF THE IT ACT WHILE MAKING THE PAYMENTS TOWARDS THE HIRING CHARGES TO THE AFORESAID PARTIES. FURTHER, THE CIT(A) OBSERVED THAT AS THE CONTENTION OF THE ASSESSEE THAT THE PAYEES HAD INCL UDED THE AFORESAID RECEIPTS IN THEIR RETURNED INCOME AND PAID TAX ON T HE SAME WAS NOT SUPPORTED WITH ANY EVIDENCE, THUS THE SAME COULD NO T BE SUMMARILY ACCEPTED. ON THE BASIS OF HIS AFORESAID DELIBERATIO NS THE CIT(A) UPHELD THE DISALLOWANCE OF RS. 9,50,600/- MADE BY THE A.O UNDER SEC. 40(A)(IA) AND DISMISSED THE APPEAL. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF T HE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE S UBMITTED THAT AS THE PAYMENTS MADE TOWARDS HIRING CHARGES OF CRANES DID NOT FALL WITHIN THE REALM OF THE DEFINITION OF THE TERM WORK AS E NVISAGED IN SEC. 194C OF THE IT ACT, HENCE NO OBLIGATION WAS CAST UP ON THE ASSESSEE TO DEDUCT TAX AT SOURCE UNDER THE SAID STATUTORY PROVI SION. THE LD. A.R IN P A G E | 4 ITA NO. 587/ASR/2017, A.Y. 2013-14 M/S BHANGAL CONSTRCUTION CO. VS. ITO. ORDER TO BUTTRESS HIS AFORESAID CONTENTION DREW OUR ATTENTION TO THE DEFINITION OF THE TERM WORK AS CONTEMPLATED IN EXPLANATION (IV) OF SEC. 194C OF THE IT ACT. IT WAS VEHEMENTLY SUBMITTE D BY THE LD. A.R THAT AS THE PAYMENTS MADE BY THE ASSESSEE TOWARDS S IMPLICITER HIRING OF CRANES COULD NOT BE CONSTRUED AS PAYMENTS FOR CA RRYING OUT ANY WORK, HENCE THE SAME COULD NOT BE BROUGHT WITHIN TH E SCOPE AND GAMUT OF THE PROVISIONS OF SEC. 194C OF THE IT ACT. IN SUM AND SUBSTANCE, IT WAS THE CONTENTION OF THE LD. A.R THA T THE LOWER AUTHORITIES HAD ERRED IN DISALLOWING UNDER SEC. 40( A)(IA) THE PAYMENTS MADE BY THE ASSESSEE TOWARDS HIRING CHARGES OF CRAN ES ON THE GROUND THAT IT HAD FAILED TO DEDUCT TAX AT SOURCE UNDER SE C. 194C IN RESPECT OF THE AFORESAID AMOUNTS. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. IT W AS SUBMITTED BY THE LD. D.R THAT AS THE ASSESSEE HAD FAILED TO DEDUCT T AX AT SOURCE UNDER SEC. 194C OF THE IT ACT ON THE PAYMENTS MADE TOWARD S HIRING CHARGES OF CRANES, HENCE THE A.O HAD RIGHTLY DISALLOWED THE SAID AMOUNT UNDER SEC. 40(A)(IA) OF THE IT ACT. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FO R BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIE S AND THE MATERIAL AVAILABLE ON RECORD. THE ISSUE INVOLVED IN THE PRES ENT APPEAL LIES IN A NARROW COMPASS I.E. AS TO WHETHER THE PAYMENTS TOWA RDS HIRING CHARGES OF CRANES WOULD BE LIABLE FOR DEDUCTION OF TAX AT SOURCE UNDER SEC. 194C OF THE IT ACT, OR NOT. WE FIND THAT AS PE R THE PROVISIONS OF SEC. 194C ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER REFERRED TO AS CONTRACTOR) FOR CARRYIN G OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WO RK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED P ERSON SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CO NTRACTOR OR AT THE P A G E | 5 ITA NO. 587/ASR/2017, A.Y. 2013-14 M/S BHANGAL CONSTRCUTION CO. VS. ITO. TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CH EQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMO UNT AS THEREIN SPECIFIED AS INCOME TAX ON INCOME COMPRISED THEREIN . IN SUM AND SUBSTANCE, THE OBLIGATION TO DEDUCT TAX AT SOURCE U NDER SEC. 194C ARISES ONLY WHERE THERE IS A PAYMENT/CREDIT OF ANY SUM TO A CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CO NTRACTOR AND A SPECIFIED PERSON. WE FIND THAT THE TERM WORK AS D EFINED IN EXPLANATION (IV) TO SEC. 194C, READS AS UNDER : (IV) WORK SHALL INCLUDED :- (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION O F PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OR TRAN SPORT OTHER THAN BY RAILWAYS; (D) CATERING (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A P RODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER. WE ARE PERSUADED TO SUBSCRIBE TO THE CONTENTION ADV ANCED BY THE LD. A.R THAT A SIMPLICITER PAYMENT TOWARDS HIRING CHARG ES OF CRANES CANNOT BE BROUGHT WITHIN THE SWEEP OF THE DEFINITIO N OF THE TERM WORK AS ENVISAGED IN SEC. 194C OF THE IT ACT. WE THUS ARE OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES HAD ERRE D IN CONCLUDING THAT AS THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SO URCE UNDER SEC. 194C OF THE IT ACT ON THE PAYMENTS MADE TOWARDS HIR ING CHARGES OF CRANES AGGREGATING TO RS. 9,50,600/-, HENCE THE SAI D AMOUNT WAS LIABLE TO BE DISALLOWED UNDER SEC. 40(A)(IA) OF THE IT ACT. IN OUR CONSIDERED VIEW, AS THE ASSESSEE WAS UNDER NO OBLIG ATION TO DEDUCT TAX AT SOURCE UNDER SEC. 194C IN RESPECT OF THE PAY MENTS MADE TOWARDS HIRING CHARGES OF CRANES, THEREFORE, THE LO WER AUTHORITIES HAD P A G E | 6 ITA NO. 587/ASR/2017, A.Y. 2013-14 M/S BHANGAL CONSTRCUTION CO. VS. ITO. ERRED IN DISALLOWING THE SAME FOR THE SAID REASON B Y INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE IT ACT. WE THUS NOT BEING IN AGREEMENT WITH THE VIEW TAKEN BY THE LOWER AUTHORIT IES THAT IT WAS OBLIGATORY ON THE PART OF THE ASSESSEE TO DEDUCT TA X AT SOURCE UNDER SEC. 194C ON THE PAYMENTS MADE TOWARDS SIMPLICITER HIRING CHARGES OF CRANES, SET ASIDE THE ORDER OF THE CIT(A) AND VACAT E THE DISALLOWANCE OF RS. 9,50,600/- MADE BY THE A.O UNDER SEC. 40(A)(IA) OF THE IT ACT. 8. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/03/2019 SD/- SD/- ( N.K. SAINI) (RAVISH SOOD) VICE PRESIDENT JUDICIAL ME MBER PLACE : CHANDIGARH; DATED 11.03.2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. DR, ITAT, CAMP BENCH, JALANDHAR 6. / GUARD FILE. //TRUE COPY// ! / BY ORDER, ' / # $% (DY./ASSTT. REGISTRAR) & '() /ITAT, CAMP. BENCH, JALANDHAR