PUNJA PETROKEM ENGINEERING LTD, MUMBAI V. ITO 10(3)(2), MUMBAI

ITA 6574/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3418 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P N DEVADASAN
• Assessee Lawyers: DR P DANIEL
• Section: 194C; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 6574/MUM/2009 (ASSESSMENT YEAR: 2006-07) PUNJA PETROKEM ENGINEERING LTD. INCOME TAX OFFICER - 10(3)(2) A-1/3 MAHAVIR SHIKHAR, LBS MARG ROOM NO. 459, 4TH F LOOR MULUND (W), MUMBAI 400080 VS. AAYAKAR BHAVAN, M.K. ROAD PAN - AACCP 0125 G MUMBAI 400020 APPELLANT RESPONDENT APPELLANT BY: DR. P. DANIEL RESPONDENT BY: SHRI P.N. DEVADASAN O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XXII, MUMBAI DATED 17.11.2000 AGAINST THE DISALLOWANCE MA DE BY THE A.O. UNDER SECTION 40(A)(IA) WITH REFERENCE TO VARIOUS EXPENDI TURES CLAIMED UNDER THE HEAD LABOUR CHARGES AND HIRE CHARGES. 2. THE A.O. MADE THE FOLLOWING DISALLOWANCES IN RESPEC T OF WHICH TDS HAVE NOT BEEN DEDUCTED AND PAID ACCORDING TO THE A. O. IN VIOLATION OF SEC. 194C AND THE CLAIM OF EXPENDITURE WAS DISALLOWED UN DER SECTION 40(A)(IA). THE DETAILS ARE AS UNDER: - LABOUR/SUB-CONTRACTORS S.NO. NAME OF PARTIES AMOUNT (IN RS.) 1 JYOTI CONSTRUCTION 3,22,500 2 AMI HIRING 2,09,682 3 GURU HANDEV ENGG. WORKS 1,09,751 4 KHP ENGINEERS 1,50,000 5 SIDDHIVINAYAK DISHED END WORKS 3,04,358 6 GIRIYOG ENGG. WORKS 99,054 7 SUPER STAR FABRICATOR 6,94,223 8 R.N. ENGINEERING WORKS 4,63,420 9 JESSICA INDUSTRIAL EQUIPMENT CO. 1,05,815 ITA NO. 6574/MUM/2009 PUNJA PETROKEM ENGINEERING LTD. 2 10 GAYATRI ENTERPRISES 1,36,265 11 G. SHYAM ENGINEERS 79,890 12 SUPER TECH ENGINEERS 1,17,200 13 SHAFT TECH ENGINEERS 91,000 14 GAURI ENTERPRISES 35,820 15 BISHNU & CO. 59,280 TOTAL 29,78,258 HIRE CHARGES S.NO. NAME OF PARTIES AMOUNT (IN RS.) 1 SAFE WELD ENGINEERS 53,333 2 CONTINENTAL HIRING CO. 2,20,000 3 CONTINENTAL LIFTERS 4,00,000 4 RAMRAJ ENGINEERS 78,484 5 TRISTAR CRANE & TRANSPORT 10,84,000 TOTAL 18,35,817 TESTING CHARGES S.NO. NAME OF PARTIES AMOUNT (IN RS.) 1 METMECH IMAGEVISION 1,35,635 TOTAL 1,35,635 3. THE MATTER WAS CARRIED TO THE CIT(A) AND IN THE MEA NTIME THE A.O. ALSO PASSED AN ORDER UNDER SECTION 154 DATED 30 TH DECEMBER 2009 ALLOWING THE AMOUNTS WHICH HAVE BEEN PERTAINING TO MARCH 200 6 BUT PAID BEFORE FILING THE RETURN. THE A.O., HOWEVER, HAS NOT ALLOW ED OTHER PAYMENTS WHICH ARE MADE ON OR BEFORE 28 TH FEBRUARY 2006. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CONFIRMED THE DISALLOW ANCES HOLDING AS UNDER:- 2.4 I HAVE CONSIDERED THE FACTS OF THE CASE, PERUSED TH E ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELL ANT AND ALSO DISCUSSED THE CASE WITH A/R OF THE APPELLANT . THE A.O. HAS MADE DISALLOWANCE U/S. 40(A)(IA) REGARDING NON TDS ON LABOUR CHARGES, HIRING AND TESTING CHARGES PAID. REGARDING LABOUR C HARGES, IT HAS BEEN STATED BY THE APPELLANT THAT IN ORDER U/S 154 PASSE D BY A.O. DATED 30.03.2009, RS.4.15,363/- HAS BEEN ALLOWED. COPY OF THE ORDER U/S. 154 HAS BEEN FILED. IT IS NOTED THAT A.O. HAS ALLOW ED THE PAYMENTS WHICH WERE TO BE PAID BY MARCH, 2006 AND WERE PAID BEFORE FILING OF THE RETURN. HOWEVER, THE A.O. HAS NOT ALLOWED THE OTHER PAYMENT S WHICH WERE TO BE PAID BY 28 TH FEB. I DO NOT FIND ANY INFIRMITY IN THE DISALLOWAN CE TO BE ITA NO. 6574/MUM/2009 PUNJA PETROKEM ENGINEERING LTD. 3 MADE AS WORKED OUT BY THE A.O. IN THE ORDER U/S 154 , HENCE THE ADDITION MADE BY A.O. IN THIS REGARD IS CONFIRMED. REGARDING HIRE CHARGES PAID AMOUNTING TO RS.18,35,817/- APPELLANT HAS CLAIMED T HAT THEY ARE NOT IN THE NATURE OF CONTRACT AND ARE PETTY AMOUNT. HOWEVE R, FROM THE DETAILS, I FIND THAT RS.10,84,000/- HAS BEEN PAID TO TRISTAR C RANES & TRANSPORT CO., RS.4 LAKHS TO CONTINENTAL LIFTERS AND RS.2,20, 000/- TO CONTINENTAL HIRING CO. THE APPELLANT CANNOT CLAIM THAT THESE AR E PETTY AMOUNTS. FURTHER, BEING WITH THE SAME PARTY THESE ALSO APPEA L TO BE CONTRACTUAL IN NATURE. FURTHER, THE TESTING CHARGES OF ` 1,35,635/- ARE IN THE NATURE OF PROFESSIONAL FEES. ACCORDINGLY, THE APPELLANT IN MY OPINION HAS VIOLATED THE PROVISION OF SECTION 194C AND 194J. THEREFORE, IT IS HELD THAT THE A.O. WAS JUSTIFIED IN MAKING DISALLOWANCE U/S. 40(A)(IA) OF THE I.T. ACT, WHICH IS SUSTAINED. 4. CONTESTING THE ABOVE FINDING THE LEARNED COUNSEL SU BMITTED THAT THE DISALLOWANCE INCLUDED AN AMOUNT PAID TO GAURI ENTER PRISES OR ` 35,820/- IN WHOSE CASE EACH OF THE PAYMENT DOES NOT EXCEED ` 20,000/- AND THE TOTAL DOES NOT EXCEED ` 50,000/- IN AN YEAR SO AS TO COME UNDER THE PROVISI ONS OF SECTION 194C. HE REFERRED TO THE DETAILS OF THE PAY MENT IN THE PAPER BOOK. ONE PAYMENT MADE ON 1 ST MARCH 2006 WAS OF ` 11,400/-, ANOTHER PAYMENT OF ON 17.03.2006 WAS ` 19,500/- AND THE THIRD PAYMENT MADE ON 15.12.2005 WAS ` 4,920/-. IT WAS ASSESSEES SUBMISSION THAT THE ABOV E AMOUNTS ARE NOT COVERED BY PROVISIONS OF 194C. WITH REFERENCE TO TH E OTHER PAYMENTS UNDER LABOUR SUB-CONTRACT THE DETAILS OF TDS WERE FURNISH ED TO THE A.O. BUT HE DID NOT ALLOW THE AMOUNTS AS THEY WERE NOT PAID ON DUE DATES AS PER THE PROVISIONS OF THE ACT. HE FAIRLY SUBMITTED THAT THE AMENDMENT TO SECTION WAS MADE SUBSEQUENTLY ONLY TO ALLOW PAYMENTS OF MARCH I F THE AMOUNTS WERE PAID BEFORE FILING OF FILING OF THE RETURN. IT WAS HIS SUBMISSION THAT THESE AMOUNTS ARE ALSO TO BE ALLOWED. WITH REFERENCE TO M ACHINE HIRE CHARGES IT WAS HIS SUBMISSION THAT THE HIRE CHARGES ARE NOT CO VERED BY THE PROVISIONS OF SECTION 194C AND PROVISIONS OF SECTION 194I WERE INTRODUCED WEF. 01.07.2007 AND, THEREFORE, THE HIRE CHARGES PAID DU RING THE YEAR ARE NOT COVERED BY THE PROVISIONS OF TDS. WITH REFERENCE TO LABOUR CHARGES AND TESTING CHARGES IT WAS HIS SUBMISSION THAT THE ASSE SSEE HAS TO TEST THE QUALITY OF STEEL UTILISED IN THE PROJECT. FOR THIS PURPOSE THEY GO TO VARIOUS TESTING LABORATORIES FOR GIVING SAMPLES AND TESTING THE PRODUCT AND TAKING THE TEST REPORT. THERE IS NO CONTRACT INVOLVED AND THEY ARE ONLY RENDERING THE SERVICES WHICH ARE NOT COVERED BY THE PROVISIONS OF SECTION 194C. IT WAS HIS ITA NO. 6574/MUM/2009 PUNJA PETROKEM ENGINEERING LTD. 4 SUBMISSION THAT IT CANNOT BE CONSIDERED AS PROFESSI ONAL CHARGES ALSO AS CONSIDERED BY THE CIT(A). HE CONTESTED THE FINDINGS OF THE CIT(A) IN DISALLOWING THE AMOUNTS ALTERNATELY. 5. THE LEARNED D.R., HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND CIT(A) IN EXPLAINING THAT THE PROVISIONS ARE APPLICABLE. 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FACTS . AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, AS FAR AS LABOUR CHARGES AND SUB- CONTRACTORS CHARGES ARE CONCERNED THE PAYMENTS MAD E TO M/S. GAURI ENTERPRISES ARE NOT COVERED BY THE PROVISIONS OF SE CTION 194C AS EACH PAYMENT DOES NOT EXCEED ` 20,000/- AND THE TOTAL AMOUNT ALSO DID NOT EXCEED ` 50,000/-. TO THAT EXTENT ASSESSEE IS ELIGIBLE FOR D EDUCTION OUT OF LABOUR AND SUB-CONTRACTORS CHARGES. WITH REFERENCE TO THE CONTENTION THAT THE AMOUNTS WHICH ARE COVERED BY TDS BUT PAID BELAT EDLY ARE ALSO TO BE ALLOWED, THE PROVISIONS OF SECTION 40(A)(IA) WERE A MENDED FROM 01.04.1010, THEREFORE THE AMOUNTS WHICH ARE DEDUCTED EARLIER BU T NOT PAID IN TIME IN TURN COULD NOT BE ALLOWED AS PER THE PROVISIONS OF THE SECTION. TO THAT EXTENT ASSESSING OFFICERS ACTION IS TO BE UPHELD. B) WITH REFERENCE TO MACHINE HIRE CHARGES, AS R IGHTLY SUBMITTED BY THE LEARNED COUNSEL THE PROVISIONS OF SECTION 194I WERE MADE EFFECTIVE FROM 01.07.2007, ACCORDINGLY THE HIRE CHARGES DISALLOWED BY THE A.O. ARE NOT COVERED BY THE PROVISIONS OF SECTION 194C. THEREFOR E THE DISALLOWANCE UNDER SECTION 40(A)(IA) ON THIS AMOUNT DOES NOT ARISE. TH E A.O. IS DIRECTED TO ALLOW THE AMOUNT. C) WITH REFERENCE TO TESTING CHARGES EVEN THE CIT(A)S ORDER CONSIDERED IT IN THE NATURE OF PROFESSIONAL FEES. WE ARE AFRAI D THAT THIS AMOUNT CANNOT BE TREATED AS PROFESSIONAL FEES AS THE ASSESSEE IS AVAILING THE SERVICES OF REPUTED TESTING LABS FOR ANALYSING THE PRODUCTS. SI NCE THE NATURE OF THE JOB DOES NOT INVOLVE ANY CONTRACT OR ANY PROFESSIONAL S ERVICES IN THE STRICT SENSE OF SECTION 194J THE AMOUNT CANNOT BE CONSIDERED FOR TDS IN THE YEAR UNDER CONSIDERATION. THEREFORE, WE ARE OF THE VIEW THAT L ABORATORY TESTING CHARGES CANNOT BE BROUGHT UNDER THE PROVISIONS OF TDS AS IT IS NOT A PAYMENT TO THE CONTRACTOR TO BE COVERED BY SECTION 194C AND ALSO C AN NOT BE PROFESSIONAL ITA NO. 6574/MUM/2009 PUNJA PETROKEM ENGINEERING LTD. 5 SERVICES TO BE CONSIDERED UNDER SECTION 194J. IN VI EW OF THIS, THE A.O. IS DIRECTED TO ALLOW THE TESTING CHARGES ALSO. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH DECEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXII, MUMBAI 4. THE CIT X, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.