ITO, Trichy V. M/s. Laxmi Engineering Works, Trichy

ITA 662/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1294 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: T VASUDEVAN
• Keywords: Retrospective amendment
• Section: 194C; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 662/MDS/2010 ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER, WARD-IV(1), TRICHY. V. M/S. LAXMI ENGINEERING WORKS, 25, DEVELOPED PLOT ESTATE, THUVAKUDI, TRICHY-620 015. (PAN : AAAFL1987H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B. SEKARAN RESPONDENT BY : T. VASUDEVAN O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS), TRICHY IN ITA NO. 458/08-09 DATED 15- 2-2010 FOR THE ASSESSMENT YEAR 2006-07. 2. SHRI P. B. SEKARAN, LEARNED CIT-DR REPRESENTED O N BEHALF OF THE REVENUE AND SHRI T. VASUDEVAN, ADVOCATE REPRESENTED ON BEHA LF OF THE ASSESSEE. 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : I.T.A. NO.662/MDS/2010 2 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANC ES OF THE CASE. 2. THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN DE LETING THE ADDITION MADE BY THE ASSESSING OFFICER. 3. THE CIT(APPEALS) HAS ERRED IN NOT LOOKING INTO THE FACT THAT SRI MURUGAN TRANSPORT IS A UHIRING CONTRA CTOR OF THE ASSESSEE AND HENCE PROVISIONS OF SECTION 40(A)(IA) OF I.T.ACT IS APPLICABLE IN THE CASE OF THE PAYMENT MADE TO SRI M URUGAN TRANSPORT. 4. THE CIT(APPEALS) HAS FAILED TO APPRECIATE THE F ACT THAT THE PAYMENT MADE TO NAVEEN NDT SERVICE AND M/S . SUPER QUALITY SERVICE ARE ONLY IN THE NATURE OF CONSULTAN CY CHARGES ATTRACTING THE PROVISION OF SECTIONS OF 194J SINCE THE SERVICES RENDERED BY THE CONCERNS INVOLVED SPECIALIZED HUMAN SKILLS AND KNOWLEDGE COUPLED WITH USE OF ADVANCE TECHNOLOGY LI KE RADIOGRAPHY AND ULTRASONAGRAPHY WHICH CANNOT BE CON CLUDED AS AUTOMATIC PROCESS INVOLVING MACHINE INTERFACE ONLY. 5. THE RELIANCE PLACED BY THE CIT(APPEALS) IN THE CASE OF CIT VS. BHARATHI CELLULAR LTD. 175 TAXMANN 573 (200 8) IS ERRONEOUS SINCE THE FACTS OF THE CASE LAW IS DIFFER ENT FROM THE INSTANT CASE. 6. THE CIT(APPEALS) HAS NOT TAKEN INTO CONSIDERATI ON THE FACT THAT THE PAYMENTS MADE TO SHRI GUNASEKAR AND S HRI RAVI ARE CLEARLY IN THE NATURE OF LABOUR CONTRACT PAYMEN TS AND ARE NOT PAYMENT TO INDIVIDUAL LABOURERS WHICH CLEARLY A TTRACTS THE PROVISIONS OF 194C. I.T.A. NO.662/MDS/2010 3 FOR THESE REASONS AND SUCH OTHERS THAT MAY BE ADDU CED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE CANCELL ED AND THAT OF THE ASSESSING OFFICER RESTORED. 4. GROUNDS 1 AND 2 OF THE REVENUES APPEAL ARE GENE RAL IN NATURE AND DO NOT CALL FOR ANY ADJUDICATION. 5. IN REGARD TO GROUND NO.3 IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE IS DOING THE BUSINESS OF ENGINEERING WORKS AND THE ASSESSEE HAD BOOKED EXPENSES UNDER THE HEAD LORRY CHARGES ION THE LEDGER FOLIO OF M/S. SRI MURUGAN TRANSPORT WITHOUT DEDUCTING TDS. IT WAS TH E SUBMISSION THAT THE ASSESSING OFFICER HAD APPLIED THE PROVISIONS OF SEC 40(A)(IA) OF THE ACT ON ACCOUNT OF THE NON-DEDUCTION OF THE TDS AND HAD DIS ALLOWED THE TOTAL PAYMENT OF ` 2,23,847/-. IT WAS THE SUBMISSION THAT THE LEARNE D CIT(A) HAD DELETED THE DISALLOWANCE BY HOLDING THAT THE PAYMENTS HAD BEEN MADE TO THE LORRY OWNERS AND CONSEQUENTLY NO TDS WAS LIABLE TO BE MADE AS TH E PAYMENTS DID NOT EXCEED THE PRESCRIBED LIMITS. IT WAS THE SUBMISSION THAT AS THE EXPENSES HAD BEEN BOOKED UNDER THE LEDGER FOLIO OF M/S. SRI MURUGAN T RANSPORT, THE TDS WAS LIABLE TO BE MADE AND THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 6. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO PAGES 3 TO 8 OF THE PAPER BOOK WHICH SHOWED THE BRE AK UP OF THE LORRY NUMBERS, DATES AND THE AMOUNTS PAID. IT WAS THE FURTHER SUB MISSION THAT THE EVIDENCES WERE BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAD ALSO RECOGNIZED I.T.A. NO.662/MDS/2010 4 THAT THE PAYMENTS HAD BEEN MADE TO THE LORRY OWNERS DIRECTLY AND IT WAS ONLY BECAUSE THE LEDGER FOLIO ENTRY WAS IN THE NAME OF M /S. SRI MURUGAN TRANSPORT THE DISALLOWANCE HAD BEEN MADE. HE DREW OUR ATTENT ION TO THE ORDER OF THE ASSESSING OFFICER AT PAGE 2 WHEREIN THE ASSESSING O FFICER HAD ACCEPTED THAT THE AMOUNTS HAD BEEN PAID TO THE VARIOUS LORRIES. IT W AS THE SUBMISSION THAT M/S. SRI MURUGAN TRANSPORT WAS TO IDENTIFY THE LORRY AS REQUIRED BY THE ASSESSEE AND THE PAYMENTS WERE MADE BY THE ASSESSEE DIRECTLY TO THE LORRY OWNERS AS THE PAYMENTS WERE REQUIRED TOWARDS WEIGH CHARGES, DIESE L EXPENSES AND DRIVERS BATA ETC. IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE MAY BE UPHELD. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS IT WAS NOTICED THAT THE PAYMENTS HAD BEEN MADE TO THE LORRY OWNERS DIRECTLY AS IS EVIDENT FROM THE EVIDENCES PRODUCED IN THE PAPER BOOK WHICH HAS ALSO BEEN ACCEPTED BY THE ASSESSING OFFICER, THE FINDING OF THE LEARNED CIT(A ) ON THIS ISSUE STANDS UPHELD. HERE WE MAY SPECIFICALLY MENTION THAT AS PER THE PR OVISIONS OF SECTION 194C AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF TH E CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUEWH ICHEVER IS EARLIER. HERE AS THE PAYMENTS HAD BEEN MADE TO THE LORRY OWNERS, THE PAYMENT COMES FIRST AND AS THE AMOUNT PAID DOES NOT EXCEED THE PRESCRIB ED LIMITS, NO TDS IS LIABLE TO BE MADE. I.T.A. NO.662/MDS/2010 5 8. IN REGARD TO GROUNDS NO. 4 AND 5 IT WAS SUBMITTE D BY THE LEARNED DR THAT THE ASSESSEE HAD PAID QUALITY CONTROL AND QUALITY I NSPECTION CHARGES TO M/S. NAVEEN SERVICES AS ALSO TO SUPER QUALITY SERVICES A ND ON THE SAME NO TDS HAD BEEN DONE UNDER THE PROVISIONS OF SECTION 194J AS T HE INSPECTION JOB DONE BY THE SAID TWO PARTIES WERE HIT BY THE PROVISIONS OF SEC. 194J. 9. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE INSPECTION DID NOT INVOLVE ANY MANUAL INTERVENTION AND IT WAS THROUGH AUTOMATED PROCESS INVOLVING MACHINE OPERATION ONLY. IT WAS T HE SUBMISSION THAT THE LEARNED CIT(A) HAD FOLLOWED THE DECISION OF THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT V. BHARTI CELLULAR LTD. (2008) 175 TAXM AN 573. HE FURTHER FAIRLY ADMITTED THAT THE DECISION OF THE HON'BLE DELHI HIG H COURT IN THE CASE OF BHARTI CELLULAR LTD. HAD BEEN SUBJECT MATTER OF A CIVIL AP PEAL BEFORE THE HON'BLE SUPREME COURT AND THE HON'BLE SUPREME COURT HAD IN ITS DECISION IN CIVIL APPEAL NO. 6691 OF 2010 RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR REEXAMINATION. IT WAS SUBMITTED THAT HE HAD NO OBJ ECTION IF THE ISSUE IN THIS GROUND IS RESTORED TO THE FILE OF THE ASSESSING OFF ICER FOR EXAMINATION. IT WAS THE SUBMISSION THAT NO TDS WAS LIABLE TO BE MADE ON THE PAYMENTS. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS NOTICED THAT THE LEARNED CIT(A) HAS ONLY FOLLOWED THE DECISION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF M/S. BHARTI CELLULAR LTD. WHICH HAS BEE N A SUBJECT MATTER OF APPEAL BEFORE THE HON'BLE SUPREME COURT AND THE HON'BLE SU PREME COURT HAS RESTORED I.T.A. NO.662/MDS/2010 6 THE ISSUE VIDE ITS ORDER DATED 12-08-2010 TO THE FI LE OF THE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION AND AFTER EXAMINATION O F THE ISSUE OF HUMAN INTERVENTION AND AS IT IS ALSO NOTICED THAT THIS IS SUE OF HUMAN INTERVENTION HAS NOT BEEN LOOKED INTO BY THE LEARNED ASSESSING OFFIC ER IN THE PRESENT CASE ALSO, THIS ISSUE IN THIS GROUND IS RESTORED TO THE FILE O F THE ASSESSING OFFICER FOR RE- ADJUDICATION AFTER GRANTING THE ASSESSEE ADEQUATE O PPORTUNITY TO SUBSTANTIATE ITS CASE. 11. IN REGARD TO GROUND NO.6 IT WAS SUBMITTED BY TH E LEARNED DR THAT THE ASSESSEE HAD MADE PAYMENTS TO SHRI GUNASEKAR AND SH RI RAVI WHICH WERE IN THE NATURE OF LABOUR CONTRACT PAYMENTS. IT WAS THE SUB MISSION THAT THE ASSESSEE HAD DEDUCTED TDS DURING THE MONTH OF MARCH, 2006 BU T THE SAME WAS REMITTED ONLY IN MAY, 2006. CONSEQUENTLY, AS THE AMOUNTS HA D NOT BEEN PAID BEFORE THE LAST DAY OF THE PREVIOUS YEAR, THE ASSESSING OFFICE R HAD INVOKED THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT. 12. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT IN VIEW OF THE AMENDED PROVISIONS OF SECTION 40(A)(IA) AS ALSO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. ALOM EXTRUSIONS LTD. REPORTED IN 319 ITR 306, THE SUBSTITUTION MADE BY THE FINANCE ACT, 2010 TO THE PROVISIONS OF SECTION 40(A)(IA) SHOULD BE READ TO BE RETROSPECTIVE AND TH E ASSESSEE HAD MADE THE PAYMENT OF THE TDS BEFORE THE DUE DATE OF FILING TH E RETURN, THE ASSESSEE SHOULD BE HELD TO BE ENTITLED TO THE EXPENDITURE AS CLAIME D. I.T.A. NO.662/MDS/2010 7 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ALOM EXTRUS IONS LTD., REFERRED TO SUPRA, IT IS NOTICED THAT THE HON'BLE SUPREME COURT WHILE DECIDING THE PROVISIONS OF SECTION 43B, MORE SPECIFICALLY THE AMENDMENT MAD E THEREIN BY THE FINANCE ACT, 2003 W.E.F. 1.4.2004, HAS READ TO BE HAVING RE TROSPECTIVE EFFECT FROM 1.4.1988 AS THE PROVISION WAS AMENDED TO REMOVE UNI NTENDED CONSEQUENCES. HERE IN THE PRESENT CASE ALSO IT IS NOTICED THAT OR IGINALLY I.E. BEFORE THE SUBSTITUTION BY THE FINANCE ACT, 2010 SUB-CLAUSE (A ) DID RECOGNIZE THAT IF THE TDS WAS DEDUCTED AND IT RELATED TO THE LAST MONTH OF TH E PREVIOUS YEAR AND THE SAME WAS PAID BEFORE THE DUE DATE SPECIFIED IN SUB-SECTI ON (1) OF SECTION 139 THE BENEFIT WAS LIABLE TO BE GIVEN TO THE ASSESSEE. HO WEVER, BY THE SUBSTITUTION BY FINANCE ACT, 2010 THIS SUB-CLAUSE (A) HAS BEEN MADE APPLICABLE TO THE TDS DEDUCTED FOR THE WHOLE YEAR SUBJECT TO THE CONDITIO N THAT THE TDS IS PAID BEFORE THE DUE DATE FOR FILING THE RETURN UNDER SECTION 13 9(1). OBVIOUSLY, THIS SUBSTITUTION HAS BEEN MADE TO REMOVE UNINTENDED CON SEQUENCES AND CONSEQUENTLY IN VIEW OF THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF ALOM EXTRUSIOINS LTD., REFERRED TO SUPRA , THE SAME WOULD HAVE TO BE GIVEN RETROSPECTIVE EFFECT. IN THE PRESENT CASE AS IT IS NOTICED THAT THE ASSESSEE HAS DEDUCTED THE TDS ON THE PAYMENTS TO BOTH SRI GU NASEKAR AND SRI RAVI IN RESPECT OF THE LABOUR CONTRACTS AND AS IT IS NOTICE D THAT THE TDS HAS ALSO BEEN PAID MUCH BEFORE THE DUE DATE OF FILING THE RETURN UNDER SECTION 139(1), WE ARE I.T.A. NO.662/MDS/2010 8 OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT WOULD NOT APPLY. IN THE CIRCUMSTANCES, THE FINDING OF THE LEARNED CI T(A) ON THIS ISSUE STANDS CONFIRMED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 15. THE ORDER WAS PRONOUNCED IN THE COURT ON 7/1/20 11. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 07 TH JANUARY, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE