ITO, CHENNAI V. M/s. Shree Jai Jinendra Construction Ltd., CHENNAI

ITA 818/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51997 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K GOPALAKRISHNAN
• Assessee Lawyers: G C SAMDARIYA
• Keywords: TDS
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 818/MDS/2011 (ASSESSMENT YEAR : 2006-07) THE INCOME-TAX OFFICER TDS WARD II(2) CHENNAI (APPELLANT) VS. M/S SHREE JAI JINENDRA CONSTRUCTION LTD NO. 09, VAIKUNDA VATHIYAR STREET SOWCARPET, CHENNAI. PAN NO. CHEKO 2347 C (RESPONDENT) ASSESSEE BY : SHRI G. C. SAMDARIYA , C.A. DEPARTMENT BY : SHRI K. GOPALAKRISHNAN, SR. DR. DATE OF HEARING : 13.10.2011 DATE OF PRONOUNCEMENT : O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY DEPARTMENT FOR THE ASSE SSMENT YEAR 2007-08 AGAINST THE ORDER DATED 31.01.2011 OF COMMI SSIONER OF INCOME TAX [A]-IV, CHENNAI. I.T.A. NO.818/MDS/11 2 2. THE REVENUE HAS TAKEN THREE GROUNDS OF APPEAL AN D THE ISSUE INVOLVED IN THE GROUNDS OF APPEAL OF THE ASSESSEE I S THAT THE LD. CIT(A) ERRED IN DELETING THE DEMAND RAISED U/S 201( 1) AND INTEREST U/S 201(1A) OF THE INCOME-TAX ACT, 1961 [IN SHORT, THE ACT]. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER HAS OBSERVED THAT THE ASSESSEE COMPANY HAS UTILIZED THE SERVICES OF G.K. SHETTY BUILDERS PVT. LTD [DEDUCTEE] FOR CONSTR UCTION OF RESIDENTIAL FLATS IN CHENNAI DURING THE FINANCIAL Y EARS 2004-05 AND 2006-07. ON PERUSAL OF THE BILLS RAISED BY THE CONT RACTOR, IT WAS NOTICED THAT TAX WAS DEDUCTED @ 2% ON THE NET AMOUN T AFTER EXCLUDING MATERIALS SUPPLIED U/S 194C OF THE ACT BY THE DEDUCTOR. AS PER TDS PROVISIONS, THE ASSESSEE COMPANY OUGHT T O HAVE DEDUCTED TDS ON THE GROSS AMOUNT OF CONTRACT PAYMEN T AND NOT ON THE NET AMOUNT. THE ASSESSING OFFICER FURTHER OBSE RVED THAT DURING THE COURSE OF HEARING, THE AUTHORIZED REPRESENTATIV E OF THE ASSESSEE ARGUED THAT THE SERVICES OF THE ABOVE BUILDERS WERE TAKEN ONLY FOR LABOUR. HOWEVER, THE ASSESSEE DID NOT PRODUCE ANY CREDIBLE EVIDENCE TO SHOW THAT THE CONTRACT WAS TAKEN ONLY F OR LABOUR. THE I.T.A. NO.818/MDS/11 3 ASSESSING OFFICER VERIFIED BY ISSUE OF SUMMONS WITH M/S G.K. SHETTY BUILDERS PVT. LTD TO ASCERTAIN IF THE CONTRACT ENTE RED INTO BY THE ASSESSEE WAS A COMPOSITE CONTRACT INCLUDING THE MAT ERIALS SUPPLIED BY THE ASSESSEE. ON VERIFICATION, HE ASCERTAINED T HAT THE ASSESSEE HAD DEDUCTED TAX U/S 194C OF THE ACT ON THE NET AMO UNT ONLY AFTER EXCLUDING THE VALUE OF THE MATERIALS SUPPLIED. HE, THEREFORE, TREATED THE ASSESSEE COMPANY AS ASSESSEE IN DEFAULT FOR FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR 2006-07 U/ S 201(1) WITH REFERENCE TO SECTION 194C AND DEMAND ON ACCOUNT OF SHORT DEDUCTION WAS RAISED. WHILE COMPLETING ORDER DATED 23.4.2007 RELEVANT TO INTEREST U/S 201(1A) OF THE ACT WAS ALS O RAISED. THUS THE ASSESSEE WAS REQUIRED TO PAY RS. 3,38,842/- U/ S 201(1) AND RS. 1,13,918/- U/S 201(1A) OF THE ACT. 4. THE ASSESSING OFFICER OBSERVED THAT IN RESPECT O F RUNNING BILL AMOUNTS RAISED, AS PER BILL NO. 1 AND NO. 2 [DURING FINANCIAL YEAR 2005-06] THERE IS SHORT DEDUCTION OF TAX ON ACCOUNT OF EXCLUDING THE VALUE OF MATERIAL SUPPLIED ON THE NET AMOUNT ON WHI CH TDS WAS DEDUCTED AS UNDER: I.T.A. NO.818/MDS/11 4 BILL NO/DATE VALUE OF WORK DONE TDS ON BILL AMOUNT DATE OF PAYMENT/AMT PAID DATE OF TDS PAYMENT/ TDS AMOUNT PAID NO. 1. 26.12.2005 RS. 1,52,02,579/- RS. 3,41,146/- 18.05.2005 RS. 10,00,000/- 07.06.2005 RS. 22,440/- NO. 2. 10.03.2006 RS. 69,25,771/- RS. 1,55,414/- 02.08.2005 RS. 15,00,000/- 05.10.2005 RS. 15,00,000/- 08.09.2005 RS. 33,212/- 06.10.2005 RS. 448/- RS. 4,96,560/- RS. 40,08,000/- RS. 89,760/- 5. ON APPEAL, THE LD. CIT(A) DELETED THE DEMAND U/S 201(1) AND INTEREST U/S 201(1A) OF THE ACT BY OBSERVING AS UND ER: THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. AFTER VERIFYING THE TDS MODULE, THE CASE WAS TAKEN UP BY THE AO FOR TDS VERIFICATION. 'ON VERIFICATION OF RECORDS, THE AO N OTICED THAT THE APPELLANT HAD UTILIZED THE SERVICES OF G.K. SHETTY BUILDERS PVT. LTD. (DEDUCTEE) FOR CONSTRUCTION OF RESIDENTIAL FLATS IN CHENNAI DURING THE FINANCIAL YEARS 200405 TO 20060 7. IT WAS FOUND THAT THE APPELLANT HAD DEDUCTED TAX AT SOURCE AT THE RATE 2% ON THE NET AMOUNT AFTER EXCLUDING MATERIALS S UPPLIED U/S 194C. ACCORDING TO THE AO, THE ASSESSEE COMPANY OUGHT I.T.A. NO.818/MDS/11 5 TO HAVE DEDUCTED TDS ON THE GROSS AMOUNT OF THE CONTR ACT PAYMENT AND NOT ON THE NET AMOUNT. THE SUBMISSION OF THE ASSESSEE THAT THE SERVICES OF THE BUILDER WAS TAKEN ONLY FOR LABOUR AND MATERIALS LIKE STEEL AND CEMENT WERE SUPP LIED BY IT WERE NOT ACCEPTED BY THE AO. HE RELIED ON THE DE CISION OF THE AY 2007-08 AND STATED THAT THE REASONS FOR THAT YEAR HOLDS GOOD FOR AY 200607 AS WELL. HE ALSO PLACED R ELIANCE UPON THE JUDICIAL DECISIONS CITED BY THE AO FOR THE AY 2007- 08. ACCORDINGLY, THE LEVIED DEMAND U/S 201(1) AND IN TEREST U/S 201(1A) AMOUNTING TO RS. 4,52,778/- FOR FAILURE TO COMPLY WITH PROVISION OF SECTION 194C. 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSION MADE BY THE ID. AR. I FIND THAT THE FACTS OF THE CASE AND REASONS FOR LEVY OF DEMAND U/S 201(1) AND I NTEREST U/S 201(1A) BY THE AO ARE SAME AS THOSE FOR ASSESSME NT YEAR 2007-08. THE GROUNDS OF APPEAL AND WRITTEN SUBMISSIO N OF THE APPELLANT ARE ALSO SIMILAR TO THOSE OF THE AY 2007- 08. AFTER CONSIDERING THE FACTS OF THE CASE, SUBMISSION OF THE APPELLANT AND AFTER DISCUSSION, THE APPEAL FOR AY 2007-08 HAS BEEN ALLOWED IN ITA NO.236/08-09/A-IV DATED 27.01.2011. SINCE THE FACT SITUATION IS SIMILAR, FOLLOWING THE SAME REASON , THE I.T.A. NO.818/MDS/11 6 APPEAL IS ALLOWED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE ASSESSING OFFICER. ON A QUERY FROM THE BENCH THAT THE LD. CIT(A) HAS FOLLOWED HIS ORDER FOR ASSESSMENT YEAR 2007-08 ALLOWING THE APPEAL OF THE ASSESSEE IN ITA NO. 236/08-09/A-IV DA TED 27.1.2011 AND WHETHER THE REVENUE HAS FILED APPEAL AGAINST TH E SAID ORDER BEFORE THE TRIBUNAL, THE LD. D.R. SUBMITTED THAT NO APPEAL WAS FILED AGAINST THE ORDER OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2007-08 PASSED IN THE CASE OF THE ASSESSEE. 7. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSE E SUBMITTED THAT HE FULLY JUSTIFIES THE ORDER OF THE LD. CIT(A) AND FURTHER SUBMITTED THAT AS NO APPEAL HAS BEEN FILED BY THE R EVENUE AGAINST THE ORDER OF THE LD. CIT(A) FOR ASSESSMENT YEAR 200 7-08 AND THE FACTS AND ISSUE REMAINING SAME ON THE GROUND OF CON SISTENCY, THE ORDER OF THE LD. CIT(A) SHOULD BE UPHELD AND APPEAL OF THE REVENUE SHOULD BE DISMISSED. I.T.A. NO.818/MDS/11 7 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON THE AMOUNT OF MATERIAL SUPPLIED BY IT TO THE CONTRACTOR, NAMELY M/S G.K. SHETTY BUILDERS PVT . LTD. AND AS THE ASSESSEE HAS NOT DEDUCTED TAX ON THE AMOUNT OF THE MATERIALS SUPPLIED BY IT, THE ASSESSEE WAS TREATED AS A ASSES SEE IN DEFAULT AND THE DEMAND WAS RAISED ON THE ASSESSEE OF RS. 3,38, 842/- AS TAX U/S 201(1) AND INTEREST OF RS. 1,13,918/- U/S 201(1A) O F THE ACT IN RESPECT THERETO. 9. ON APPEAL, THE LD. CIT(A) VACATED THE ABOVE DEMA ND BY FOLLOWING HIS EARLIER ORDER PASSED IN THE CASE OF A SSESSEE FOR ASSESSMENT YEAR 2007-08 IN ITA NO. 236/08-09/A-IV D ATED 27.1.2011 WHICH WAS ON IDENTICAL FACTS. BEFORE US, BOTH THE PARTIES ADMITTED THAT THE FACTS AND ISSUE IN THE INSTANT CASE WAS SA ME AS THE FACTS AND ISSUE INVOLVED IN THE ASSESSMENT YEAR 2007-08. IT IS OBSERVED THAT THE DEPARTMENT HAD ACCEPTED THE EARLIER ORDER OF THE LD. CIT(A) PASSED IN THE CASE OF THE ASSESSEE FOR THE A SSESSMENT YEAR I.T.A. NO.818/MDS/11 8 2007-08. THE LD. D.R. COULD NOT POINT OUT ANY JUST REASON FOR FILING THE INSTANT APPEAL AFTER ACCEPTING SIMILAR ORDER PA SSED BY THE LD. CIT(A) IN THE CASE OF THE ASSESSEE ITSELF FOR ASSE SSMENT YEAR 2007- 08. FURTHER, WE FIND THAT THE LD. CIT(A) VACATED S IMILAR DEMAND IN THE ASSESSMENT YEAR 2007-08 BY OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSION OF THE LD. A.R. I HAVE GONE THROUGH THE DECISIONS RELIED ON BY THE ASSESSING OFFICER AND THE LD. A.R. I HAVE ALSO PERUSED THE CONTRACT AGREEMENT BETWEEN THE APPELLANT AND GKSB, PHOTO COPY OF SAMPLE INVOICES OF PURCHASE OF S TEEL AND CEMENT, EXTRACT OF LEDGER ACCOUNT OF STEEL AND CEMEN T AND STATEMENT OF ACCOUNT WITH GKSB. IT IS SEEN THAT THE BILLS WERE RAISED FOR PURCHASE OF STEEL AND CEMENT IN THE NAME OF THE APPELLANT AND NOT IN THE NAME OF GKSB. THE CHEQUE FO R THE PURCHASES MADE HAD ALSO BEEN PAID BY THE APPELLANT A ND NOT BY THE CONTRACTOR. THE MATERIALS HAVE BEEN DELIVERE D TO THE CONTRACTOR AT THE SITE OF THE APPELLANT. IT IS ALSO SEEN THAT THE APPELLANT HAS MADE DEDUCTION ON THE AMOUNT PAID TO TH E CONTRACTOR INCLUDING ALL MATERIALS OTHER THAN STEEL AND CEMENT. AS REGARDS THE STEEL AND CEMENT, THE PURCHAS ES WERE MADE BY THE APPELLANT ITSELF AND THE PAYMENT WAS AL SO MADE DIRECTLY TO THE SUPPLIERS OF THE MATERIALS. THEREFO RE, IT WAS I.T.A. NO.818/MDS/11 9 NOT REQUIRED TO DEDUCT TAX ON THE PURCHASES MADE BY I T. I ALSO FIND SUBSTANCE IN THE CONTENTION OF THE APPELLANT TH AT ONCE THE CONTRACTOR FULLY ACCOUNTS FOR THE RECEIPTS AND PA ID THE TAX THEREON, THERE COULD NOT BE ANY TAX DEMAND ON TH E APPELLANT. THIS VIEW IS FORTIFIED BY THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA (SU PRA). FURTHER, WHERE THE CONTRACTOR HAS UNDERTAKEN ONLY TO PROVIDE THE LABOUR FOR THE WORK, THE OWNERSHIP OF MATERIALS SUPPLIED REMAINING AT ALL TIMES WITH THE PRINCIPAL, THE SUM P AYABLE TO THE CONTRACTOR IN RESPECT OF THE CONTRACT WILL ONLY BE THE AMOUNT PAID FOR SUCH LABOUR AND SERVICES AND WILL THUS NOT INCLUDE THE PRICE OF MATERIAL SUPPLIED BY THE PRINCI PAL. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OPINION T HAT THERE WAS NO DEFAULT ON THE PART OF THE APPELLANT IN COMPL YING TO THE PROVISIONS OF SECTION 194C OF THE ACT. THEREFOR E, THE DEMAND RAISED U/S 201(1) AND INTEREST U/S 201(1A) BY THE AO IS DELETED. ACCORDINGLY, THIS GROUND IS ALLOWED. 10. THE LD. D.R. COULD NOT POINT OUT ANY SPECIFIC E RROR IN THE FINDING OF THE LD. CIT(A). IT IS NOT IN DISPUTE TH AT THE MATERIALS IN QUESTION, NAMELY STEEL AND CEMENT WERE DIRECTLY PUR CHASED BY THE ASSESSEE AND THE ASSESSEE HAS NOT PAID ANY AMOUNT T O THE CONTRACTOR FOR THE ABOVE MATERIAL. FROM THE FACTS OF THE CASE, IT IS I.T.A. NO.818/MDS/11 10 OBSERVED THAT NEITHER THE ASSESSEE PAID ANY AMOUNT TO THE CONTRACTOR FOR THE MATERIALS IN QUESTION NOR THE AS SESSEE WAS LEGALLY LIABLE TO PAY ANY AMOUNT IN RESPECT OF THOSE MATERI ALS TO THE CONTRACTOR. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). IT IS CONFIRMED. GRO UNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 21 ST OCTOBER, 2011. SD/- SD/- (GEORGE MATHAN) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST OCTOBER, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE