M/s. D. Ramakotaiah & Co. V. Assistant Commissioner of Income Tax, Circle-2, Vijayawada

ITTA/24/2002

AI Insights

The case involves M/s. D. Ramakotaiah & Co., a civil contractor, who appealed against the orders of the Income Tax Appellate Tribunal, Visakhapatnam, concerning the treatment of Tax Deduction at Source (T.D.S) amounts as income for the assessment years 1988-89 and 1989-90. The Tribunal had previously decided that the T.D.S amounts credited to the assessee's account, which were deducted by the principal from payments to subcontractors, should be treated as income and not as tax paid on behalf of the assessee. The High Court upheld this decision, agreeing with the Tribunal and the Assessing Officer's interpretation that these amounts represented income from subcontracted works and were correctly included in the assessee's taxable income.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 799533 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 23-07-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: A V KAUNDINYA
• Keywords: Assessment years; Civil Contractor; Income Tax; Sub-contractor; Tax deduction at source
• Section: 260A; 194(C); 198

Judgement Text

"* HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A. Nos.24 OF 2002 & 52 OF 2003 %23.07.2014 I.T.T.A. No.24 OF 2002: # M/s. D. Ramakotaiah & Co., ..... Appellant And Assistant commissioner of Income Tax, Circle-2, Vijayawada .....Respondent ! Counsel for the appellant: Sri A.V. Krishna Kaundinya ^ Counsel for respondent : Sri J.V Prasad < Gist: > Head Note: ? Cases referred: Nil HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. Nos.24 OF 2002 & 52 OF 2003 COMMON JUDGMENT:- (per Hon’ble Sri Justice Challa Kodanda Ram) These two appeals are filed under Section 260A of the Income Tax Act (for short, ‘the Act’), by the assessee, raising the following common questions of law said to be arising from the orders dated 29.03.2001 of the Income Tax Appellate Tribunal (for short, ‘the Tribunal’), Visakhapatnam, in I.T.A.No.1902/Hyd/1994 and I.T.A.No.1903/Hyd/1994, for the assessment years 1988-89 and 1989-90 respectively. “Whether on the facts and the circumstances of the case, the Tribunal is right in holding that the appellant/assessee is not entitled to the credit of tax deducted at source on the amounts paid on sub- contract works.” 2) Since question of law is common to different assessment years, relating to the same assessee, it is being dealt with, in a common judgment. 3) The brief facts leading to filing the present appeals are that, the assessee was a Civil Contractor and during the assessment years 1988-89 and 1989-90, he was assessed with respect to income, arising from the works executed by himself as well as the works executed by the Sub-Contractor, on his behalf. A sum of Rs.89,032/- for the assessment year 1988-89 and Rs.2,88,048/- for assessment year 1989-90 was credited to the account of the assessee in the form of Tax Deduction at Source (for short, ‘the T.D.S’) made by the principal. If the works were executed by the sub-contractor, the assessee was entitled only to 2% royalty on the gross receipts. 4) The Assessing Officer initially sought to bring to the tax, the entire turnover relating to the contract, to the extent it was executed by the subcontractors and was also assessed in the hands of the subcontractors, treating the same as the receipts of the assessee. In appeal and further appeals, the issues came to be settled finally by the order dated 29.03.2001 of the Tribunal, whereby the turnover relating to the subcontracts corresponding to the T.D.S amounts were deleted. 5) While passing consequential orders to give effect to the order of the Tribunal, the assessing officer treated the T.D.S amount as income of the assessee and brought the same to tax. Assessee filed C.I.T appeals and the same were allowed. Revenue filed further appeal and the Tribunal found the order of the C.I.T is erroneous and thereby restored the order of the assessing officer. As against this order, the assessee is in appeal under Section 260A of the Act raising the substantial question of law referred in para No.1. 6) Heard Sri A.V. Krishna Kaundinya, learned counsel for the assessee and Sri J.V. Prasad, learned counsel for the revenue. 7) Facts are not in dispute. The crucial aspect of the matter is as to whether the treatment accorded to the sum of Rs.89,032/- for the assessment year 1988-89 and Rs.2,88,048/- for the assessment year 1989-90, as T.D.S in the assessment of the income of the assessee for the respective assessment years; is sustainable in law. The contention of the assessee is that in the proceedings for the earlier assessment years, such amounts were not treated as income, and the dispute has been settled through the orders of the Tribunal; and thus the T.D.S amounts are required to be given credit, as such. 8) On the other hand, the contention of the learned counsel for the revenue is to the effect that the disputed amounts are required to be treated as part of the income, liable for assessment and the same cannot be treated as tax paid, on behalf of the assessee, but deserve to be treated as corresponding income. 9) We have considered the rival submissions and we do not find any error in the orders of the Tribunal. The crucial aspect of the matter is that at the time when the amounts were deducted by the principal while making payments to the subcontractors, these amounts were deducted at 2% towards T.D.S under Section 194(C ) of the Act. The said deducted amount was given credit to the assessee. On the premise the said amount representing the tax deduction at source at 2%, the assessing officer brought to tax the corresponding turnover representing the T.D.S amount. On appreciation of the facts on record, in particular, the nature of agreement entered into by the assessee with the subcontractor, in the ultimate analysis the turnover relating to the contract executed by the subcontractor was held liable to be deleted. In giving effect to the orders of the Tribunal, while passing the consequential orders, the assessing officer had deleted the amount relating to the T.D.S which was treated as the income of the assessee under Section 198 of the Act. This is on account of the fact that while making the original assessment, the assessing officer had already included 2% and 2.15% representing the royalty, the commission as part of the income besides treating the 2% T.D.S amount also as income by virtue of Section198 of the Act. In other words, the same amount was included twice in computation. After deducting T.D.S amount he also deducted Rs.2,88,048/- from the tax credit given. It is not representing that the T.D.S on account of the fact that the turnover relating to the corresponding amount infact was not treated as income of the assessee. The amount deducted initially as T.D.S either can be treated as part of the income of the assessee or as representing and relatable to the receipts which are liable to be reckoned in the process of assessment. 10) In the present case, on account of the earlier proceedings, the amount received by the assessee on account of the T.D.S came to be treated as part of the commission, which the assessee is entitled to receive under agreement entered into with the subcontractor. The same is rightly treated as income for the respective assessment years. In that view of the matter, the assessee obviously is not entitled to the benefit of treating the amounts initially deducted as T.D.S, as part of the tax paid by the assessee. Therefore, the common substantial question of law which has been raised in the appeals, is required to be answered against the assessee and in favour of the revenue. 11) Accordingly, both the appeals are dismissed. There shall be no order as to costs. __________________________ L. NARASIMHA REDDY,J ____________________________ CHALLA KODANDA RAM, J Date:23.07.2014. Note: L.R. copy to be marked. B/o. Gk HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. Nos.24 OF 2002 & 52 OF 2003 Date:23.07.2014. Gk "