M/sVijayawada Municipal Corporation,, Vijayawada v. THE DCIT, CIRCLE - 3(1) (TDS),, Vijayawada

CO 3/VIZ/2014 | 2009-2010
Pronouncement Date: 27-11-2014 | Result: Dismissed

Appeal Details

RSA Number 325323 RSA 2014
Assessee PAN HYDMO3776D
Bench Visakhapatnam
Appeal Number CO 3/VIZ/2014
Duration Of Justice 10 month(s) 19 day(s)
Appellant M/sVijayawada Municipal Corporation,, Vijayawada
Respondent THE DCIT, CIRCLE - 3(1) (TDS),, Vijayawada
Appeal Type Cross Objection
Pronouncement Date 27-11-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 27-11-2014
Assessment Year 2009-2010
Appeal Filed On 07-01-2014
Judgment Text
ITA NOS.457 458&459/V/2013 & CO NOS.1 2&3/V/2014 M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN VICE PRESIDENT AND SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER ITA NOS.457 458&459/VIZAG/2013 ASSESSMENT YEAR : 2007 - 08 2008 - 09 & 2 009 - 10 DCIT CIRCLE-3(1)(TDS) VIJAYAWADA VS. M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.HYDMO3776D CO NOS.1 2 & 3/VIZAG/2014 (ARISING OUT OF ITA NOS.457 458&459/VIZAG/2013) ASSESSMENT YEAR : 2007-08 2008-09 & 2009-10 M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA VS. DCIT CIRCLE-3(1)(TDS) VIJAYAWADA (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI C. SUBRAHMANYAM AR REVENUE BY: SHRI R.K. SINGH DR DATE OF HEARING : 27.11.2014 DATE OF PRONOUNCEMENT : 27.11.2014 ORDER PER D. MANMOHAN VICE PRESIDENT:- THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER S PASSED BY THE CIT(A) VIJAYAWADA. ORDER PASSED U/S 201(1) & 201(1 A) OF THE INCOME-TAX ACT 1961 IS THE SUBJECT MATTER OF DISPUTE BEFORE U S. 2. AT THE OUTSET IT MAY BE NOTED THAT THE DCIT CIR CLE-3(1)(TDS) VIJAYAWADA PASSED A CONSOLIDATED ORDER FOR THE FINA NCIAL YEARS 2006-07 TO 2008-09 CONCERNING FAILURE TO DEDUCT TAX U/S 194C AND 194J OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DID NO T DEDUCT TAX ON LEGAL CHARGES CONSULTANCY AND QUALITY CONTROL CHARGES M OBILIZATION CHARGES AND ALSO ON CERTAIN LABOUR CONTRACT PAYMENTS DURING THI S PERIOD. THEREFORE A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS TO WHY AN ORDER U/S 201(1) OF THE ACT SHOULD NOT BE MADE FOR ITS FAILURE TO DE DUCT TAX. ITA NOS.457 458&459/V/2013 & CO NOS.1 2&3/V/2014 M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA 2 3. IN RESPONSE THERETO THE ASSESSEE SUBMITTED THAT LEGAL CHARGES WERE PAID TO STANDING COUNSELS WHO INFORMED THAT THEY HA VE COVERED THESE INCOMES IN THEIR ANNUAL INCOME-TAX RETURNS AND REQU ESTED NOT TO DEDUCT TAX AT SOURCE. WITH REGARD TO THE QUALITY CONTROL AND CONSULTANCY CHARGES IT WAS STATED THAT THEY HAVE ENGAGED GOVERNMENT INSTIT UTIONS AND SUBSIDIARY ORGANIZATIONS AND THEREFORE THERE WAS NO NEED TO DE DUCT TAX. AS REGARDS MOBILIZATION ADVANCES TAX WAS DEDUCTED AT THE TI ME OF SETTLING THEIR WORK BILLS. WITH REGARD TO THE PAYMENTS MADE TO VARIOUS LABOUR CONTRACTOR SOCIETIES IT WAS SUBMITTED THAT LABOUR CONTRACTS W ERE ENTERED BETWEEN THE ASSESSEE AND DWCUA AND CMEY GROUPS FOR SWEEPING AND CLEANING OF STREETS. THESE GROUPS WERE FORMED BY POOR PEOPLE AS PER THE GUIDELINES ISSUED BY THE GOVERNMENT. THE AMOUNTS PAID TO THE GROUPS WILL BE DIVIDED AMONGST THE GROUP MEMBERS AND HENCE TAX WAS NOT DEDUCTED. IT W AS ALSO SUBMITTED THAT THEY STARTED DEDUCTING TAX FROM 1.11.2008. SIMILAR EXPLANATION WAS GIVEN WITH REGARD TO THE LABOUR CONTRACTS AND VEHICLE HIR E CHARGES. 4. THE ASSESSING OFFICER WAS HOWEVER OF THE OPINION THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE AND THEREFORE TREATED THE ASSESSEE AS DEFAULTER U/S 201(1) OF THE ACT AND RAISED THE DEMA ND INCLUDING THE INTEREST U/S 201(1A) OF THE ACT. 5. AGGRIEVED ASSESSEE FILED SEPARATE APPEALS FOR E ACH DEFAULT AND CONTENDED BEFORE THE CIT(A) THAT THE ASSESSEE IS NO T LIABLE TO DEDUCT TAX IN THE LIGHT OF THE CIRCULAR NO.502 DATED 27.1.1988. IT WAS CONTENDED THAT DWCRA PROGRAMMES ARE FRAMED BY THE GOVERNMENT UNDER IRDP TO HELP POOR WOMEN AND CHILDREN AND THE FUNDS SHOULD GO TO INDIV IDUALS WHO ARE WORKING BUT NOT TO THE ASSOCIATIONS IN WHICH THEY ARE MEMBE RS. ALL THE PAYMENTS ARE MADE TO THE INDIVIDUALS AND NOT TO THE ASSOCIATIONS WHOSE ROLE IS LIMITED TO COLLECTIVE DISPOSAL OF LABOUR. 6. IT WAS FURTHER SUBMITTED THAT ONE OF ITS MAJOR OB JECTS IS TO KEEP THE CITY CLEAN AND IN THIS PROCESS THE ASSESSEE ENGAGE D THE LABOUR THROUGH ITA NOS.457 458&459/V/2013 & CO NOS.1 2&3/V/2014 M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA 3 DWCRA GROUPS. IT WAS FURTHER CONTENDED THAT THE PAY MENTS WERE MADE TO CONTRACTORS AFTER DULY PROCESSING THE BILLS. ON FE W OCCASIONS THE TDS WAS SHORTLY DEDUCTED ON ACCOUNT OF IGNORANCE OF THE CON CERNED CLERK. BUT THE FACT REMAINS THAT ALL THE PAYEES ARE ASSESSEES AND ARE PAYING TAXES DULY DECLARING THE GROSS RECEIPTS FROM THE CORPORATION. RELYING UPON THE DECISION OF THE APEX COURT IN THE CASE OF HINDUSTHAN COCA CO LA BEVERAGES (P) LTD. 296 ITR 226 (SC) IT WAS CONTENDED THAT THERE IS NO LOS S OF REVENUE AND THE ASSESSEE BEING A GOVERNMENT ORGANIZATION IT CANNOT HAVE ANY MALAFIDE INTENTION AND THUS IT CANNOT BE TREATED AS ASSESSEE IN DEFAULT. ASSESSEE HAD ALSO FURNISHED CERTIFICATE OF CHARTERED ACCOUNTANT IN RESPECT OF FOUR OF THE PAYEES. 7. THE LD. CIT(A) OBSERVED THAT WITH REGARD TO THE LEGAL CHARGES ASSESSEE SHOULD BE TREATED AS A DEFAULTER U/S 201(1 ) AND INTEREST IS CHARGEABLE U/S 201(1A) OF THE ACT. WITH REGARD TO THE CONSULTANCY AND QUALITY CONTROL CHARGES THE LD. CIT(A) OBSERVED TH AT THE ASSESSEE PRODUCED CERTIFICATES FROM TWO PARTIES WHICH REQUIRE FURTHER PROBE BY THE AO AND THEREFORE DIRECTED THE AO TO VERIFY THE SAME. AS R EGARDS MOBILIZATION ADVANCE HE OBSERVED THAT IT IS RELEVANT FOR THE FI NANCIAL YEAR 2007-08. IN THIS REGARD HE OBSERVED THAT IF THEY ARE COVERED U /S 44AB OF THE ACT THEN ONLY A TDS LIABILITY ARISES FROM THE FINANCIAL YEAR 2009-10 AND ONWARDS. SINCE THE PAYMENT IS RELEVANT DURING THE FINANCIAL YEAR 2 007-08 TDS PROVISIONS ARE NOT APPLICABLE AND ACCORDINGLY THE AO IS DIRECTED T O DELETE THE LIABILITY U/S 201(1) AND 201(1A) OF THE ACT. WITH REGARD TO THE LABOUR CONTRACTOR SOCIETIES THE PAYMENTS HAVING BEEN MADE TO INDIVID UAL MEMBERS THE AO WAS DIRECTED NOT TO TREAT THE ASSESSEE IN DEFAULT IN RE SPECT OF THOSE PAYMENTS. WITH REGARD TO THE 5 TH ITEM I.E. PAYMENT TO OTHER LABOUR CONTRACTORS THE LD. CIT(A) OPINED THAT PROVISIONS OF SECTION 194C OF TH E ACT IS APPLICABLE AND CONSEQUENTLY ASSESSMENT ORDER INVOKING THE PROVISI ONS OF SECTION 201(1) AND 201(1A) OF THE ACT WAS UPHELD. WITH REGARD TO THE PAYMENT TO VEHICLE HIRE CHARGES THE ORDER PASSED BY THE ASSESSING OFFICER WAS CONFIRMED. THE REVENUE THEREFORE PREFERRED AN APPEAL ONLY WITH RES PECT TO THE TWO ISSUES I.E. ITA NOS.457 458&459/V/2013 & CO NOS.1 2&3/V/2014 M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA 4 PAYMENTS MADE BY THE ASSESSEE TO DWCRA GROUPS AND M OBILIZATION ADVANCE WHICH IS RELEVANT FOR THE FINANCIAL YEAR 2007-08. 8. THE ASSESSEE FILED CROSS OBJECTIONS ON THE GROUN D THAT THE AO IS NOT JUSTIFIED IN PASSING A CONSOLIDATED ORDER FOR ALL T HE THREE FINANCIAL YEARS AND THEREFORE SAID ORDER IS LIABLE TO BE QUASHED. 9. AT THE TIME OF HEARING LD. D.R. STRONGLY RELIED UPON THE ORDER PASSED BY THE AO WHEREAS THE LD. COUNSEL APPEARING IN FAV OUR OF THE ASSESSEE SUBMITTED THAT CIRCULAR NO.502 IS APPLICABLE IN RES PECT OF PAYMENTS MADE DIRECTLY TO INDIVIDUALS WHO ARE ENGAGED THROUGH DWC RA GROUPS. SIMILARLY WITH REGARD TO MOBILIZATION ADVANCE RELEVANT FOR TH E FINANCIAL YEAR 2007-08 ON PAYMENTS TO INDIVIDUALS AND HUFS IN CASE THEY A RE COVERED U/S 44AB OF THE ACT THEN TDS LIABILITY ARISES FROM THE FINANCI AL YEAR 2009-10 ONWARDS AND NO MATERIALS WHATSOEVER WAS PRODUCED BY THE REVENUE TO CONTRADICT FINDINGS OF THE LD. CIT(A). 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE CORP ORATION HAD MADE PAYMENTS DIRECTLY TO THE INDIVIDUAL MEMBERS WHO HAVE BEEN EM PLOYED THROUGH DWCRA IN WHICH CASE CIRCULAR NO.502 DATED 27.1.1988 IS AP PLICABLE. SIMILAR VIEW WAS TAKEN BY US IN THE CASE OF THE PROJECT DIRECTOR DI STRICT RURAL DEVELOPMENT AGENCY IN ITA NOS.255 256 257/VIZAG/2013 DATED 26. 11.2014. SINCE NO MATERIAL WAS PLACED BEFORE US BY THE REVENUE TO CON TRADICT FINDINGS OF THE LD. CIT(A) WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PAYMENTS MADE TO INDIVIDUALS ARE EXEMPT FROM TD S PROVISIONS. 11. SIMILARLY WITH REGARD TO THE PAYMENTS MADE TO MR. V. SANJIVA REDDY SECUNDERABAD TDS LIABILITY ARISES IN THE CASE OF A N INDIVIDUAL ONLY FROM THE FINANCIAL YEAR 2009-10; SINCE THE PAYMENT IS RELEVA NT TO THE FINANCIAL YEAR 2007-08 TDS PROVISIONS ARE NOT APPLICABLE AND CONS EQUENTLY THE ASSESSEE CANNOT BE TREATED AS IN DEFAULT U/S 201(1) OF THE A CT AND INTEREST CANNOT BE CHARGED U/S 201(1A) OF THE ACT. THE FACTUAL MATRIX WAS NOT CONTROVERTED BY ITA NOS.457 458&459/V/2013 & CO NOS.1 2&3/V/2014 M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA 5 THE LD. D.R. WE THEREFORE AFFIRM THE ORDER PASSED BY THE CIT(A) AND DISMISS THE APPEALS FILED BY THE REVENUE. 12. AT THE TIME OF HEARING LD. COUNSEL APPEARING O N BEHALF OF THE ASSESSEE SUBMITTED THAT THE CROSS OBJECTIONS ARE NO T PRESSED SINCE THEY ARE OF ACADEMIC IMPORTANCE. HAVING REGARD TO THE STATE MENT OF THE LD. COUNSEL FOR THE ASSESSEE WE DISMISS THE CROSS OBJECTIONS A S NOT PRESSED. PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER14 SD/- SD/- (J. SUDHAKAR REDDY) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT VG/SPS VISAKHAPATNAM DATED 27 TH NOVEMBER 2014 COPY TO 1 DCIT CIRCLE-3(1)(TDS) VIJAYAWADA 2 M/S. VIJAYAWADA MUNICIPAL CORPORATION VIJAYAWADA 3 THE CIT VIJAYAWADA 4 THE CIT(A) VIJAYAWADA 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM