I.T.O. Wd-46(2), KOLKATA, Kolkata v. Mahasin Mullick, Howrah

ITA 2043/KOL/2009 | 2006-2007
Pronouncement Date: 09-07-2010

Appeal Details

RSA Number 204323514 RSA 2009
Assessee PAN AKFPM2028M
Bench Kolkata
Appeal Number ITA 2043/KOL/2009
Duration Of Justice 7 month(s) 7 day(s)
Appellant I.T.O. Wd-46(2), KOLKATA, Kolkata
Respondent Mahasin Mullick, Howrah
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Department
Bench Allotted B
Tribunal Order Date 09-07-2010
Date Of Final Hearing 18-03-2010
Next Hearing Date 18-03-2010
Assessment Year 2006-2007
Appeal Filed On 02-12-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : KOLKATA [ BEFORE SHRI D.K. TYAGI J.M. & SHRI B.C. MEENA A.M. ] I.T.A.NO. 2043 (KOL) OF 2009 ASSESSMENT YEAR 2006-07 INCOME-TAX OFFICER WARD-46(2) -VS- MAHASIN MUL LICK KOLKATA. HOWRAH (PAN-AKFPM2028M) ( APPELLANT ) ( RESPONDEN T ) APPELLANT BY : SRI PIYUSH KOLHE RESPONDENT BY : SRI SOUMITRA CHO WDHURY O R D E R PER SRI D.K. TYAGI J.M. : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 20 06-07 IS DIRECTED AGAINST THE ORDER DATED 09.9.2009 OF C.I.T .(A)-XXX KOLKATA. THE ONLY GROUND RAISED IN THIS APPEAL BY THE REVENUE READS AS UNDER :- WHETHER ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED TO ALLOW THE APPEAL OF THE ASSESSEE INSPI TE OF THE FACT THAT THE ASSESSEE FAILED TO DEDUCT TAX U/S. 194C(2) OF THE I .T.ACT WHEN PAYMENTS EXCEEDING RS.50 000/- TO 12 PERSONS HELD TO BE SUB- CONTRACTORS WERE MADE AND ATTRACT THE PROVISION OF SECTION 40(A)(IA) OF T HE I.T.ACT. 2. THE ASSESSEE AN INDIVIDUAL CARRIES ON BUSINES S IN THE LINE OF JOB WORK OF ZARI WORK AND EMBROIDERY ON SAREES WHICH HE RECEIVES FROM TH E VARIOUS SHOPS AND STOCKISTS OF SAREES. AS PER AUDITORS REPORT IN FORM 3CD ASSES SEES BUSINESS WAS MENTIONED AS LABOUR JOB OF EMBROIDERY. FOR DOING THIS JOB TH E ASSESSEE ENGAGES LARGE NUMBER OF LABOURERS RUNNING INTO 360 WORKERS/PERSONS. THE AS SESSEE RECEIVED PAYMENTS FROM DIFFERENT SAREE SHOPS/STOCKISTS AFTER DEDUCTION OF TAXES AT SOURCE U/S. 194C FROM THE PAYMENTS MADE TO HIM. THE ASSESSEE MADE PAYMENTS T O THE LABOUR-SARDARS AND LABOURERS FOR THE WORK DONE BY THEM. DURING THE YEAR UNDER AP PEAL THE ASSESSEE DEBITED AN AMOUNT OF RS.1 70 59 450/- AS LABOUR CHARGES IN HIS ACCOUNT. THE A.O. IDENTIFIED 12 LABOURERS WHOSE INDIVIDUAL EARNING DURING THE YEAR WAS ABOVE RS.50 000/- EACH AND AS SUCH THE PAYMENTS MADE TO THESE PERSONS TOTALLING T O RS.8 17 716/- WERE TREATED TO BE LIABLE FOR DEDUCTION OF TAX @ 1%. SINCE NO TAX HA D BEEN DEDUCTED AT SOURCE FROM THESE 2 12 LABOURERS THE A.O. ADDED THE SAID SUM OF RS.8 1 7 716/- TO THE TOTAL INCOME OF THE ASSESSEE U/S. 40(A)(IA) OF THE ACT FOR VIOLATION OF PROVISIONS OF SEC.194C(2) OF THE ACT. 3. BEFORE THE LD. C.I.T.(A) THE ASSESSEE INTER AL IA CONTENDED THAT THE EMBROIDERY WORK WAS UNDERTAKEN BY THESE 12 WORKERS/PERSONS WH ICH WERE GIVEN BY THE ASSESSEE TO THEM. THESE PERSONS ENGAGED OTHER WORKERS ALSO FOR COMPLETION OF THE WORK. THEREFORE THE PAYMENT TO THESE PERSONS WAS FOR THE WORK DONE BY THEM AND ALSO FOR THE WORK DONE BY OTHER LABOURERS. AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE AND PERUSING THE ORDER OF THE A.O. THE LD. C.I.T.(A) DELETED THE AD DITION MADE U/S. 40(1)(IA) BY OBSERVING AS UNDER :- IT IS SEEN THAT THE APPELLANT INCURRED SUBSTANTI AL LABOUR PAYMENT OF ABOUT RS.1.70 CRORES. THE QUANTUM OF PAYMENT MADE TO THE 12 PERS ONS IS MARGINALLY EXCEEDING RS.50 000/-. THE APPELLANT FURNISHED LETTER FROM T HESE PERSONS CONFIRMING THAT THEY ARE ACTUAL WORKERS DOING THE EMBROIDERY WORK. IN VIEW OF THESE AND IN THE ABSENCE OF CONCLUSIVE EVIDENCE BROUGHT ON RECORD BY THE A.O. THE APPELLANTS CONTENTION HAS A MERIT. SINCE THE PERSONS RECEIVIN G THE LABOUR PAYMENT ARE THEMSELVES WORKERS THEY CANNOT BE HELD AS SUB-CONT RACTORS OF THE APPELLANT. HENCE THE PROVISIONS OF SECTION 194C(2) ARE NOT APP LICABLE TO THE FACTS AND THE CIRCUMSTANCES OF THE APPELLANTS CASE. THE A.O. IS NOT CORRECT IN DISALLOWING THE LABOUR PAYMENT OF RS.8 17 716/- U/S. 40(A)(IA). TH E A.O. IS DIRECTED TO DELETE THE ADDITION. 4. AT THE TIME OF HEARING BEFORE US THE LD. DEPAR TMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE A.O. THE LD. A/R OF THE ASSESSEE ON THE OTHER HAND SUPPORTED THE ORDER OF THE LD. C.I.T.(A) ON THIS ISSUE. HE ALSO FILED A COPY OF THE ORDER OF I.T.A.T. KOLKATA BENCH B DATED 14/9/2009 IN THE CASE OF IT O VS. MD. SAMIM SK. VIDE ITA NO. 1003 (KOL)/2009 FOR A.Y. 2006-07 IN SUPPORT OF HIS CONTENTION THAT AS THE DEDUCTOR AND DEDUCTEE BOTH ARE INDIVIDUALS PROVISIONS OF SEC. 1 94C DO NOT ATTRACT. HE FURTHER SUBMITTED THAT SINCE THE ASSESSEE MERELY MADE PAYME NTS OF WAGES (LABOUR CHARGES) TO THE LABOURERS AND ALSO THE PRICES OF THE MATERIALS AND SINCE THE LABOURERS ARE NOT CONTRACTORS OR SUB-CONTRACTORS OF THE ASSESSEE THE RE WAS NO QUESTION OF DEDUCTING ANY TAX AT SOURCE AS REQUIRED U/S. 194C OF THE ACT FROM THE SAID PAYMENTS MADE BY THE ASSESSEE AND THEREFORE PROVISIONS OF SEC. 40(A)(I A) WOULD NOT BE ATTRACTED IN THE CASE OF THE ASSESSEE. HE SUBMITTED THAT THE A.O. HIMSELF HAS ADMITTED THE PAYMENTS AS LABOUR CHARGES WHEN HE WROTE IN THE ORDER THAT THE ASSESSEE FAILED TO DISCHARGE HIS DUTY 3 TO DEDUCT AND DEPOSIT ON LABOUR CHARGES PAID. HE F URTHER SUBMITTED THAT PROVISION OF SEC. 194C(2) IS NOT APPLICABLE TO THE CASE OF THE A SSESSEE AS ALLEGED BY THE A.O. BECAUSE AS PER THIS SECTION PAYMENT SHOULD BE MADE TO THE SUB-CONTRACTOR IN PURSUANCE OF A CONTRACT. IN THE CASE OF THE ASSESSEE NEITHER THERE WAS ANY FORMAL CONTRACT NOR ORAL CONTRACT AND THE LABOUR-HEADS WERE NOT SUB-CON TRACTORS OF THE ASSESSEE. THE ASSESSEE ENGAGED SOME LABOURERS THROUGH LABOUR-HEAD S FOR CARRYING OUT EMBROIDERY WORK UNDER SOME ARRANGEMENT. ON THE ABOVE FACTS THE LD . C.I.T.(A) HAS RIGHTLY HELD THAT SINCE THE PERSONS RECEIVING THE LABOUR PAYMENT ARE THEMSE LVES WORKERS THEY CANNOT BE HELD AS SUB-CONTRACTORS OF THE APPELLANT AND MORE SO WHEN T HE DEPARTMENT COULD NOT BRING ON RECORD ANY EVIDENCE TO ESTABLISH THE LABOURERS WERE SUB-CONTRACTORS OF THE ASSESSEE. HE THEREFORE REQUESTED FOR CONFIRMING THE ORDER O F THE LD. C.I.T.(A). 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED BEFORE US. ACCORDING TO THE A.O. ASSESSEES CASE FALLS WITHIN THE PURVI EW OF SEC. 194C(2) OF THE ACT AS THE ASSESSEE WAS A CONTRACTOR AND IF LABOUR CHARGES WER E PAID BY THE CONTRACTOR FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR TO THE SUB- CONTRACTOR IT REQUIRED DEDUCTION OF TAX AT SOURCE U/S. 194C(2). FACTS HAVE BEEN GIVEN ABOVE. HOWEVER TO REITERATE THE ASSESSEE USED TO RECEIVE SAREES FROM DIFFERENT SHOP OWNERS AND STOCKISTS FOR CARRYING ON EMBROIDERY WORK ETC. ON THESE SAREES. THE PAYME NTS MADE BY THESE SHOP OWNERS TO THE ASSESSEE WERE SUBJECT TO TDS. THEREFORE THE A SSESSEE ACTED AS A CONTRACTOR. THE ASSESSEE ENGAGED LARGE NUMBER LABOURERS THROUGH LAB OUR SARDARS AND HANDED OVER THOSE SAREES TO THEM FOR EMBROIDERY WORK. THE LABOURERS USED TO PURCHASE MATERIALS FOR EMBROIDERY WORK AND AFTER COMPLETION OF WORK THE LA BOUR SARDARS/LABAOURERS USED TO RETURN BACK THOSE FINISHED SAREES DULY EMBROIDERED TO THE ASSESSEE AND RAISED BILLS FOR LABOUR CHARGES AS WELL AS MATERIALS SUPPLIED. 5.1. NOW WE LOOK INTO THE MEANING OF CONTRACTOR AND SUB-CONTRACTOR. FROM A PERUSAL OF SECTION 194C OF THE ACT IT IS OBVIOUS THAT A C ONTRACTOR FOR THE PURPOSE OF THE PROVISIONS OF THIS SECTION WOULD BE ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CENTRAL OR ANY STATE GOVERNMENT ANY LOCAL AUTHORITY AND CO RPORATION ESTABLISHED BY OR UNDER A CENTRAL STATE OR PROVINCIAL ACT ANY COMPANY OR AN Y CO-OPERATIVE SOCIETY FOR CARRYING OUT ANY WORK INCLUDING THE SUPPLY OF LABOUR FOR CARRYIN G OUT ANY WORK AND A SUB-CONTRACTOR 4 WOULD MEAN ANY PERSON WHO ENTERS INTO A CONTRACT WI TH THE CONTRACTOR FOR CARRYING OUT OR FOR THE SUPPLY OF LABOUR FOR CARRYING OUT THE W HOLE OR PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR UNDER A CONTRACT WITH ANY OF THE AUT HORITIES NAMED ABOVE OR FOR SUPPLY WHETHER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTR ACTOR HAS UNDERTAKEN TO SUPPLY IN TERMS OF HIS CONTRACT WITH ANY OF THE AFORESAID AUT HORITIES. HONBLE HIMACHAL PRADESH HIGH COURT HAD THE OCCASION TO DEAL WITH THE MEANIN G OF CONTRACTOR AND SUB-CONTRACTOR IN TERMS OF SEC. 194C IN THE CASE OF ITO V. RAMA NA ND & CO. [163 ITR 702 704 (HP)]. IN THAT CASE THE RESPONDENT-FIRM PURCHASED FROM THE G OVERNMENT CERTAIN QUANTITY OF SCENTS OF TIMBER. IT WAS HELD THAT THE RESPONDENT-F IRM WAS NOT A CONTRACTOR WITHIN THE MEANING OF SECTION 194C AS IT HAD NOT ENTERED INTO ANY CONTRACT FOR CARRYING OUT ANY WORK OR FOR SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK W ITH ANY GOVERNMENT LOCAL AUTHORITY CORPORATION COMPANY OR CO-OPERATIVE SOCIETY. THERE FORE THE PAYMENTS MADE BY THE ASSESSEE TO ANY PERSON COULD NOT BE TREATED AS PAYM ENTS MADE BY A CONTRACTOR TO A SUB- CONTRACTOR SO AS TO ATTRACT THE PROVISION 194C(2). THE RELEVANT PORTION OF THE OBSERVATION OF THEIR LORDSHIPS OF HONBLE HIMACHAL PRADESH HIGH COURT AT PAGE 704 OF THE REPORT IS TO QUOTE AS UNDER :- IT IS OBVIOUS FROM THE ABOVE EXTRACTED PROVISIONS T HAT A CONTRACTOR FOR THE PURPOSE OF THESE PROVISIONS WOULD BE ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CENTRAL OR ANY STATE GOVERNMENT ANY LOCAL AUTHORIT Y ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRAL STATE OR PROVINCIAL ACT ANY CO MPANY OR ANY CO-OPERATIVE SOCIETY FOR CARRYING OUT ANY WORK INCLUDING THE SUPPLY OF L ABOUR FOR CARRYING OUT ANY WORK AND A SUB-CONTRACTOR WOULD MEAN ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CONTRACTOR CARRYING OUT OR FOR THE SUPPLY OF LABOU R FOR CARRYING OUT THE WHOLE OR PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR UNDER A CONTRACT WITH ANY OF THE AUTHORITIES NAMED ABOVE OR FOR SUPPLY WHETHER WHOLL Y OR PARTLY ANY LABOUT WHICH THE CONTRACTOR HAS UNDERTAKEN TO SUPPLY IN TERMS OF HIS CONTRACT WITH ANY OF THE AFORESAID AUTHORITIES. NOW IN THE INSTANT CASES ADMITTEDLY THE RESPONDENT FIRM HAD NOT ENTERED INTO ANY CONTRACT FOR CARRYING OUT ANY WORK OR FOR SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK WITH ANY GOVERNMENT LOCA L AUTHORITY CORPORATION COMPANY OR CO-OPERATIVE SOCIETY. THE RESPONDENT THUS NOT B EING A CONTRACTOR THE PAYMENTS MADE BY THIS FIRM TO ANY PERSON CANNOT BE TREATED A S PAYMENTS MADE BY A CONTRACTOR TO A SUB-CONTRACTOR SO AS TO ATTRACT THE PROVISIONS OF SECTION 194C(2) OF THE ACT . [EMPHASIS SUPPLIED] IT IS PERTINENT TO MENTION HERE THAT THE DEPARTMENT FILED S.L.P. BEFORE THE HONBLE SUPREME COURT IN THE ABOVE CASE AND THEIR LORDSHIPS OF HONBLE SUPREME COURT UPHELD 5 THE DECISION OF HONBLE HIMACHAL PRADESH HIGH COURT AND THUS DISMISSED THE S.L.P. [157 ITR (ST) 31]. FROM THE ABOVE IT IS THUS CLEAR THA T THERE SHOULD BE A RELATION AS CONTRACTOR AND SUB-CONTRACTOR TO CARRY OUT ANY WORK OR FOR SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK. 5.2. THE A.O. HAS POINTED OUT THAT THE SUB-CONTRA CTS WERE GIVEN TO THESE PERSONS I.E. LABOURERS. HOWEVER THERE IS NO DIRECT EVIDENCE ON RECORD TO CONCLUSIVELY HOLD THAT THERE WAS ANY WRITTEN CONTRACT OR EVEN ORAL CONTRACT/AGRE EMENT BETWEEN THE PARTIES. FURTHER IT IS NOT CLEAR FROM THE EVIDENCE ON RECORD WHETHER THE ASSESSEE USED TO GET HIS WORK DONE THROUGH THE SAME LABOUR SARDARS IN EARLIER OR SUBSEQUENT YEARS SO AS TO PONDER OVER ACTUAL NATURE OF JOB WHETHER THERE WAS ANY PERMANE NT ARRANGEMENT OR IT IS MERE TEMPORARY ARRANGEMENT BETWEEN THE ASSESSEE AND THE LABOUR-HEADS. IF THERE IS EXISTENCE OF PERMANENT CONTRACT BETWEEN ASSESSEE AN D LABOUR HEADS ON PRINCIPAL TO PRINCIPAL BASIS THEN HOW THE PROVISIONS OF SECTION 194C(2) ARE ATTRACTED. 5.3. THE LEARNED A/R HAS DISPUTED THE STAND OF THE REVENUE THAT ENGAGEMENT OF LABOUR-HEADS/SARDARS FOR EMBROIDERY WORK WAS WORK C ONTRACT BETWEEN THE ASSESSEE AND SUCH LABOUR-HEADS AND THERE WAS A VERBAL/ORAL AGREE MENT FOR THE CONTRACTUAL JOB AS PER BILL RAISED BY THE ASSESSEE PIECE-WISE. IN OUR CONS IDERED OPINION WHEN THE ASSESSEE CLAIMS THAT THERE WAS NO EXISTENCE OF ANY CONTRACT WITH LABOUR-HEADS FOR SUCH EMBROIDERY WORK ETC. AND MATERIALS WERE SUPPLIED BY THE LABOURERS ONUS SHIFTS UPON THE DEPARTMENT TO PROVE OTHERWISE MORE SO WHEN THE REV ENUE CLAIMS THAT THERE WAS EXISTENCE OF CONTRACT OR AT LEAST ORAL AGREEMENT. A CCORDING TO SEC. 110 OF THE EVIDENCE ACT 1872 DEALING WITH BURDEN OF PROOF AS TO OWNERS HIP WHEN THE QUESTION IS WHETHER ANY PERSON IS OWNER OF ANYTHING OF WHICH HE HAS SHOWN T O BE IN POSSESSION THE BURDEN OF PROVING THAT HE IS NOT THE OWNER IS ON THE PERSON W HO AFFIRMS THAT HE IS NOT THE OWNER 5.4. SEC. 40(A)(IA) REQUIRES THAT UNLESS TAX IS DE DUCTED ACCORDING TO SECTION 194C ON PAYMENT TO CONTRACTORS OR SUB-CONTRACTORS WHICH IN CLUDES SUPPLIER OF LABOURERS FOR CARRYING OUT ANY WORK IT WILL ATTRACT DISALLOWANCE OF EXPENDITURE. THE HONBLE SUPREME COURT IN BIRLA CEMENT WORKS V CBDT [2001] 248 ITR 216 HAS LAID DOWN THE CONDITIONS PRECEDENT FOR ATTRACTING THE PROVISIONS OF SECTION 194C NAMELY (I) THERE MUST BE A CONTRACT BETWEEN THE PERSON RESPONSIBLE FOR MAKING PAYMENT TO CONTRACTOR (II) THE 6 CONTRACT MUST BE FOR CARRYING OUT OF ANY WORK (III ) THE WORK IS TO BE CARRIED THROUGH THE CONTRACTOR (IV) THE CONSIDERATION FOR THE CONTRACT SHOULD EXCEED RS.10 000/- I.E. THE AMOUNT FIXED BY SECTION 194C AND (V) THAT THE PAYME NT IS MADE TO THE CONTRACTOR FOR THE WORK CARRIED OUT BY HIM. THEREFORE SECTION 40(A)(I A) CANNOT BE READ IN ISOLATION OR TO THE EXCLUSION OF SECTION 194C. IN THE INSTANT CASE THE CONTROVERSY WAS REGARDING THE PAYMENTS MADE FOR DISBURSEMENT OF LABOUR CHARGES TO LABOUR-HEADS. THE ASSESSEE HAD SPECIFICALLY STATED BEFORE THE LOWER AUTHORITIES TH AT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR-HEADS. WHEREAS IT IS THE CA SE OF THE REVENUE THAT THE ASSESSEES CASE FALLS U/S. 194C(2) OF THE ACT. THUS REVENUE CLAIMS THAT THERE WAS EXISTENCE OF SUB-CONTRACT AND THESE LABOUR HEADS AR E SUB-CONTRACTORS. IT IS ALSO NOT CLEAR FROM THE RECORDS WHETHER THERE IS ANY CONTRAC T EXISTED ON PRINCIPAL-TO-PRINCIPAL BASIS BETWEEN ASSESSEE AND LABOUR HEADS. KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE SUBMISSIONS OF TH E PARTIES WE DEEM IT PROPER TO RESTORE THE ISSUE OF DETERMINATION OF EXISTENCE OF ANY CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR-HEADS TO THE FILE OF A.O. IN THE LIG HT OF GUIDELINES ENUNCIATED BY THE HONBLE SUPREME COURT IN THE CASE OF BIRLA CEMENT W ORKS (SUPRA) AS DISCUSSED ABOVE AND THE FACTS OF THE CASE. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FOR THE ABOVE PURPOSE. NEEDLESS TO MENTION THE A.O. SHALL PROVIDE ADEQUATE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE WHILE READJUDICATING THE ISSUE. 6. IN THE RESULT THE APPEAL BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE COURT ON 9.7.10. SD/- SD/- [B.C.MEENA] [D .K. TYAGI] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9-07-2010 PRONOUNCED BY - SD/- KKG(AM) SD/- DK T (JM) COPY FORWARDED TO : 1. MAHASIN MULLICK VILL. KOLARAH MORE PO- BAGRI HOW RAH-711 411. 2. I.T.O. WARD-46(2) KOLKATA. (3) CIT (A)-XXX KOL KATA (4) CIT KOL - 5. THE DEPARTMENTAL REPRESENTATIVE ITAT KO LKATA. TRUE COPY BY ORDER [DKP] DY. REGISTRAR.