ACIT, Circle - 2, Burdwan, Burdwan v. M/s. Shiva Construction, Burdwan

ITA 2162/KOL/2010 | 2007-2008
Pronouncement Date: 14-07-2011 | Result: Dismissed

Appeal Details

RSA Number 216223514 RSA 2010
Assessee PAN AAWFS7211F
Bench Kolkata
Appeal Number ITA 2162/KOL/2010
Duration Of Justice 7 month(s) 8 day(s)
Appellant ACIT, Circle - 2, Burdwan, Burdwan
Respondent M/s. Shiva Construction, Burdwan
Appeal Type Income Tax Appeal
Pronouncement Date 14-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 14-07-2011
Assessment Year 2007-2008
Appeal Filed On 06-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE /AND . !' . ) [BEFORE HONBLE SRI MAHAVIR SINGH JM & HONBLE SHR I C. D. RAO AM] # # # # / I.T.A NO. 2162/KOL/2010 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR : 2007-08 ASSISTANT COMMISSIONER OF INCOME-TAX VS. M/S. SH IVA CONSTRUCTION CIRCLE-2 BURDWAN (PAN AAWFS 7211 F) ( )* /APPELLANT ) (+ )*/ RESPONDENT ) FOR THE APPELLANT: SHRI R. K. SAHA FOR THE RESPONDENT: SHRI SOMNATH GHOSH - / ORDER PER MAHAVIR SINGH JM ( ) THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A) ASANSOL IN APPEAL NO.59/CIT(A)/ASL/CIR-2/ERST.BWN/09-10 DATED 26.10.2 010. ASSESSMENT WAS FRAMED BY ACIT CIRCLE-2 BURDWAN U/S. 143(3) OF THE INCOME T AX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE H IS ORDER DATED 17.12.2009. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING DISALLOWANCE MADE BY AO U/S. 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS U/S. 194C OF THE ACT. FOR THIS THE REVENUE HAS RA ISED FOLLOWING THREE EFFECTIVE GROUNDS OF APPEAL: 1.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE U/S. 40(A)(IA) OF TH E INCOME-TAX ACT 1961. 2.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) OUGHT TO HAVE GIVEN RECOGNITION TO ORAL CONTRACT EXISTING BETWEEN THE ASSESSEE AND THE PAYEES OF LABOUR CHARGES SO THAT THE PAYMENT OF LABOUR CHARGE S COULD BE HELD TO HAVE ATTRACTED TDS PROVISIONS U/S. 194C OF THE ACT. 3.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE DISALLOWANCE MADE U/S. 40(A)(IA) BECA USE TDS HAS NOT BEEN MADE FROM THE PAYMENT OF LABOUR CHARGES. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSING OFFICER DISALLOWED LABOUR CHARGES OF RS.68 32 024/- DEBITED BY ASSESSE E ON ACCOUNT THAT TDS WAS NOT 2 ITA 2162/K/2010 SHIVA CONSTRUCTION. A.Y.07-08 DEDUCTED AND HENCE ASSESSEES CASE FALLS SQUARELY U/S. 40(A)(IA) OF THE ACT. THE ASSESSEE EXPLAINED BEFORE ASSESSING OFFICER THAT TH ERE IS NO SPECIFIC CONTRACT OR AGREEMENT HENCE PROVISION OF SECTION 194C OF THE ACT WILL NOT APPLY AND LABOURERS ENGAGED WERE OF CASUAL IN NATURE AND NOT SUB-CONTRA CTORS. ASSESSEE ALSO CONTENDED THAT IT IS ENGAGED IN CONTRACT FOR SALE WITH RAILWAYS AN D THERE IS NO WORK CONTRACT AND HENCE AS PER CIRCULAR TDS PROVISIONS ARE NOT APPLICABLE. AGGRIEVED AGAINST THE DISALLOWANCE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND HE RELY ING ON THE TRIBUNALS DECISION IN ASSESSMENT YEAR 2005-06 DELETED THE DISALLOWANCE AS UNDER: 3. THE 1 ST TWO GROUNDS OF APPEAL ARE ADJUDICATED TOGETHER AS COMMON ISSUE IS INVOLVED. IN THESE GROUNDS THE APPELLANT IS CHALLENGING THE A.O.S ACTION IN DISALLOWING U/S. 40(A)(IA) LABOUR CHARGES PAID BY IT. THE SAME ISS UE HAS FEATURED IN THE APPELLANTS CASE FOR A.Y. 2005-06. IN THAT YEAR THE HONBLE ITAT C BENCH KOLKATA BY ITS ORDER IN ITA NO. 245(KOL) OF 2009 PASSED ON 09.04.2010 HAS DIREC TED DELETION OF THIS DISALLOWANCE. THE FACTS FOR THIS YEAR REMAIN THE SAME. RESPECTFU LLY FOLLOWING THE CITED DECISION I DIRECT THE DELETION OF THIS DISALLOWANCE FOR THIS YEAR ALS O. THESE GROUNDS OF APPEAL ARE ALLOWED. AGGRIEVED NOW REVENUE IS IN APPEAL BEFORE US. 4. AT THE OUTSET LD. COUNSEL FOR ASSESSEE STATED T HAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE BY TRIBUN ALS DECISION IN ASSESSEES OWN CASE IN ITA NO. 245(KOL) OF 2009 ASSESSMENT YEAR 2005-0 6 DATED 9.4.2010 WHEREIN IT HAS BEEN HELD AS UNDER : 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL PERUSAL OF THE MATERIAL AVAILABLE ON RECORD INCLUDING THE LEDGER COPIES OF THE SUBSEQUENT ASSESSMENT YEAR ENDING ON 31.03.2006 ALONGWITH LEDGER COPY OF 5 SAR DARS AND ON CAREFUL PERUSAL OF THE CASE LAWS ON WHICH THE LD. AUTHORISED REPRESENTATIV E OF THE ASSESSEE PLACING RELIANCE WE ARE OF THE CONSIDERED OPINION THAT THE INFERENCE DRAWN BY THE REVENUE AUTHORITIES THAT THERE IS A SUB-CONTRACT IS EXISTING BETWEEN TH E ASSESSEE AND THE LABOUR SARDARS IS NOT CORRECT AND THE FACTS OF THE CASE ARE IDENTICAL TO THAT OF ONE IN THE CASE OF M/S. SAMANWAYA VS. ACIT (SUPRA) WHEREIN THE TRIBUNAL HA S HELD AS UNDER :- 6. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATE RIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL FOR THE ASSE SSEE. BEFORE WE EMBARKED ON DISCUSSION ON THE CONTROVERSY INVOLVED IN THIS PRES ENT GROUND OF APPEAL IT IS NECESSARY FIRST TO DISCUSS THE PROVISIONS WHICH LED TO THE CO NTROVERSY. SECTION 40(A)(IA) OF THE I. T. ACT 1961 REQUIRES THAT UNLESS TAX IS DEDUCTED ACCO RDING TO S 194C ON PAYMENT TO CONTRACTORS OR SUB-CONTRACTORS WHICH INCLUDES SUPP LIER OF LABOURS FOR CARRYING OUT ANY WORK WILL ATTRACT DISALLOWANCE AS EXPENDITURE. SEC TION 194C OF THE I.T. ACT 1961 READS AS UNDER:- 194C. PAYMENTS TO CONTRACTORS AND SUB-CONTRACTORS (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO AN Y RESIDENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CAR RYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURS UANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND- 3 ITA 2162/K/2010 SHIVA CONSTRUCTION. A.Y.07-08 (A) THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT; OR (B) ANY LOCAL AUTHORITY; OR (C) ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRAL STATE OR PROVINCIAL ACT; OR (D) ANY COMPANY; OR (E) ANY CO-OPERATIVE SOCIETY; OR (F) ANY AUTHORITY CONSTITUTED IN INDIA BY OR UNDER ANY LAW ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING TH E NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNING DEV ELOPMENT OR IMPROVEMENT OF CITIES TOWNS AND VILLAGES OR FOR BOTH; OR (G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRA TION ACT 1860 (21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA; OR (H) ANY TRUST; OR (I) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UN DER A CENTRAL STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSITY GRANTS COMMISSION ACT 1956 (3 OF 1956); OR (J) ANY FIRM; OR (K) ANY INDIVIDUAL OR A HINDU UNDIVIDED FAMILY WHOSE T OTAL SALES GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESS ION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATEL Y PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR P AID TO THE ACCOUNT OF THE CONTRACTOR SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT AN AMOUNT EQUAL TO- (I) ONE PER CENT IN CASE OF ADVERTISING (II) IN ANY OTHER CASE TWO PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN WE FIND THAT THE HONBLE SUPREME COURT IN BIRLA CEM ENT WORKS -VS- CBDT SUPRA HAD LAID DOWN THE CONDITIONS PRECEDENT F OR ATTRACTING THE PROVISION S. 194C OF THE I.T. ACT 1961; NAMELY (I) THERE MUST BE A CONTRACT BETWEEN THE PERSON RESPONSIBLE FOR MAKING PAYMENT TO CONTRACTOR (II) THE CONTRACT MUST BE FOR CARRYING OUT OF ANY WORK (III) THE WORK IS TO BE CARRIED THROUG H THE CONTRACTOR (IV) THE CONSIDERATION FOR THE CONTRACT SHOULD EXCEED RS. 10 000/- I.E. THE AMOUNT FIXED BY S. 194C AND (V) THAT THE PAYMENT IS MADE TO THE CONTRA CTOR FOR THE WORK CARRIED OUT BY HIM. WE FURTHER FIND IN ITO -VS- RAMA NAND & CO SUP RA THAT A CONTRACTOR FOR THE PURPOSE OF THESE PROVISIONS WOULD BE ANY PERSON WHO ENTERS INTO A CONTRACT WITH THE CENTRAL OR ANY STATE GOVERNMENT OR ANY LOCAL AUTHO RITY ANY CORPORATION ESTABLISHED BY OR UNDER A CENTRAL STATE OR PROVINCIAL ACT ANY COMPANY OR ANY CO-OPERATIVE SOCIETY FOR CARRYING ON ANY WORK INCLUDING SUPPLY O F LABOUR FOR CARRYING OUT ANY WORK AND A SUB-CONTRACTOR WOULD MEAN ANY PERSON WHO EN TERS INTO A CONTRACT WITH THE CONTRACTOR FOR CARRYING OUT OR FOR THE SUPPLY OF L ABOUR FOR CARRYING OUT THE WHOLE OR THE PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR U NDER A CONTRACT WITH ANY OF THE AUTHORITIES NAMED ABOVE OF FOR SUPPLY WHETHER WHOLL Y OR PARTLY AND LABOUR WHICH THE CONTRACTOR HAS UNDERTAKEN TO SUPPLY IN TERMS OF HIS CONTRACT WITH ANY OF THE AFORESAID AUTHORITIES. WE THEREFORE FIND THAT S. 40(A)(IA) OF THE I.T. ACT 1961 CANNOT BE READ IN ISOLATION OR TO THE EXCLUSION OF S. 194C. WE FIND THAT IN THIS PRESENT CASE THE CONTROVERSY IS REGARDING TO PAYMENTS MADE FOR DISBU RSEMENT OF LABOUR CHARGES TO LABOUR SARDARS. WE FURTHER FIND THAT IN THE INSTANT CASE THE ASSESSEE HAD SPECIFICALLY STATED BEFORE THE LD. LOWER AUTHORITIES THAT THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARS. WE ALSO FIND THAT THE REVEN UE AUTHORITIES COULD NOT CONTROVERT 4 ITA 2162/K/2010 SHIVA CONSTRUCTION. A.Y.07-08 THE SUBMISSION OF THE ASSESSEE IN THIS RESPECT. AT THE TIME OF HEARING BEFORE US THE LD. DR COULD NOT BRING OUT ANY EVIDENCE BY PRODUCING CO GENT MATERIAL IN RESPECT OF ANY CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDAR S TO CONTRADICT THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THERE WAS NO C ONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARS. IT IS NOT IN DISPUTE THAT A CONTRAC TOR OR A SUB-CONTRACTOR IS ENGAGED ON THE BASIS OF A CONTRACT WHICH IS THE MOST IMPORTANT ESSENCE OF A CONTRACT JOB AND IS A PRIMARY REQUIREMENT FOR THE APPLICATION OF S. 194C OF THE ACT. WE THEREFORE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL OF THE ASSESSEE THAT THE LABOUR SARDARS IN THE INSTANT CASE CANNOT BE SAID TO BE LABOUR CONTRACTOR S WITHIN THE MEANING OF THE PROVISION OF S. 194C(2). IN THE CIRCUMSTANCES THER E IS NO REQUIREMENT IN LAW TO DEDUCT TAX AT SOURCE BY THE ASSESSEE UNDER THE PROVISIONS OF S. 194C(2). THIS VIEW OF OURS IS ALSO SUPPORTED BY THE DECISION OF THE PUNJAB & HARY ANA HIGH COURT IN CIT -VS- ESSKAY CONSTRUCTION CO. SUPRA WHEREIN IT WAS HELD T HAT ONCE A FINDING HAS BEEN RECORDED THAT THERE WAS NO SUBCONTRACT OF WORK THE RE COULD NOT BE ANY APPLICABILITY OF SECTION 194C(2) OF THE I.T. ACT 1961. THEREFORE TH E RATIO LAID DOWN IN THE AFORESAID JUDGMENT IS SQUARELY APPLICABLE TO THE FACTS OF THI S CASE. WE FURTHER FIND THAT THE ASSESSEE HAS MADE PAYMENTS TO INDIVIDUAL LABOURS W HICH IS EVIDENT FROM THE MUSTER- ROLL ENCLOSED IN THE PAPER BOOK PAGE 21. WE ALSO FI ND FROM THE MUSTER ROLL THAT THE PERSON SIGNING AS LABOUR SARDAR IS ALSO INCLUDED IN THE SERIAL OF THE LABOURS. WE FIND THAT IN THIS CASE ADMITTEDLY THE LABOUR SARDARS I N THE PRESENT CASE HAS NO LOCUS STANDI AS LABOUR CONTRACTOR AS A LABOUR SARDAR AND A LABOU R CONTRACTOR ARE AS DIFFERENT AS CHALK AND CHEESE. WE FIND THAT THERE WAS NO CONTRAC T BETWEEN THE ASSESSEE AND THE LABOUR SARDARS FOR SUPPLY OF LABOURS AND WITHOUT WH ICH THERE CANNOT BE ANY APPLICATION OF S. 194C AND AS SUCH THE INVOCATION O F PROVISION OF S. 40(A)(IA) IS OUTSIDE THE SCOPE AND AMBIT OF THE SUCH ENACTMENT. IN VIEW OF THE MATTER WE ARE OF THE CONSIDERED OPINION THAT S.194C(2) BEING NOT APPLICA BLE IN THIS CASE THE DISALLOWANCE OF RS. 74 33 210/- MADE BY THE AO BY INVOKING S. 40 (A)(IA) OF THE I. T. ACT 1961 AND SUSTAINED BY THE LD. CIT (A) IS HEREBY DELETED. THI S GROUND OF THE ASSESSEE IS ALLOWED. RESPECTFULLY FOLLOWING THE SAME WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES AND KEEPING IN VIEW OF THE FACT THAT SE CTION 194C(2) BEING NOT APPLICABLE IN THIS CASE THE DISALLOWANCE OF RS. 72 61 850/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 40(A)(IA) OF THE INCOME TAX ACT 1 961 AND SUSTAINED BY THE LD. CIT (A) IS HEREBY DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. AS THE FACTS ARE EXACTLY IDENTICAL AND REVENUE COUL D NOT DISTINGUISH THE SAME RESPECTFULLY FOLLOWING TRIBUNALS DECISION CITED SU PRA WE DISMISS THIS APPEAL OF THE REVENUE. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. 6. ORDER PRONOUNCED IN OPEN COURT. SD/- SD/- . !' !'!' !' . (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ' ) )) ) DATED 14TH DAY OF JULY 2011 ./ $01 2 JD.(SR.P.S.) 5 ITA 2162/K/2010 SHIVA CONSTRUCTION. A.Y.07-08 - 3 +4 54&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ACIT CIRCLE-2 BURDWAN 2 + )* / RESPONDENT M/S. SHIVA CONSTRUCTION 4 NO . CHOU DHURY CHIRA MILL LANE BADAMTALA BURDWAN. 3 . -$ ( )/ THE CIT(A) KOLKATA 4. -$ / CIT KOLKATA 5 . => +$ / DR KOLKATA BENCHES KOLKATA 4 +/ TRUE COPY -$?/ BY ORDER 1 /ASSTT. REGISTRAR .