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2015 (2) TMI 1369 - HC - Income TaxDisallowance of payment to the sub-contractors @ 30% - payment was made by the respondent-assessee to the sub-contractors, who in turn made payment to the labourers for clearing goods on the port - assessee has submitted the very fact that 70% of the payment made has been allowed by the Assessing Officer would be a admission on the part of the Department that the sub-contractors were carrying on the business of providing labourers to the respondent-assessee and hence the genuineness of the transaction cannot be doubted - THAT:- Once 70% of the payment made to the sub-contractors by the respondent-assessee is accepted, the business nexus between the respondent-assessee and the sub-contractors cannot be disputed. The Assessing Officer also did not doubt the genuineness of the business relationship but the only question which was decided by the Assessing Officer was with regard to the quantum of the transaction. In our opinion, there was no reason given by the Assessing Officer to disallow 30% of the payment made by the respondent-assessee to the sub-contractors. Merely because in the earlier years the respondent-assessee had made payment to the labourers directly and for the assessment year in question they had shifted the mode of payment through the sub-contractors, cannot make the entire transaction doubtful. The expenditure incurred by the respondent-assessee for the purpose in question through the sub-contractors cannot be said to be prohibited by law. Unless the payment through a sub-contractor is prohibited by law, merely because the assessee has switched over from direct payment mode to payment through sub-contractor cannot be said to be a reason for attracting the provisions of Section 37 of the IT Act and disallowing the expenditure incurred by the assessee. It is not disputed that the normal practice in the line of the business of the assessee is to pay certain extra amounts to port labourers as speed money for promptly and speedily carrying out the labour work of handling cargo beyond working hours. In our opinion, the ratio of the decision in the Konkan’s case[2008 (7) TMI 362 - KARNATAKA HIGH COURT]applies to the facts of the present case. The only difference in the said case is that the payment was made directly to the labourers whereas in the present cases the payment has been made through sub-contractors, which would not make any difference as making payment to labourers through sub-contractors is not prohibited by law and thus would be permissible. No substantial question of law.
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