TMI Blog2011 (10) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... both the conditions are satisfied then such payment can be disallowed u/s. 40(a)(ia) of the Act but where tax is deducted by the assessee, even under bonafide wrong impression, under wrong provisions of TDS, the provisions of section 40(a)(ia) of the Act cannot be invoked. - I.T.A No. 1135/Kol/2010 - - - Dated:- 21-10-2011 - ORDER This appeal by revenue is arising out of order of CIT(A)-XX, Kolkata in Appeal No.194/CIT(A)-XX/DC Cir-33/09-10/Kol dated 12.03.2010. Assessment was framed by DCIT, Circle-33, Kolkata u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2007-08 vide his order dated 30.12.2009. 2. The only issue in this appeal of revenue is against the order of CIT(A) deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c work; and therefore, tax was deducted @ 1% as per the provisions of section 194C(2) of the Act. The payments were not made for hiring of machines, but, the same have been wrongly grouped under the head machine hire charges . Copies of agreements with the concerned parties were filed at the assessment stage to show that they were sub-contractors, who were assigned specific work; and that the payments do not actually relate to hiring of machines. The Assessing Officer did not accept the explanation. The Assessing Officer observed that it was clearly mentioned in the agreements that the rate are exclusively for machine and maintenance, all material will be supplied by us. The Assessing Officer concluded that the payments were made for hirin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing concrete mixture and manual means and machinery and completing the job as per specification and direction of E/I. In each of the agreements, the quantity of work is fixed, and, the rate is also fixed on the basis of such quantity of work. I find substance in the argument that hire charges depend on the time period for which the machines are used. But, in the present case, the time consumed by the sub-contractors, or the period for which the machines are used, is not at all a factor in deciding the payments made to the sub-contractors; it is only on the basis of the quantity of work that the payments have been made. The sub-contractors are required to complete the assigned job by utilizing their machines and equipments, and also, by em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affairs where salient evidences have been overlooked. In view of the above, I am of the opinion that the payments of Rs.3,37,37,464 were made to the sub-contractors, and, that the provisions of section 194C(2) are applicable in the case of the appellant. Since the appellant has deducted tax 1 % on such payments, which is in conformity with the provisions of section 194C(2), the provisions of section 40(a)(ia) are not attracted. The addition is directed to be deleted. The grounds raised by the appellant are liable to he allowed. Aggrieved, revenue is in appeal before us. 5. From the order of CIT(A), we find that CIT(A) has gone into the controversy of assessee falling under the head sub contractor or falling under the head rent , t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion while computing the income of the assessee for the previous year relevant to AY under consideration. But in the present case before us, the assessee has deducted tax, although u/s. 194C(2) of the Act and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40a(ia) of the Act. Even otherwise if it is considered that this particular sum falls under section 194I of the Act, it may be considered as tax deducted at a lower rate and it cannot be considered a case of non-deduction or no deduction. Similar view is taken by C Bench of Mumbai ITAT in ITA No. 20/Mum/2010 in the case of DCIT v M/s Chandabhoy Jassobhoy dated 08.07.2011, wherein it is held that there is no dispute with reference to the dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments proportionately by invoking the provisions of section 40(a)(ia) of the Act. The Ld. CIT, DR also argued that there is no word like failure used in section 40(a)(ia) of the Act and it referred to only non-deduction of tax and disallowance of such payments. According to him, it does not refer to genuineness of the payment or otherwise but addition u/s. 40(a)(ia) can be made even though payments are genuine but tax is not deducted as required u/s. 40(a)(ia) of the Act. We are of the view that the conditions laid down u/s. 40(a)(ia) of the Act for making addition is that tax is deductible at source and such tax has not been deducted. If both the conditions are satisfied then such payment can be disallowed u/s. 40(a)(ia) of the Act but ..... X X X X Extracts X X X X X X X X Extracts X X X X
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