TMI Blog2012 (4) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 21-3-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Mr. Sanjeev Rajpal, sr. standing counsel For Respondent: Mr. Chandra Shekhar, Mr. Saurabh Upadhyay, Mr. Manoj Agarwal and Ms. Meghna De, Advs. SANJIV KHANNA, J: (ORAL) By order dated 10th March, 2011, the following substantial questions of law were framed : (i) Whether ITAT was correct in law in deleting the addition of Rs.1.50 crore made by the AO invoking the provisions of Section 40(a)(ia) read with Section 194C of the Act? (ii) Whether ITAT was correct in law in holding that there was no relationship of contractor and sub-contractor between the assessee and M/s Rishikesh Properties Limited? 2. The present appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 ( Act‟, for short) pertains to assessment year 2006-07. 3. The respondent-assessee, Rishikesh Buildcon Pvt. Ltd., is a group company, who along with other two group companies namely, Rishikesh Properties Pvt. Ltd. and Rupa Promoters Pvt. Ltd. were awarded contracts by PGF Ltd. 4. During the course of assessement proceedings in the case of the assessee, it was noticed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 7.4 I have considered the submissions of the A/R of the appellant and the facts brought out in the assessment order by the A.O. that the assessee has paid a sum of Rs.150,00,000/- to M/s Rishikesh Properties as sub-contractor for carrying out the work without deducting TDS under the relevant provisions of the Act, therefore the Ld. A.O. had proceeded to disallow the amount of Rs.150,00,000/- by invoking the provisions of Section 40(a) of the I.T. Act red with section 194C(2). However the A/R of the assessee has argued before me that only expenses which have been claimed by the assessee in profit loss account can be disallowed under the provisions of section 40(a) of the Act if the deduction of TDS under relevant provisions of the I.T.Act has not been made. The A/R of the assessee has further argued that the Ld. A.O. though has invoked provisions of section 40(a) but the said payment has not been a part of expenses claimed by the assessee in its books of account as such the disallowance was uncalled for. 8. At this stage we may mention that the aforesaid reasoning is not convincing and has to be rejected. The assessee had submitted that it had paid ₹ 1.5 crores to Ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to M/s. Rishikesh Properties Pvt. Ltd. for carrying out any work for it as sub contractor, secondly it is claimed as an expenditure under the head profits and gain of business and profession . In fact Rs.1,50,00,000/- paid by the respondent assessee to M/s. Rishikesh Properties for the work done by them assigned to them by the same company i.e. M/s. PGF Limited. Thus it is an expenditure in the books of account of M/s PGF Ltd. for carrying out work for them and they are claiming this expenditure in order to declare their profit or loan as per P L Account but not assessee company who made payment due to wrong payment made to them belonging to M/s. Rishikesh Properties (P) Ltd. We have already dealt similar issue in the case of Rishikesh Properties (P) Ltd. in ITA No.2061/D/09 wherein total contract receipts were declared of Rs.4,25,00,000/- for the work assigned to them by M/s. PGF Limited which includes Rs.1,50,00,000/- also. Thus same receipt can not form part of another for the same work assigned by same company. From the perusal of the facts stated in other two cases namely Rishikesh Properties (P) Ltd. and Rupa promoter (P) Ltd. it is found that all these companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that all these group companies did contract work for same client namely M/s. PGF Ltd. Whereas total contract work done by all these three companies and total contract work as confirmed by M/s. PGF Ltd. do not differ, in individual cases the amount of work differs. However, the value of work done by each company can be better appreciated on the basis of expenses incurred by such companies for their respective share of work. The AO has not doubted the expenses incurred by each company. Therefore, corresponding work done by them cannot be rejected. The confusion further arose due to payments accounted by client and TDS made thereon. When we are concerned with computation of income, the same has to be on the basis of contract work done by each company and expenses incurred by them. The tax is deducted on basis of payments made but TDS is not the criteria to compute the income. Thus due to discrepancy in deducting tax at source by the client, the income cannot vary. It is also seen that all the receipts for contract work done is accounted for and it is not case of revenue that the total receipt is not accounted by three companies taken together. There is no sub-contracting also. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter and whether the assessee can change its stand has not been considered and examined by the Tribunal. Failure to consider the relevant and material evidence, which has been referred to by the Assessing Officer, can in a given case result in perversity and unreasonable findings, which are contrary to law. In view of the aforesaid position, we find that the order of the Tribunal is perverse and this Court should interfere with the said order. On the question of perversity we may refer to the decision of the Supreme Court in the Dhirajlal Girdharilal Vs. CIT (1954) 26 ITR 736, wherein it has held: It is well established that when a court of fact acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding. Such a finding is vitiated because of the use of inadmissible material and thereby an issue of law arises. 13. In, Excise Taxation Officer-cum-Assessing Authority v. Gopi Nath Sons, 1992 Supp.SCC (2) 312, it has been held as: 7. if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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