TMI Blog2012 (5) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise the assessee is liable to deduct TDS - set aside the entire issue to the file of the AO to decide the same afresh – in favour of assessee. - ITA Nos.1078 & 1079/Hyd/2011 - - - Dated:- 29-2-2012 - Chandra Poojari, Asha Vijayaraghavan, JJ. For Appellant: Sri A Srinivas For Respondent: Sri K Viswanatham ORDER Per: Chandra Poojari: These appeals preferred by the assessee are directed against separate orders passed by the CIT (A)-II, Hyderabad both dated 17-9-2007 and they pertain to the assessment years 2003-04 and 2004-05. The assessee raised common grounds of appeals for these two assessment years. Hence, these are clubbed, heard together and disposed of by this combined order for the sake of convenience. 2. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer vide order under section 154 of the Act dated 16-12-2005 wherein, the short deduction under section 201(1) and 201(1A) was worked out only for the default under section 194C on account of payment under labour charges and a final demand of Rs.9,88,229/- had been raised comprising of short deduction under section 201(1) amounting to Rs.7,53,625/- and interest under section 201(1A) amounting to Rs.2,34,604/-. Aggrieved by the order of the assessing officer, the assessee went in appeal before the CIT (A). 3. Similarly, for the assessment year 2004-05, the assessing officer computed short deduction under section 201(1) and interest under section 201 (1A) as under:- Nature of payment Default Demand u/s 201(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 10 as follows:- 8. We have heard both the parties on this issue. The section 194C reads as follows: 9. To settle the controversy involved herein, it is necessary to know about the provisions of section 194C of the IT Act. Payments made to contractors and sub contractors: (1) Any person responsible for paying any sum to any resident (hereinafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a) The Central govt. Or any state govt. 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 cooperative soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the provisions of section 194C of the Act viz., (1) there must be a contract between the person responsible for making payment to contractor (2) the contract must be for carrying out of any work, (3) the work is to be carried through the contractor (4) the consideration for the contract should exceed Rs.10,000/ (20,000)- i.e. the amount fixed by sub. sec. 194C and (5) that the payment is made to the contractor for the work carried out by him. In the present case, the relationship between the assessee and the maistry created through the agreement. The agreement need not be in writing. The assessee paid the money to the maistry for supply of labour for carrying any work which is popularly known as labour contract, there is legal obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract between the assessee and the maistries and it cannot be said to be labour contractors within the meaning of the provisions of section 194C . According to him, there is no requirement in law to deduct tax at source by the assessee under the provisions of section 194C of the Act and he placed reliance on the order of the Tribunal in the case of Samanwaya Vs. ACIT (34 SOT 332 (Kol.) On the other hand, the DR placed reliance on the judgement of Uttaranchal High Court in the case of Kumaon Mandal Vikas Nigam Ltd. Vs. ITO (290 ITR 538). In our opinion, when the mobilisation of labour is assigned to the labour contractor, there is an agreement between the assessee and the maistry and for which the assessee has paid charges. This fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on oath from the Managing Director in the course of assessment proceedings wherein the Managing Director categorically stated that the masteries are also employees and head a group of labourers and that each of the mastri is in charge of the group. It is further submitted that the first appellate authority while accepting the fact that the masteries are employees, erred in holding them as contractors. 6. We have considered the rival submissions and perused the material available on record. The main grievance of the assessee is that the assessee made the payments to each labourer individually not to mastri and it is accounted for the said payments in its cash book. As the individual payment does not exist the prescribed limit under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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