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TMI Blog2011 (9) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer & confirmed by the CIT(A) be deleted. Just and proper relief be granted to the appellant in this respect. 2. On facts & circumstances prevailing in the case & as per provisions of law, it be held that the part of the ad hoc disallowance / additions sustained by the CIT(A) is unwarranted, unjustified and contrary to the provisions of the Act and facts prevailing in the case. It further be held that no addition is warranted & justified on facts & circumstances prevailing in the case. The appellant be granted just & proper relief in this respect. The part of addition sustained by the 1st appellate authority be deleted. 3. On facts & circumstances prevailing in the case & as per pr visions of law, it be held that the observations made by the CIT(A) & inferences drawn the CIT(A) in para 5.3 of the order is unjustified, unwarranted & perverse. It further e held that provisions of see. 50C(2) has not been complied with. It further be held that e addition sustained by the first appellate authority to the provisions of law and facts prevailing in the case & the addition in this respect be deleted." In assessment year 2006-07, assessee has raised following grounds: 1. On facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and confirmed by the first appellate authority be deleted. Just and proper relief be granted to the appellant in this respect." 3. Briefly stated the relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had made the following payments for the works performed by them: Name Amount Work performed Shri Ramesh Narwade Rs.2,46,000 Centring work Shri Abu Alam Khan Rs.1,06,500 Fabrication work Shri Raghunath Kumawat Rs.1,89,050 Tiling work Rs.6,80,532 The AO was of the opinion that since the assessee is engaged in undertaking contract works, the payments were clearly in the nature of sub-contract payments and hence liable for deduction of tax at source u/s. 194C(2) of the Act. Accordingly, he made a disallowance of Rs. 6,80,532 under section 40(a)(ia) of the Act which was confirmed by the CIT(A). Being aggrieved, the assessee is in appeal before us. 4. Before us, learned A.R. has contended as under:- (i) The assessee is an individual and is awarded contracts on the basis of tenders that he files with various entities. (ii) The provisions of section 194C are not applicable to the appellant for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of participation in various tenders. For executing the contract, the assessee had to engage the services of outside parties in various works. To be precise, the assessee engaged the services of outside parties for centring, tiling and fabrication work and tiling works, for which payments exceeded Rs. 50,000 in each case. The assessee is carrying on civil work in individual capacity. 5.1. The provisions of section 194C(2), deals with payments to contractors . Accordingly, in case any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and specified person 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 tax at source as stipulated under the provisions of section 194(2) of the Act. The provisions of section 40(a)(ia) deals with the deductability of amount deductible and relevant clause reads as under: "Notwithstanding anything to the contrary in sections 30 to38, the following amounts shall not be deducted in computing the income chargeable under the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervision of assessee. This view is fortified by the decision in the case of Myhtri Transport Corporation vs. ACIT, 124 ITD 40(Vishakhapatnam), wherein the Tribunal has held that for a contract to qualify as a subcontractor, the subcontractor should spend their time and energy and also undertake the risk attached with the main contract. As the element of risk taking was missing, the contract could not be held as subcontract. While passing the above said order, the Tribunal has taken into consideration the decision reported in 163 ITR 702 (Himachal). Similarly, in the case of R.R. Carrying Corporation vs. ACIT, 126 TTJ 2240(/CTK), it has been held by the Tribunal that the AO has to establish that relationship was that of a contractor and subcontractor. There was no written nor real agreement to substantiate the view taken by the AO and therefore, it cannot be held to be a contract. We are aware of the fact that the agreement can be oral but the essence of contract lies on the fact whether assessee had the control of the work i.e. the manner in which the work has to be done. In case it lies with the assessee then it is not the subcontract so as to attract the provisions of section 194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the findings of the CIT(A). In view of this, we do not see any reason to interfere in the well reasoned of the CIT(A) and, accordingly, we uphold the same. 6.4. This ground is thus dismissed. 7. The next issue in A.Y. 2006-07 is with regard to the disallowance of Rs. 5,78,000 pertaining to the payment made to the petty contractor. 7.1. The Assessing Officer disallowed Rs. 5,78,000 by invoking the provisions of section 40(a)(ia),which was confirmed by the CIT(A). 7.2. The contention of the assessee was that the issue is not covered by mischief of provisions of section 40(a)(ia) warranting any addition in terms of the said section. The assessee has taken assistance to carry out some part of the work from outsiders on principal to principal basis. At the most the arrangement can be considered as arrangement of appointing the contractor for carrying out such work. The assessee is not required to deduct any tax at source for payment made by such persons. Therefore, it was submitted that the addition is contrary to the provisions of law & facts prevailing in the case. 7.3. On the other hand, learned D.R. supported the orders of the authorities below. 7.4 The issue raised in this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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