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2015 (6) TMI 172 - ITAT KOLKATA

2015 (6) TMI 172 - ITAT KOLKATA - TMI - Non deduction of TDS under section 40(a)(ia) on labour payment - CIT(A) deleted the addition - Held that:- As there is a clear-cut finding given by the ld. CIT(Appeals) that the assessee has duly produced the books of account as well as the bills, etc. before the Assessing Officer and even the evidences were filed to prove that Shri Dilip Kumar Paul was the employee of the assessee to whom the assessee had transferred funds and he was not a sub-contractor. .....

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al s) that it is not a case where the provisions of section 194C can be applied - Decided against revenue.

No deduction of TDS for payment to various parties under section 194C read with section 40(a)(ia) - CIT(A) deleted the addition - Held that:- The second proviso to section 40(a)(ia) was inserted by the Finance Act, 2012 w.e.f. 1s t April, 2012 will apply in the case of the assesse. In order to rationalize the provisions of disallowance on account of non-deduction of tax from the .....

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income by the resident payee. Thus restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and taxes paid by them. See Santosh Kumar Kedia Versus Income-tax Officer, Wd-56 (1) , Kolkata [2015 (6) TMI 123 - ITAT KOLKATA] - Decided in favour of revenue for statistical purposes

No deduction of TDS on account of transport charges - CIT(A) deleted the add .....

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the value of the assets increased so that it can be said that the assessee has made investment. The provisions of sect ion 69 are applicable to unexplained investment. The assessee has made investment s in the financial year, which were not recorded in the books of account and the assessee offers no explanation about the nature and source of the investment or the explanation offered by him is not in the opinion of Assessing Officer satisfactory. The decrease in the value of assets by no stretch .....

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e expenditure is proved, the onus is on the revenue to prove that the expenditure has not been incurred for the purpose of business especially when the expenditure has been incurred during the course of carrying on the business. Ld. CIT(Appeals), in our view, was justified in rest ricting the disallowance to 5% of the expenditure and it cannot be denied that some part of the expenditures might have not been wholly and exclusively incurred for the purpose of business - Decided against revenue. < .....

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reciation calculated at the rate of 15% on the opening balance of ₹ 1,37,236/-. Even the Assessing Officer did not make any comment in the remand report. We, therefore, confirm the order of ld. CIT(Appeal s) on this point - Decided against revenue. - I.T.A. No. 433/KOL./2011 - Dated:- 21-5-2015 - Shri P.K. Bansal and Shri Mahavir Singh, JJ. For the Appellant Shri Kalyan Nath, JCIT, Sr. D.R. For the Respondent : Shri S. Dasgupta, C.A. ORDER Per P.K. Bansal: This appeal has been filed by t .....

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nt to various parties under section 194C read with section 40(a)(ia) of the I.T. Act, 1961. (3) Ld. CIT(A) has erred in facts as well as in law in deleting the addition of ₹ 1,08,55,000/- to various parties on account of transport charges without deducting tax at source under section 40(a)(ia) of the Income tax Act, 1961. (4) Ld. CIT(A) has erred in facts as well as in law in deleting the addition of ₹ 20,39,240/- on account of capital gain. (5) Ld. CIT(A) has erred in facts as well .....

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(ia) of the Income Tax Act, 1961. 3. Brief facts relating to this ground are that the Assessing Officer noted that the assessee had transferred a sum of ₹ 3,29,05,000/- to the account of Shri Dilip Kumar Paul to whom the Assessing Officer treated to be a sub-contractor and, therefore, took the view that the assessee was liable to deduct tax at source on such amount as per the provisions of sect ion 194C(2) of the Act. Since no tax was deducted at source, therefore, the Assessing Officer d .....

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maintenance of the site office. The funds were being transferred by the assessee, out of which the withdrawal s are made for labour and other payment s at site. After calling for the remand report of the Assessing Officer, ld. CIT(Appeal s) ultimately deleted the disallowance by observing as under:- 2.7. Now coming to the merits of the claim of the assessee, as already stated above, the A.O. has not offered any comments regarding the contents of the affidavit of Sh. Dilip Kr. Paul. The depositio .....

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shed that Sh. Paul was an employee of the assessee. 2.8. From the assessment order it is not clear as to how and why the A.O. arrived at a conclusion that Sh. Dilip Kr. Paul was a sub-contractor of the assessee. During the course of assessment proceedings, when the A.O. raised question regarding the payments made to Sh. Dilip Kr. Paul, the assessee had explained to him that Sh. Dilip Kr. Paul was engaged to supervise the entire work and the site office maintenance of the assessee and that whatev .....

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(Emphasis supplied). 2.9. This observation of the A.O. that from the circumstantial evidence it is proved beyond doubt that Sh. Dilip Kr. Paul was the person through whom labour payment s were made by the assessee, establishes that Sh. Dilip Kumar Paul was only making payments to labourers on behalf of the assessee and was not a labour sub-contractor. If Shri Dilip Kr. Paul was a subcontractor then he would have received the payment for himself and assessee would not have made payments to labou .....

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ments should be in pursuance of a contract between the payer and the payee. Existence of contract has been held to be of essence for application of the provision of section 194C by Hon'ble Punjab and Haryana High Court in CIT -vs- United Rice Land Ltd. (2008) 174 Taxman 286, by Kolkata ITAT, 'A' Bench in M/s. Samanwaya -vs- ACIT vide their order dated 23/04/2009 in ITA No.4841K01l2008 and in Rakshit Transport -vs- ACIT vide order dated 11/09/2009 in ITA No.261/Kol/2009 and by Cuttack .....

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any contract between him and Sh. Dilip Kr. Paul. The facts of the case, as discussed in preceding paras, also do not indicate existence of any contract between the assessee and Sh. Dilip Kr. Paul laying Sh. Dilip Kr. Paul to be a subcontractor of the assessee. 2.12. In the light of the above discussion the disallowance of a sum of ₹ 3,29,05,000/- made by the A.O. is found to be misconceived and unjustified since Sh. Dilip Kr. Paul is found to be not a sub-contractor rather an employee of .....

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books of account as well as the bills, etc. before the Assessing Officer and even the evidences were filed to prove that Shri Dilip Kumar Paul was the employee of the assessee to whom the assessee had transferred funds and he was not a sub-contractor. We al so noted that the ld. CIT(Appeals) duly called for the remand report from the Assessing Officer and in the remand report the Assessing Officer did not deny that Shri Dilip Kumar Paul was the employee of the assessee, but only objected the adm .....

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brought to our knowledge which may compel us to take a different view from the ld. CIT(Appeals). Since the assessee has made the payment to the labourers through the employee Shri Dilip Kumar Paul, therefore, we do agree with the ld. CIT(Appeal s) that it is not a case where the provisions of section 194C can be applied. We accordingly confirm the order of the ld. CIT(Appeals) deleting the addition of ₹ 3,29,05,000/-. 6. Ground No. 2 relates to the deletion of the addition of ₹ 30,9 .....

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eal s), ld. CIT(Appeals) deleted the addition by taking the view that the provisions of section 194C(2) will be applicable only when a payment is made by a contractor to a sub-contractor in pursuance of a cont ract. Since there was neither any oral or written agreement between the cont ractor and the sub-contractor nor it was proved that the payment was made in pursuance of a contrac t, the assessee was not liable to deduct tax under sect ion 194C from the payments made. 9. We have heard the riv .....

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missions and carefully considered the same along with the order of the tax authorities below. The provisions of section 40(a)(ia) are very clear if the assessee fails to deduct the tax at source or after deduction has not paid before the due date specified in sub-section (1) of section 139, the same will not be allowed in computing the income under the head profit and gains of business or profession . The contention of the assessee, however, is that the provisions of section 194C are not applica .....

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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 an amount equal to- (i)one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii)two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income .....

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be deducted at source- (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu .....

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duct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, on furnishing of his Permanent Account Number, to the person paying or crediting such sum. (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax .....

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e purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university .....

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the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) goods carriage shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) contract shall include sub-contract; (iv) work shall include- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport ot .....

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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 specified person is required to deduct tax at source under section from the amounts so paid or payable. There is no doubt that the assessee in this case has made the payments as transportation charges in the nature of hiring charges for goods carried vehicles. The main contention of the assessee is, however, that the .....

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case of Smt J Rama Vs CIT (236 CTR 105), Law doe s not stipulate the existence of a written contract as a condition precedent for ( invoking the provisions of Section 194 C with respect to) payment of TDS . The transporters have received the payments from the assessee towards the transportation charges, therefore, the presumption normally be that one would proceed on the basis that there was a contract for hiring of goods carried vehicles. Therefore, if the assessee has made the payment for hiri .....

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e payments pertain to a contract. Contract need not be in writing. It may infer from the conduct of the parties. It may be oral also. Our aforesaid view is duly supported by the decision of ITAT, A Bench, Kolkata in the case of DCIT -vs.- Kamal Kr. Mukherjee & Co. in ITA No. 199/Kol/2010. We also noted that under section 194C, sub-section (5) proviso thereto, the aggregate amount of all the payments or credited should e xceed only ₹ 50,000/-, then the assessee shall be liable to deduct .....

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the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax, and, therefore, he took the plea that the second proviso although inserted w. e.f. 1s t April, 2013 but being curative in nature has retrospective effect and accordingly contended that the issue be restored to the file of the Assessing Officer so that the assessee can provide all the details in terms of the second proviso to section 40(a)(ia) . 10. .....

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rgument made by Ld. counsel for the assessee that the second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 would apply in the instant case. According to him, the second proviso is curative in nature intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the pay .....

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is deduction the department is realizing the tax twice on the same income. It does not appear that this point was agitated before the Tribunal. We, however, make it clear that if the amount of tax has already been realised from the employees concerned directly, there cannot be any question of further realisation of tax as the same income cannot be taxed twice. If the tax has been realised once, it cannot be realised once again, but that does not mean that the assessee will not be liable for paym .....

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aforesaid settled position in law has also been legislatively recognized by insertion of a proviso in sub-section (1) of section 201 of the Act by the Finance Act, 2012. Thus, the settled position in law is that if the deductee/payee has paid the tax, no recovery can be made from the person responsible for paying of income from which he failed to deduct tax at source. In a case where the deductee/payee has paid the tax on such income, the person responsible for paying the income is no longer req .....

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the legislature clearly is not to disallow legitimate business expenditure. The allowance of such expenditure is sought to be made subject to deduction and payment of tax at source. However, in a case where the deductee/payee has paid tax and as such the person responsible for paying is no longer required to deduct or pay any tax, legitimate business expenditure would stand disallowed since the situation contemplated by the first proviso viz. deduction and payment of tax in a subsequent year wo .....

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N AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS I. Deemed date of payment of tax by the resident payee. Under the existing provisions of Chapter XVII-B of the Income-tax Act, a person is required to deduct tax on certain specified payments at the specified rates if the payment exceeds specified threshold. In case of non-deduction of tax in accordance with the provisions of this Chapter, he is deemed to be an assessee in default under section 201(1) in respect of the amount of suc .....

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ich such tax was deductible to the date on which the payee has discharged his tax liability directly. As there is no one-to-one correlation between the tax to be deducted by the payer and the tax paid by the payee, there is lack of clarity as to when it can be said that payer has paid the taxes directly. Also, there is no clarity on the issue of the cut-off date, i.e., the date on which it can be said that the payee has discharged his tax liability. In order to provide clarity regarding discharg .....

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iii) Has paid the tax due on the income declared by him in such return of income, and the payer furnishes a certificate to this effect from an accountant in such form as may e prescribed. The date of payment of taxes by the resident payee shall be deemed to be the date on which return has been furnished by the payer. It is also proposed to provide that where the payer fails to deduct the whole or any part of the tax on the payment made to a resident and is not deemed to be an assessee in default .....

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2012. II. Disallowance of business expenditure on account of non-deduction of tax on payment to resident payee. A related issue to the above is the disallowance under section 40(a)(ia) of certain business expenditure like interest, commission, brokerage, professional fee, etc. due to non-deduction of tax. It has been provided that in case the tax is deducted in subsequent previous year, the expenditure shall be allowed in that subsequent previous year of deduction In order to rationalize the pro .....

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and paid the tax on such sum on the date of furnishing of return of income by the resident payee. These beneficial provisions are proposed to be applicable only in the case of resident payee. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. 11. No contrary decision was brought to our knowledge by the ld. D.R. By respectfully following the said decision, we restore this issue to the fil .....

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eted. Thus this ground is allowed for statistical purposes. 12. Ground No. 3 relates to the disallowance of ₹ 1,08,55,000/- on account of transport charges made by the Assessing Officer under section 40(a)(ia) of the I.T. Act. 13. The Assessing Officer noted that the assessee has debited a sum of ₹ 1,08,55,000/- in the Profit & Loss A/c. under the head transport charges . But the assessee has not deducted any TDS as per the provisions of Chapter XVII-B and, therefore, he added th .....

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office of the jurisdictional Commissioner of Income Tax. The copies of Forms 15J were also submitted during the appellate proceedings which bear the stamp of the office of the jurisdictional Commissioner of Income Tax evidencing that those forms were timely filed with the jurisdictional Commissioner of Income Tax. The evidences relied upon by the ld. AR along with his written submission were sent to the AO for his comments. In this regard, the AO remained silent in the remand report and has not .....

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not denied by the ld. D.R. that the assessee has submitted forms 15J in terms of Rule 29D read with second proviso of sect ion 194C(3)(i). In view of this fact, we do not find that this ground warrants our interference in the order of ld. CIT(Appeal s). We accordingly dismiss this ground. 16. Ground No. 4 relates to the deletion of the addition of ₹ 20,39,240/-. Facts relating to this addition are that the Assessing officer noted that there was decrease in the value of asset s of the balan .....

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ot decreased. It is not a case where the value of the assets increased so that it can be said that the assessee has made investment. The provisions of sect ion 69 are applicable to unexplained investment. The assessee has made investment s in the financial year, which were not recorded in the books of account and the assessee offers no explanation about the nature and source of the investment or the explanation offered by him is not in the opinion of Assessing Officer satisfactory. The decrease .....

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ue, therefore, should be only ₹ 11,67,038/-. The Assessing Officer disallowed 20% of diesel and petrol expenses for verification but when the matter went in appeal, ld. CIT(Appeal s) reduced the disallowance to ₹ 3,89,013/-. 19. We have heard the rival submission and carefully considered the same along with the order of tax authorities below. We noted that the assessee has incurred total expenditure on account of diesel and pet rol expenses at ₹ 77,88,254/-. The Assessing Offic .....

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₹ 3,89,013/- and allowed relief of ₹ 11,67,038/- restricting the disallowance to 5% of the expenditure. It is not denied that the site office where the assessee is to carry out the work is too far away and is mainly in South Tripura. The assessee has to maintain vehicles and has to spend on diesel and petrol. The expenses so incurred do not exceed 6.5% approximately of the receipt. In our opinion, once the genuinity of the expenditure is proved, the onus is on the revenue to prove t .....

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0. Ground No. 6 relates to the deletion of addition of ₹ 1,04,800/-. The Assessing Officer noted that the assessee had paid a sum of ₹ 1,04,800/- in four instalments of ₹ 35,200/- to Kotak Mahindra and this amount has not been shown in the balance-sheet as investment. The Assessing Officer, therefore, added a sum of ₹ 1,04,800/- as undisclosed investment. 21. Ld. CIT(Appeals) deleted the addition by holding that in the Bank account statement of the assessee the amount of .....

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