TMI Blog2015 (7) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer shall give due opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance u/s.40(a)(ia) - non deduction of tax from account writing charges and audit fees - Held that:- As nothing was brought to our notice by the Ld. Counsel for the assessee so as to take a contrary view. Therefore, the order of the CIT(A) upholding the disallowance u/s.40(a)(ia) on account of account writing charges and audit fees is upheld. - Decided against assessee - ITA Nos.1654 and 1655/PN/2013 - - - Dated:- 26-6-2015 - Shri R.K. Panda and Shri Vikas Awasthy, JJ. For The Appellant : Shri Nikhil Pathak For The Department : Shri Rajesh Damor ORDER PER R.K. PANDA, AM : The above 2 appeals filed by the assessee are directed against the separate orders dated 28-06-2013 of the CIT(A)-V, Pune relating to Assessment Years 2007-08 and 2009-10 respectively. For the sake of convenience, these were heard together and are being disposed of by this common order. 2. First we take up ITA No.1654/PN/2013 for A.Y. 2007-08 as the lead case. Facts of the case, in brief, are that the assessee is a job worker carrying out pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee ought to have deducted TDS on the said payments. b. The assessee had allotted sub contracts to other parties and hence, the assessee was liable to deduct TDS under the provisions of section 194C(2) of the Act. 3. The learned CIT(A) failed to appreciate that the disallowance u/s 40(a)(ia) was not justified for the following reasons a. The job work contracts given by the assessee to other parties did not involve the transfer of any obligations or risks attached to the principal contract received by the assessee and hence, the said contracts were not in the nature of 'subcontracts'. b. The assessee had entered into separate contracts with the other parties for job work which were independent from the principal contract received by the assessee and hence, the said contracts were not in the nature of 'sub contracts'. c. Since the assessee had not entered into any sub contracts, he was not required to deduct TDS u/s. 194C(2) of the Act and hence, the disallowance u/s. 40(a)(ia) is not justified on the facts of the case. Without prejudice to the above grounds, the assessee submits the following grounds : 4. The Ld.CIT(A) ought to have appreciated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the equal amount. We find the CIT(A) upheld the action of the Assessing Officer on account of such default in deducting TDS from the labour charges paid. It is the submission of the Ld. Counsel for the assessee that the job work contracts given by the assessee to other parties did not involve transfer of any obligations or risks attached to the principal contract received by the assessee and therefore the said contracts were not in the nature of sub contracts and therefore there is no liability on the part of the assessee to deduct TDS u/s.194C(2) of the I.T. Act. We find an identical issue had come up before the Tribunal in the case of Pramprakash Vishwakarma (Supra) where it has been observed as under : 3.3 Now, the issue arises is as to whether the labour charges paid by the assessee are in the nature of contract awarded by the assessee or sub contract awarded. The customer provides the raw material to the assessee for carrying out certain job work. Since the assessee do not have certain machines and hence, the assessee in turn, gives the contract to other labour contractors to carry out part of the job. Ultimately the assessee is liable for the work carried out by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or subcontractor, being resident, for carrying out any work (including supply of labour for carrying out any work) on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or after deduction (has not been paid on or before the due date specified in sub-section (1) of section 139. 3.6 The assessee has in fact, engaged various labour contractors as discussed above for which, the assessee himself was responsible for executing the contract and the labour contractors had no privacy of contract with Principal customer. No risk factor was associated with the alleged subcontract. The whole control of the work was in the hands of the assessee and labour contract was executed under the full control of the assessee himself. 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. Accordingly, the payments made to the labour contractors are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not take shelter of this clause and the payments made were payments towards subcontracting. This approach of the revenue is not justified because the burden is on the revenue to establish that the assessee, in fact, has violated the terms of conditions of subcontracting the contract granted by the principal. The assessee has in fact engaged various agencies as discussed above for which, the assessee itself was responsible for executing the contract and alleged agencies of subcontract had no privacy of contract with principal. No risk factor was associated with the alleged subcontract. The whole control of the work was in the hands of the assessee and alleged subcontract work was executed i.e. centring, tiling and fabrication work under the full control of the assessee itself. There are no such discretion with alleged subcontractor for executing the above works. They were executing the work as per requirement of tender under full control and supervision 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 subcont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be held as subcontract. 4. In the case before us, there is no written or real agreement to substantiate the view taken by the Assessing Officer and therefore, it could not 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 194C(2) of the Act and subsequently the rigour of section 40(a)(ia) would not come into play for executing work of roughing and finishing of job work. Under the facts and circumstances, the authorities below were not justified in making disallowance u/s.40(a)(ia). The same is directed to be deleted. Before parting with this decision we want to make it clear that the alternative plea taken by the assessee on legal issue goes academic. So, we are not addressing the same. However, the assessee is at liberty to raise the same as and when need arises. 7.1 Since the argument that the assessee is not liable to deduct tax u/s.194C(2) is advanced before us for the first time and the lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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