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2015 (7) TMI 733 - ITAT AHMEDABAD

2015 (7) TMI 733 - ITAT AHMEDABAD - TMI - Disallowance u/s 40(a)(ia) - assessee made the payment for labour charges without deduction of tax at source u/s 194C - assessee in default - Held that:- The 14 persons supplied the labourers to the assessee issued bills/vouchers in respect of labourers supplied on the basis of man-days and charged separately for skilled labour supply and for un-skilled labour supply. Against those bills, payment is made to those 14 persons from time to time and some pay .....

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peal is dismissed. - Decided in favour of Revenue. - ITA NO.2878/Ahd/2012,ITA NO.2170 to 2172 /Ahd/2012 - Dated:- 17-7-2015 - Shri G.D. Agrawal and Shri Shailendra Kumar Yadav, JJ. For the Petitioner : Smt. Arti N. Shah, AR For the Respondent : Smt Sonia Kumar, Sr. DR. ORDER PER G.D. AGRAWAL, VICE PRESIDENT: ITA No. 2878/Ahd/2012 is the appeal filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals)-IV, Bardoa dated 08.11.2012, for Assessment Years 2009-10. .....

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ppeal by the assessee reads as under:- The Learned Commissioner of Income Tax (Appeals)-IV, Baroda has erred in law as well as on facts of the case by confirming disallowance of ₹ 48,64,187/- u/s 40(a)(ia) of the I.T. Act, 1961 made by the Assessing Officer. 3. The facts of the case are that the assessee derives income from construction business. The Assessing Officer found that the assessee made the payment of ₹ 48,64,187/- for labour charges without deduction of tax at source u/s 1 .....

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iod. The person providing the labourers obtains income for services from the group of labourers. In all the copies of the bills submitted by the assessee before the ITO (TDS) are progressively increasing mentioning specific projects for the specific period and all these bills contain signature of preparers and site supervisors in addition to the signature of sub-contractor. The sub-contractors in the aforesaid bills are happened to be the 14 persons as mentioned above. Further, all these person .....

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1(1) only after considering all the materials produced before him and no fresh materials / evidences have been produced / furnished before the undersigned in order to take a contrary view in this regard. The case law relied by the assessee is not relevant in this case as the assessee could not furnish any details such as vouchers signed by the labourers for the amount received by them, name and address of the person to whom the payment were made etc. at the time of assessment proceedings. Since .....

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nce, this appeal by the assessee. 5. At the time of hearing before us, it is submitted by the ld. Counsel that the payment was made to 14 labour supervisors who brought the labourers. That the payment to the labour supervisors was a collective payment in respect of all the labourers brought by him. There was no contract between the assessee and the labour supervisors and therefore, section 194C was not applicable. In support of this contention, she relied upon the following decisions:- i. Karnat .....

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u/s 40(a)(ia) amounting to ₹ 48,64,187/- may be deleted. 7. The ld. Departmental Representative, on the other hand, relied upon the orders of the authorities below, especially page nos.12-13, paragraph no. 7 of the CIT(A) s order. She pointed out that the 14 persons to whom the labour charges were paid were not the labour supervisors but the labour contractors who supplied the labourers to the assessee. That even their name appeared in the balance-sheet as creditor because the part of the .....

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. These facts clearly prove that the payment by the assessee was to the labour contractor and not to the labour supervisor. Therefore, section 194C was clearly applicable. Since the assessee failed to deduct the tax, which he was required to deduct u/s 194C, the disallowance of labour payment was rightly made u/s 40(a)(ia). 8. We have carefully considered the arguments of both the sides and perused the material placed before us. Section 194C reads as under:- 194C. (1) Any person responsible for .....

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s 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 comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediti .....

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ly 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 undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees : From th .....

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e facts of the case so as to ascertain whether the persons to whom the payment was made were labour contractors who supplied the labourers or were only labour supervisors. We find that in the paper-book the assessee has given the bills/vouchers issued by those 14 persons. At page No.24, there is a voucher for labour payment made to Avinash Soni. It would be appropriate to reproduce the whole voucher which is as under:- BIPL F/PRJ/07A ABSTRACT Project - M.P. Resort Date 30/05/2008 Sub Contractor- .....

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on work done between 15/3/2008 to 15/4/2008 8,680 8,680 TOTAL 682,997 867,922 Less-Upto Date amount of Previous Bill 682,997 (A) Total Amount for This Bill 184,925 Note : - Up to Date 28/05/2008 total paid amount ₹ 749550/- Sd/- Sd/- Sd/- Prepared By Sub-Contractor Site Incharge Note :- Security Deposit. Advance & Income Tax will be deducted at H.O. 9. From the above, it is evident that in the bill/voucher, Avinash Soni to whom the payment is made is designated as sub-contractor . In t .....

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t made up to 28.05.2008 (Rs.7,49,550/-) is also mentioned. After the perusal of the above bill/voucher, there remains no doubt in our mind that the payment made to Avinash Soni was for supply of labourer by him. This was not the payment to a labour supervisor for and on behalf of the labourers worked under him. The payment is made to Avinash Soni for labourers supplied by him. Similar is the position of other bills/vouchers issued by other labour suppliers. On these facts, the decisions relied u .....

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construction works directly by eliminating middlemen like contractors and sub-contractors to avoid exploitation of the rural poor, thereby passing on the full worth of money to the people. The material on record discloses that the Corporation transfers the amount earmarked for said projects to the account of the engineer who is in charge of the such project, who is also an employee of the assessee-company. The said engineer at the spot engages the services of the workers. Probably, he cannot go .....

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ut the labourers were directly employed by the assessee and the payment was made to the Group Leader for and on behalf of his co-employees and he in turn distributed the amount to his co-employees. The facts are altogether different in the appeal before us. In the appeal before us, the 14 persons supplied man- power to the assessee and they issued the bill for supply of skilled/unskilled man-power for which payment is made to them. Thus, the payments to the 14 persons were made in the capacity o .....

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me the contractor for installation and fittings of such material and the casual workers became sub-contractors and therefore, the assessee was liable to deduct the tax at source. In our opinion, the facts of the present case are altogether different than the facts of the Jaipur Bench in the case of Tulsi Ram Modi (supra). Similarly, the facts in the case of Laxmi Protein Products P. Ltd (supra) before the Ahmedabad Bench of the ITAT were also different. In the aforesaid case, it was undisputed t .....

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ho are employees of the assessee. The individual payment is not exceeding the prescribed limit and once this is not the case, the assessee is not supposed to deduct tax under section 194C of the Act. Accordingly, this issue of the Revenue s appeal is dismissed. 10. As we have already noted, the facts in the case of the assessee are altogether different. Here the 14 persons supplied the labourers to the assessee issued bills/vouchers in respect of labourers supplied on the basis of man-days and c .....

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ssessing Officer rightly disallowed the labour charges paid to the labour contractors by invoking the provisions of Section 40(a)(ia). Accordingly, the assessee s appeal is dismissed. ITA Nos. 2170 to 2172 /Ahd/2012-Assessee s Appeal: AYs 2009-10 to 2011-12 11. In all these three appeals, only one ground is raised which reads as under:- AY 2009-10 The Learned Commissioner of Income Tax (Appeals)-IV, Baroda has erred in law as well as on facts of the case by confirming the order of Income Tax Off .....

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interest of ₹ 12,522/- u/s 201(1A) of the Income Tax Act, 1961 thereon. AY 2011-12 The Learned Commissioner of Income Tax (Appeals)-IV, Baroda has erred in law as well as on facts of the case by confirming the order of Income Tax Officer (TDS), Anand holding that Appellant has failed to deduct tax of ₹ 4,22,891/- u/s 201(1) of the I T Act, 1961 and levying interest of ₹ 38,060/- u/s 201(1A) of the Income Tax Act, 1961 thereon. 12. At the time of hearing before us, it is submit .....

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