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2016 (3) TMI 358 - ITAT JAIPUR

2016 (3) TMI 358 - ITAT JAIPUR - TMI - Deduction of TDS under section 194C - contract for carrying out the specific work - Held that:- From the details given, the AO and the ld. CIT (A) has worked out the average cutting and sawing charges of more than ₹ 2155/- per day paid to the said M/s. Garvit Stonex, M/s. Chanda Marbles & M/s. Nidhi Granites. In our view, the said firms/companies are doing the edge cutting and sawing on regular basis and are also having business relationship with the .....

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set of promises are formed. The consideration for each other is an agreement and an agreement enforceable by law is a contract. In the present case, the contract stands concluded when the assessee asked M/s. Garvit Stonex and others to do the edge cutting and sawing of granite blocks and convert them into marble tiles for it for a consideration. The moment the said contractors/persons doing the sawing and edge cutting of the marble blocks, the said persons are entitled for the amount required t .....

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to deduct the tax on the amount paid by it to such persons/contractor, the assessee is duty bound to deduct the tax, and non deduction of tax by the assessee, attracts the provisions of section 40(a)(ia).

We will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent yea .....

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een made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors, namely, M/s. Garvit Stonex, M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of ₹ 7,51,322/-. In our view, it will be tied of justice if the disallowance is only restricted to 30% of ₹ 7,51,322/- Decided pa .....

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rejecting the application u/s 154 and thereby agreeing with the addition of ₹ 7,51,322/- u/s 40 (a)(ia) of I.T. Act, 1961 as confirmed by the predecessor CIT (A) as per his order dated 27.02.212. (2) That the learned CIT (A) grossly erred in law & on facts in applying provisions of section 40 (a)(ia) notwithstanding the fact that section 40 with clauses (a), (b) & (c) is subject to non-obstante clause with which section 40 starts (not with standing anything to the contrary in sec. .....

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like interest and penalty in terms of section 201 of the Act and not the disallowance u/s 40 (a)(ia) of the Act. 2. The appeal has been filed with a delay of 211 days. The ld. A/R for the assessee has requested to condone the delay and decide the appeal on merits. In support of his request to condone the delay, the ld. A/R furnished Affidavit of the assessee explaining the reason for delay. We are satisfied with the reasons given by the assessee, therefore, the delay caused is condoned. 3. Brief .....

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nd the such job worker. Therefore, the payments of sawing as cutting charges were made to such persons on the basis of work done by them. The assessee has shown the total payment made to the following three persons namely M/s. Garvit Stonex Kishangarh ₹ 1,54,711/-, M/s. Chanda Marbles ₹ 3,92,711/- and M/s. Nidhi Granites ₹ 2,28,700/- totaling ₹ 7,76,122/-. The AO while finalizing the assessment of the assessee, has mentioned as under :- The assessee had made regular payme .....

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squarely covers the transaction between the assessee and the persons to whom job charges have been paid as CONTRACT. Even if the contention of the assessee is taken for granted for a while the nature of payment would have been in the nature of salary or wages. Whereas in the case under consideration the payments have been made bill wise/lot wise which clearly indicates that the Marble blocks were supplied to the persons for the cutting & sawing got done or those person supplied the labour f .....

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e very well covered under the definition of contract and within ambit of Section 194C of IT Act, 1961. Therefore, the assessee was liable to made deduction of tax at source u/s 194C which assessee has not done. Section 40(a)(ia) specifically provides for non deductibility allowability of expenses where no deduction of tax is made. The AO on the basis of above said conclusion has made the addition of ₹ 7,51,322/- by resorting to section 40(a)(ia) of the IT Act. 4. Feeling aggrieved by the o .....

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ure of transactions. In view of facts mentioned by AO in the assessment order it is clear that the payment re covered by Sec. 194C and appellant was liable to make deduction of tax. As the same was not done, AO has rightly made disallowance u/s 40(a)(ia) and her action is confirmed. Addition of ₹ 7,51,322/- is confirmed. Ground No. 1 of the appeal is thus dismissed. 4.1. The assessee has preferred rectification application under section 154 of the IT Act before ld. CIT (A). The contention .....

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ed by CIT (A) without providing opportunity to assessee. The appellant also contended that the decision of then ld. CIT (A) can be rectified in view of case law on the matter. After recording the contention of the assessee, the ld. CIT (A) has rejected the rectification application mentioning that there is no mistake apparent from the record and the order passed by ld. CIT (A) is on the basis of merit. 5. Feeling aggrieved, the assessee has preferred appeal before us, though belatedly. The delay .....

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was an understanding between the appellant and the jobber in such an understanding cannot partake the character of Contract within the definition of the Contract Act. According to section 2(h) of Contract Act, contract is an agreement enforceable by law but from the facts of the case, it is clearly evident that there is no such agreement between the parties, there is nothing to suggest the course of action if any to be taken for damages for breach of contract which could be said o have emerged .....

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or 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, to deduct tax at the prescribed rates. The Hon ble Supreme Court considered the scope of section 194C in the following 2 cases. 1.Asociated Cement Co. Ltd. v. IT(1993) 201 ITR 435(SC) 2.Birla Cement Works vs. CBDT (20012) 248 ITR 216(SC) In the first mentioned case, it was held by the Apex Court that a contract could be a contractor for supply .....

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nts made to them. It is also submitted that Section 40 with clauses (a)(b) and(ba) is subject to non-obstante clauses with which section 40 starts notwithstanding anything to the contrary in section 30 to 38 hence this qualification which applies for all clauses u/s 40 applies for section 40(a)(ia) as well as it is an undisputable proposition and therefore, the question of denial o deduction for failure to deduct tax can only apply in respect of those items falling u/s 30 to 38. In respect of ot .....

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which there is such failure, there can be other consequence like interest & penalty but not denial of deduction u/s 40(a)(ia). 5.2. The ld. D/R relied upon the order passed by the authorities below and has brought to our notice the circular of the board on this issue . We are reproducing here the said circular for the purposes of clarity :- It has been brought to the notice of the Board that there are conflicting interpretations by judicial authorities regarding the applicability of the pro .....

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ng 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. In the case of Merilyn Shipping & Transports v. Addl. CIT [2012] 20 taxmann.com 244/136 ITD 23 (Vishkha.), it was held by Special Bench of ITAT, Vishakhapatnam, that the provisions of section 40(a)(ia) of the .....

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cate [2013] 33 taxmann.com 250/216 Taxman 258 and CIT-IV v. Sikandarkhan N Tunvar [2013] 33 taxmann.com 133/[2014] 220 Taxman 256 (Gujarat) respectively, have held that section 40(a)(ia) of the Act would cover not only the amounts which are payable at the end of the previous year but also which are payable at any time during the year. 3.2 The Hon'ble High Courts have further held that the intention of the legislation was to disallow certain types of expense, subject to provisions of Chapter .....

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amount should be payable and not which has been paid during the year. However, the decisions of the Hon'ble Gujarat and Calcutta High Courts (supra) were not brought to the attention of the Hon'ble Allahabad High Court. 3.4 In the case of ACIT, Circle 4(2), Mumbai v. Rishti Stock and Shares Pvt. Ltd. in ITA No. 112/Mum/2012, Hon'ble ITAT, Mumbai in its order dated 2-8-2013 has examined the decision of the Hon'ble Allahabad High Court (supra) as regards to section 40(a)(ia) of the .....

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e as on 31st March of a previous year but also amounts which are payable at any time during the year. The statutory provisions are amply clear and in the context of section 40(a)(ia) of the Act the term "payable" would include "amounts which are paid during the previous year". 5. Where any High Court decides an issue contrary to the 'Departmental View', the 'Departmental View' thereon shall not be operative in the area falling in the jurisdiction of the releva .....

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ng of marble tiles and slab. It is also an admitted fact that the marble blocks are purchased by the assessee and the same marble blocks are sent to M/s. Garvit Stonex, M/s. Chanda Marbles & M/s. Nidhi Granites for the purpose of sawing and edge cutting with a view to convert the marble blocks into marble tiles. In the assessment year under consideration, the assessee has paid a sum of ₹ 1,54,711/- to M/s. M/s. Garvit Stonex, ₹ 3,92,711/- to M/s. Chanda Marbles & ₹ 2,28 .....

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ar bills were being raised by the said concerned persons on the assessee and the assessee had been making the payment to the said persons. We do not agree with the contention of the assessee that there is no written contract or oral contract with the said persons/firms which make the payment amenable for deduction of TDS under section 194C of the IT Act. We do not find force in the submissions, as per our understanding, under the contract at every promise and every set of promises are formed. Th .....

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e by them. In fact, in the present case after doing the edge cutting and sawing, the charges were even paid by the assessee, in our understanding, a contract has come into existence between the assessee and M/s. Garvit Stonex and others. In our view, the assessee is responsible for paying the amount to such persons i.e. contractor for carrying out the specific work. Therefore, the assessee is liable to deduct the tax on such payments. Since the assessee has failed to deduct the tax on the amount .....

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