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2016 (11) TMI 667 - ITAT KOLKATA

2016 (11) TMI 667 - ITAT KOLKATA - TMI - TDS u/s 194C - Disallowance made u/s 40(a)(ia) - Held that:- There is nothing on record to suggest that the payment to labourers were paid to the contractors. On the contrary, assessee has made payment to labourers directly and in support of its claim, Ld. AR of assessee has produced the muster roll. In this regard, Ld. DR failed to bring any defect / information from the muster roll which suggested that the labour charges paid by assessee are subject to .....

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A)-XIX, Kolkata vide appeal No. 85/CIT(A)-XIX/Ward-33(2)/Kol/12-13 dated 25.10.2013. Assessment was framed by ITO, Ward-33(2), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2009-10 vide his order dated 30.12.2011. 2. The only issue to be decided in this appeal is as to whether the ld CITA is justified in deleting the disallowance made u/s 40(a)(ia) in the sum of ₹ 2,04,79,685/ -in the facts and circumstances of the case. 3. The brief facts of .....

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the assessee to explain why the labour payments made to 14 labour contractors should not be disallowed u/s 40(a)(ia) of the Act as the same were paid without deduction of tax at source . The assessee submitted the total number of labours working under each labour contractor / labour sardars and stated that the labours are coming from the remote villages and even inter state and they have no knowledge of Income Tax Act. It was submitted that the labour sardars were paid commission from the labou .....

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8377; 50,000/- in a financial year thereby warranting deduction of tax at source in terms of section 194C of the Act. Accordingly he disallowed the entire labour charges u/s 40(a)(ia) of the Act. 4. Before the ld CITA , apart from reiterating the submissions made before the ld AO, the assessee submitted that the labour contractors / labour sardars were paid commission at the rate of 1.5% to 2% on labour bills which does not exceed the overall aggregate limit of ₹ 50,000/- in terms of secti .....

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r merely brings labourers who are directly paid by the employer. The sardar simply gets a commission every time labourers are paid which may vary from 1.5% to 2% of labourers payment and in turn they manage the labours and their turnover. On the other hand, a labour contractor supplies labour and receives any payment in his own name and by keeping his cut, he pays the labourers. Thus labourers are not liable to get any direct payment from the employers. The assessee also filed details that more .....

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it will attract disallowance of expenditure. The Hon ble supreme court in Birla Cement Works Vs. CBDT (2001) 248 ITR 216 has laid down the conditions precedent for attracting the provisions of section 194C, viz. (i) there must be a contract must be for carrying out of any work, (iii) the work is to be carried through the contractor, (iv) the consideration for the contract should exceed the amount fixed by section 194C and (v) that the payment is made to the contractor for the work carried out by .....

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t case, the appellant does not fall within the ambit of section of 40(a)(ia) of the Act. I find force in the argument of the A/R of the appellant that the labour sardars in the instant case cannot be said to be labour contractors within the meaning of the provision of section 194C(2). In the circumstances, there is no requirement in law to deduct tax at source by the appellant under the provisions of section 194C(2). I find in this case, the Labour Sardars have no locus standi as Labour Contract .....

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,04,79,685/- made by the AO by invoking section 40(a)(ia) of the I.T. Act, 1961 is hereby deleted. 5. Aggrieved, the revenue is in appeal before us on the following ground:- Ld. CIT(A) erred in fact and in law, in deleting the addition of ₹ 2,04,79,685/- made on account of violation of section 40(a)(ia) of the I. T. Act 1961 though there was been failure on part of the assessee to deduct TDS from the payments made to 14 labour contractors. Ld. CIT(A) erred in holding that there was no oral .....

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which would become the primary document. He argued that formal contract is not necessary. In the instant case, all the ingredients of contract have been duly fulfilled and provisions of section 8 & 9 of the Contract Act were fulfilled. He argued that there is no difference between labour sardars and labour contractors with regard to the payment of labour charges. Accordingly he argued that the order of the ld AO need not be interfered with. In response to this, the ld AR argued that the led .....

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tered into by the assessee and hence the payments made by the assessee is outside the ambit of provisions of section 194C of the Act. He placed reliance on the following decisions in support of his contentions :- (a) Order of Hon ble Calcutta High Court in the case of CIT vs Stumm India in ITA No. 127 of 2009 dated 16.8.2010. (b) Decision of this Tribunal in the case of Samanwaya vs ACIT reported in 34 SOT 332 in ITA No. 484 (Kol) of 2008 dated 23.4.2009 . (c) Decision of this Tribunal in the ca .....

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s under the Sardars Paid to Labourers Paid to Sardar Gross amount % paid t sardars 1. MONTU SEIKH Begunbari, Beldanga, Murshidabad 150 15,32,335.00 31,500.00 15,63,835.00 2.06 2. KALU SEIKH Begunbari, Beldanga, Murshidabad 160 18,38,625.00 32,000.00 18,70,625.00 1.74 3. ARMAN All Begunbari, Beldanga, Murshidabad 130 13,30,370.00 21,500.00 13,51,870.00 1.62 4. IFAQIDDIN MOLLA Begunbari, Beldanga, Murshidabad 160 14,53,737.00 28,500.00 14,82,237.00 1.96 5. RAKHIBUL ALAM Bhagabangola, Murshidabad 1 .....

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Kaliachak, Malda. 180 18,53,830.00 31,750.00 18,85,580.00 1.71 12. PARI MAL DAS Golabari, South 24 Parganas 140 13,85,585.00 23,100,00 14,08,685.00 1.67 13. SAHAJAHAN GHARAMI Canning, South 24 Parganas 125 12,55,795.00 20,200,00 12,75,995.00 1.61 14. SUNIL MANDAL Ghutiari Sharif, South 24 Parganas 135 13,18,085.00 2,01,28,930.00 19,775.00 3,50,755.00 13,37,860.00 2,04,79,685.00 1.50 7.1. We find that the ld CITA had deleted the disallowance on the ground that there is no contract entered into by .....

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ot to have accepted the judgment and order of the CIT (Appeal) who has quashed the disallowance of deduction of ₹ 41,33,710/- and on account of tax deduction at source. The learned Tribunal has recorded the fact that the department has not been able to bring any material on record to show that the assessee has made the payment to the transporters in pursuance of contract for carriage of goods of the assessee and the question of deduction at source under section 194C does not and cannot ari .....

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ld that :- We find that in this case, admittedly, the labour sardars in the present case has no locus standi as labour contractor as a labour sardar and a labour contractor are as different as chalk and cheese. We find that there was no contract between the assessee and the labour sardars for supply of labourers and without which there cannot be any application of section 194C and as such the invocation of provision of section 40(a)(ia) is outside the scope and ambit of such enactment. In view o .....

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contentions of both the parties and perused the materials available on record. At the outset, we find that AO has called the labour contractors by issuing summons u/s. 131 of the Act and their statements were duly recorded. The AO failed to bring anything on record that the labour charges were paid in pursuance of contract either in writing or the oral with the labour sardar. The AO has held that the assessee has not complied the provision of Sec. 194C r.w.s. 40(a)(ia) of the Act on the presump .....

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is no written contract. In the absence of any documentary evidence, I can t call them as Labour Sardars but they are enjoying some special status before the assessee. All the payments were made through them as per Books of Accounts whereas the assessee produced the Muster Roll establishing through it that payments were made to the other co-labourers in their presence for the sake of convenience and the amounts were debited in their names only because the assessee can not keep track of all the l .....

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positions in comparison to other labourers. From the above it is amply clear that the AO himself is not sure and forming the opinion on his own surmise and conjecture. In our considered view the ld. DR has not brought anything contrary to the findings of ld. CIT(A). In this connection we rely on the decision of ACIT vs. Kalindi Agro Biotech Ltd. (2012) 20 taxmann.com 339 where it was held that the provisions of Sec. 194C of the Act are applicable if the payment has been made to a contractor for .....

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ssessee in this respect-Even before the Tribunal, the Department could not bring out any evidence by producing cogent material in respect of any contract between the assessee and the labour Sardars to contradict the submission of the assessee that there was no contract between the assessee and the labour Sardar-A contractor or a sub-contractor is engaged on the basis of a contract which is the most important essence of a contract job and is a primary requirement for the application of s. 194C-La .....

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