TMI Blog2018 (9) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... 20-7-2018 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Appellant : Mohd. Afzal, AR For the Respondent : Shri R.S.Aravindakshan, DR ORDER 1. These appeals are filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) (CIT(A))-2, Guntur and the Commissioner of Income-tax (Appeals)-2, Visakhapatnam as under for the assessment years 2011-12 to 2014-15. (a) I. T. A. No. 138/Vizag/2017 against the order of the Commissioner of Income-tax (Appeals))-2, Guntur vide I. T. A. No. 169/2015- 16, dated January 5, 2017, (b) I. T. A. Nos. 35-36/Vizag/2018 against the order of the Commissioner of Income-tax (Appeals)-2, Visakhapatnam vide I. T. A. No. 10421/2016-17/ACIT, C-1,Kkd/2017-18 and I. T. A. No. 82/ 2016-17/ITO, W-1,Kkd/2017-18 dated December 21, 2017. (c) I. T. A. Nos. 33-34/Vizag/2018 against the orders of the Commissioner of Income-tax (Appeals)-2, Visakhapatnam vide order I. T. A. No. 81/2016-17/AC C-1,Kkd/2017-18 and I. T. A. No. 10423/ 2016-17/AC, C-1, Kkd/2017-18 dated December 21, 2017. (d) I. T. A. No. 139/Vizag/2017 against the orders of the Commissioner of Income-tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTR 327 (Cal) (iii) CIT (Asst.) v. Shiva Constructions (I. T. A. No. 2162/Kol/2010 dated July 14, 2011) (iv) R. Subba Raju Rajahmundry v. Addl. CIT (I. T. A. Nos. 235, 287, 368 and 372/Vizag/2008 dated November 18, 2010) The learned Commissioner of Income-tax (Appeals) observed that the labour maistries were not the labour contractors and the payments made to the labour maistries does not partake of the character of contract payment as contemplated under section 194C of the Income-tax Act, accordingly held that the payments made to the maistries does not attract deduction of tax at source under section 194C of the Act and accordingly directed the Assessing Officer to delete the addition. 4. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue is in appeal before us. During the appeal hearing, the learned Departmental representative argued that the assessees have made the payments to the maistries who are none other than the labour contractors. Though there was no contract in writing, there was implied contract for supply of labour in which case, the assessee is obliged to deduct the TDS as provided under section 194C of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring vehicles there is an implied contract to carry the goods in the vehicle, hence attracts the TDS under section 194C/194-I. In the instant case except procuring the labour, the maistry does not do any service and work was got done under the supervision of the assessee but not under the supervision of the maistry. Therefore argued that the case law relied upon by the Revenue are not applicable in the assessee's case and do not help the assessee. The learned authorized representative taken the support of the decision of this Bench in the case of R. Subba Raju v. Addl. CIT in I. T. A. No. 235/vizag/2008 dated November 18, 2010 which was followed by the learned Commissioner of Income-tax (Appeals). The assessee also taken support of the decision of the hon'ble Gujarat High Court in the case of Principal CIT v. Swastik Construction in Tax Appeal No. 828 of 2017 dated December 20, 2017- [2018] 407 ITR 42 (Guj) and argued that the hon'ble High Court held that in the absence of any contract between the assessee and a specified person for carrying out any work contemplated in this section, the provisions of TDS under section 194C are not attracted and no disallowance required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng supply of labour for carrying out any work. In the instant case, the Revenue has not established that there was a contract in existence between the assessee and the maistries. The assessee relied on the decision of the hon'ble High Court of Gujarat in the case of Swastik Constructions (supra), wherein the hon'ble High Court held that section 194C is attracted when payment is made for carrying out any work in pursuance of a contract between the contractor and the specified person. There has to be a relation of contractor and contractee between the assessee and the head of labourers. Merely handing over the labour payments to one or two persons on the site for distributing the amount among the labours does not partake of the character of availing the service of the labour contractor and hence does not attract the provisions of TDS. Similarly, the hon'ble Karnataka High Court in the case of Karnataka Rural Infrastructure Development Ltd. held that the assessee cannot go in search of employees and the responsibility is given to a person who brings the labour force called a group leader. He is also one among the workers who is engaged in the works. Further, the Kolkata Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has made the payment to group leaders of the labourers i.e. mistries or the beldars on their behalf and they were working at the instruction of the contractor i.e. the assessee or its agent cannot be outrightly rejected. Therefore, the provisions of section 194C are not attracted. We accordingly do not find ourselves in agreement with the observation of the Commissioner of Income-tax (Appeals) made in this regard. We therefore, set aside the order of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow the payment made under the head 'labour charges' to the group leaders of the labourers. The assessee also relied on the decision of the Income-tax Appellate Tribunal, Visakhapatnam in the case of ITO v. Best Feeds in I. T. A. No. 282/Vizag/2013 dated February 5, 2016, wherein the co-ordinate Bench confirmed the order of the learned Commissioner of Income-tax (Appeals) in deleting the addition of section 40(a)(ia) in respect of the payment made to maistries. For ready reference, we extract paragraph No. 11 of the Tribunal order which reads as under : 11. We have heard both the parties, perused the materials avail able on record and gon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee deleted the additions made by the Assessing Officer we do not find any error or infirmity in the order passed by the Commissioner (Appeals). Hence, we inclined to uphold the order passed by the Commissioner (Appeals) and direct the Assessing Officer to delete the additions. 6.1. In the instant case, there is no dispute that the payment is genuine. There is no dispute with regard to the fact that the assessee has got the work done by the labourers under their supervision. The Department could not establish that there is express or implied contract between the assessee and maistries. Therefore, the facts of the assessees case are squarely covered by the decisions of this co-ordinate Bench in the case of R. Subbaraju and best feeds. Respectfully following the view taken by the coordinate Bench, we hold that the payments made to the labour through maistries cannot be construed as a contract between the assessee and the maistries and does not attract the TDS under section 194C of the Income- tax Act and consequently no disallowance is called for under section 40(a)(ia) of Income-tax Act. 6.2. The learned Departmental representative relied on the decisions of J. Rama ..... X X X X Extracts X X X X X X X X Extracts X X X X
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