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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ NEW DLEHI
Before: SHRI N.K. BILLAIYA & SHRI N.K. CHOUDHRY
PER N.K. CHOUDHRY, J.M. This appeal has been preferred by the Revenue Department against the order dated 27.09.2018, impugned herein, passed by the learned Commissioner of Income-tax (Appeals)-31, New Delhi (in short “Ld. Commissioner”), u/s. 250 of the Income-tax Act, 1961 (in short ‘the Act’) for the assessment year 2013-14.
Brief facts, relevant for adjudication of the instant appeal, are that in the instant case, the Assesseeby filling its return of income on dated 25.09.2013hadshown an income of Rs.79,05,150/-, which was taken into consideration by the Assessing Officer. The AO ultimately vide assessment order u/s. 143(3) of the Actdated 10.03.2016, made an addition of Rs. 2,66,39,461/- by holding as under :
“5. The facts narrated by the Assessee’s counsel in its reply mentioned above are altogether different. The Assessee has entered a contract with the Railway and has deducted tax at source as per the provisions of Income Tax Act, 1961. Now the assessee has given sub-contract to two parties for supply of manpower i.e. supply of labour. As per the provisions of section 194C(1) and the tax at source was to be deducted from the payments made to sub-contractors i.e. CG and Rites. There is no element of reimbursement of expenses to the parties for supply of labour. Had there been such a situation, the assessee would have made the payment to labour itself, while here the payments have been made through the two different parties. If the sub- contract is given to the two parties, the element of profit must be there and the same can only be verified if the cases of GC and Rites are scrutinized. The judgments quoted by the assessee’s counsel are not applicable in the instant case. In nut shell the assessee was responsible for making payment to sub-contractor s i.e. GC and Rites and was required to deduct the tax at source as per the Income tax provisions of section 194C(1) at the rate applicable. The payment made to two parties for supply of labour cannot be considered to be the reimbursement of expenses. Therefore, the reply filed by the assessee’s counsel is not acceptable. Hence, under the circumstances and facts of the case the expenses paid to GC and Rites to the extent of Rs. 1,74,55,642.90 and 91,83.818.00respectively totallingRs. 2,66,39,461/- on account of manpower expenses (debited to P&L account under the head Personal Cost) for supply of labour are disallowed as per provisions of section 40(a)(ia) and is added back to the income of the assessee. I am satisfied that the assessee has furnished inaccurate particulars of its income penalty proceedings under section 271(1)(c) are hereby initiated. (Addition of Rs. 2,66,39,461/-)”
The Assessee, being aggrieved with the addition made by the Assessing Officer, preferred first appeal before the ld. Commissioner, who vide impugned order deleted the addition under challenge. Therefore the Revenue Department, being aggrieved, is in appeal before us.
Heard the parties and perused the material available on record. The Hon’ble coordinate Bench in Assessee’s own case for the assessment year 2009-10 has also considered the same issue as involved in the instant appeal and vide order dated passed on dated 05.10.2017 in has affirmed the order of the ld. CIT(A) in deleting the said disallowance by concluding as under :
2. The brief facts of the case shows that the assessee is an Association of Persons (AOP) carrying on the business of design consultancy and construction supervision work. It filed its return of income on 27.09.2011 declaring income of Rs. 56,63,080/-. The assessment was made on 20254650/- as per order dated 31.03.2014 wherein, the ld AO made disallowance of Rs. 14591572/- u/s 40(a)(ia) of the Act. The assessee preferred appeal before the ld CIT (A) where the above addition is deleted and therefore, the ld AO is in appeal before us.”
“5. We have heard the parties and perused the orders. The brief fact of the case shows that the AOP, consisting of two members, is engaged in the execution of contract of providing services for design consultancy and construction supervision of railway tunnel at Udhampur-Katra section. The assessee has debited a sum of Rs. 14591572/- under the head ‘personnel cost’ which was paid to a members of AOP. Member having 84% share being Geo Consult ZT GMBH was paid Rs. 12199760/- and 16% share being of M/s. RITES Ltd was paid Rs. 2391812/-. Admittedly on both this tax was not deducted at source u/s section 194C of the Act. Therefore, it resulted into the disallowance. The ld CIT(A) deleted the above disallowance for the reason that clauses in the agreement show that both the joint venture partners were to provide adequate manpower/ employees to the joint venture for carrying on the contract awarded to the joint venture. The ldCIT(A) held that firstly there was merely the manpower cost incurred by members which were build to the respondent AOP thus the ld CIT(A) held that on the reimbursement of the manpower cost provision of section 194C cannot apply. Similarly, he also held that on identical facts and circumstances of the case for Assessment Year 2009-10 identical disallowances were deleted by him. In the present case the joint venture agreement dated 18.12.2007 shows that it was for the work related to the construction cost for which the member of AOP joins hands together. According to agreement the work was to be performed by the parties respectively. For the performance of such work manpower is to be provided by the joint venture members. Such employee was provided by them and their cost was debited to the account of AOP. Naturally the gross consultancy fee was also shown by the AOP and necessary expenditure incurred was also shown AOP as its expenses. As the expenditure incurred as personnel cost, details of such expenditure along with time sheet, nature of work performed and the actual cost incurred by the member was submitted as per page No. 77 to 151 of the paper book. It is not the case of the revenue that it is not the reimbursement of expenditure. There is no profit element involved in the hands of the member of the AOP on transfer of the above manpower cost. Further, it is not disputed by the ld AO that the above expenditure is not reimbursement of expenditure. As the above expenditure is reimbursed we do not find any reason for deduction of tax at source on the above sum. Thus, we do not find any infirmity in the order of the ld CIT (A) in deleting the above disallowance for the reason that the impugned expenditure is merely reimbursed. Accordingly, the solitary ground of appeal and appeal of the ld AO is dismissed.”
5. We observe that the ld. Commissioner while deleting the addition made u/s. 40a(ia) of the Act for non-deduction of TDS on manpower expenses, has not only followed the orders dated 29.04.2014 and 03.04.2014 respectively passed for the A.Y. 2009- 10 and 2011-12 in Assessee’s own cases, by its predecessors {CIT(A)} but also followed the order referred above, passed by the Hon’ble Tribunal in Assessee’s own case (ITA No. 3851/Del/2014decided on 05.10.2017) for the assessment year 2009-10. Even otherwise, we do not find any reason and/or contrary material to contradict the findings of the ld. Commissioner in the impugned order. Hence, the order under challenge does not require any interference.
In the result, the appeal filed by the Revenue Department stands dismissed.
Order pronounced in the open court on 19/07/2022.