POOVATH PAREE & SONS, STEVEDORES,DB KHON vs. DY.COMMISSIONER OF INCOME TAX CIR-EKM

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ITA/482/2009HC KeralaKLHC01025243200918 January 2019Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was an implied contract between the assessee and the agencies for the supply of manual labour. The Court reasoned that the practice of engaging workers through these agencies was a measure devised by the Stevedores' Association to maintain industrial peace and ensure parity in employment of manual labour. The absence of a written contract did not absolve the assessee from the liability to deduct tax at source. The Court found that the payments made by the assessee clearly fell under the rigor of Section 194C of the Act. Consequently, the Tribunal's order was upheld, and the appeal was rejected. No specific amount in dispute was recorded. The Court did not discern any question of law arising from the Tribunal's order.

What were the facts?

The appellant, Poovath Paree & Sons, is a stevedore engaged in stuffing and de-stuffing containers at Cochin Port, utilizing manual labour. The assessee engaged workers through two agencies, 'USA Pool' and 'Hash Agencies', as part of a stevedore association's practice to ensure parity of work for manual labourers. Payments were made to these agencies for the labour provided. The assessee did not deduct tax at source on these payments under Section 194C of the Income Tax Act, 1961. The assessee's primary contention was the absence of a direct contract between itself and the agencies, arguing that payments were merely distributed to individual workers.

What were the issues?

1. Whether the payments made by the assessee to the agencies, 'USA Pool' and 'Hash Agencies', for manual labour constitute payments under a contract for carrying out work, attracting the requirement of Tax Deducted at Source (TDS) under Section 194C of the Income Tax Act, 1961, despite the absence of a written contract. Assessee's contention: The assessee argued that there was no contract, written or implied, between itself and the agencies. It contended that it engaged workers, and the agencies merely acted as conduits for distributing payments to the individual labourers. The assessee emphasized the lack of a written agreement. Revenue's contention: The revenue contended that an implied contract existed for the purpose of engaging manual labour, and the payments made by the assessee to the agencies fell within the ambit of Section 194C, necessitating TDS. The First Appellate Authority found that the payments exceeded the wage liability and that the agencies earned a profit, indicating a contractual arrangement.

Which sections of the Income-tax Act were involved?

Section 194C

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON FRIDAY, THE 18TH DAY OF JANUARY 2019 / 28TH POUSHA, 1940 ITA. No.482 of 2009 AGAINST THE ORDER IN ITA NO.647/2008 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 30-01-2009 APPELLANT/APPELLANT: POOVATH PAREE & SONS, STEVEDORES, DB KHONA BUILDINGS SUBRAMANIAN ROAD, WILLINGDON ISLAND, KOCHI-3, REPRESENTED BY ITS MANAGING PARTNER, MR. P.H.SADIQ. BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.ANIL D. NAIR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS RESPONDENT/RESPONDENT: * * COMMISSIONER OF INCOME TAX C.R. BUILDINGS, I.S. PRESS ROAD ERNAKULAM, COCHIN-682 018. [AMENDED AS PER ORDER DATED 18.01.2019 IN I.A. NO.1898 OF 2013] BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 18.01.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA. No.482 of 2009 2

JUDGMENT K. Vinod Chandran, J. The assessee/appellant is a stevedore, who is mainly engaged in the activity of stuffing and de-stuffing containers, arriving and leaving from the Cochin Port. The assessee engaged manual labour for the stuffing and de-stuffing. The assessee being a part of the Stevedores' Association, engages workers from two agencies, so as to ensure a parity of work allotted to the manual labourers who are normally engaged in the Port.

2.

The manual labourers formed themselves into associations/firms which are the agencies supplying them for carrying out the work in the port. The payments made to two of such entities are the issue raised herein. The assessee had been engaging workers from an association named 'USA Pool' and a firm called 'Hash Agencies'. Payments were made to the agencies, for which no deduction of tax was made at source as provided under Section 194(C) of the Income Tax Act, 1961 [for brevity, 'the Act'].

3.

The assessee before the First Appellate Authority and Tribunal claimed that there was absolutely no contract between the assessee and the association/firm. The assessee had been engaging workers and the payments due to the individual workers were paid through the agencies. The amounts received by the agencies were merely distributed among the workers was the contention.

4.

On facts, the First Appellate Authority found that the payment made is far in excess of the wage liability to the workers employed by the assessee. Though the First Appellate Authority also found that there could be necessarily expenses with respect to the pooling of workers, ensuring their welfare and so on and so forth, there was always a profit earned by the agencies from the amounts collected for the manual labour carried out.

5.

The assessee's contention lay more emphasis on the absence of a written contract as such. The First Appellate Authority correctly found that there is no requirement for a written contract. There is definitely an implied contract, since it is for the purpose of maintaining industrial peace and ensuring parity in employment of manual labour, that the Association of Stevedore has devised a measure, by which its members employ persons from the two agencies, in which the different manual labourers are enrolled.

6.

There is definitely an implied contract and we cannot absolve the assessee from the liability to deduct tax at source merely on the ground of there existing no written contract. We are of the opinion that the payments made by the assessee clearly come under the rigor of Section 194C of the Act. We do not find any reason to interfere with the order of the Tribunal and we also do not discern any question of law as arising from the order of the Tribunal. We hence reject the appeal and leave the parties to suffer their respective costs in the appeal. K. VINOD CHANDRAN JUDGE ASHOK MENON JUDGE sp/22/01/19 //// P.A. To Judge

Appendix — schedule of exhibits
APPENDIX PETITIONER'S EXHIBITS: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 18.12.2007 ISSUED BY THE RESPONDENT FOR THE YEAR 2005-2006. ANNEXURE B TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 26.03.2008. ANNEXURE C TRUE COPY OF THE ORDER OF THE FIRST APPELLATE AUTHORITY DATED 30.01.2009.

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