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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI A.T. VARKEY, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A. L. Saini, AM:
The captioned appeal filed by the assessee, pertaining to assessment year 2008-09, is directed against the order passed by the Commissioner of Income Tax (Appeal)-XXXII, Kolkata, in appeal no. 99/XXXII/11-12/Cir-50/Kol, which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 / 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) dated 28/10/2011.
2 Smt. Madhumita Basu Assessment Year:2008-09 2. Although in this appeal the assessee has raised a multiple grounds of appeal, but at the time of hearing the solitary grievance of the assessee has been confined to the addition u/s 40(a)(ia) of the Act amounting to Rs. 1,80,51,163/-, which was made by Assessing Officer on account of non-deduction of TDS.
Brief facts qua the issue are that the assessee filed return of income on 30.09.2008, showing a total income of Rs. 9,30,500/-. The return of income was processed u/s 143(1) of the Act on 30.10.2009 at returned income. Later on, assessee`s case was selected for scrutiny u/s 143(2) of the Act. On scrutiny, it was noticed by the Assessing Officer that the assessee has debited a sum of Rs. 1,80,51,163/-in the work contract account, being amount paid to subcontractor. On verification of form 3CD,Assessing Officer noticed that the assessee had not deducted TDS on payment made to subcontractor as per section 194C of the Act. Therefore, notice u/s 148 of the Act was issued by Assessing Officer. In response to notice,assessee appeared on different dates and assessee has accepted that there was a violation of section 40(a)(ia) read with Section 194C of the Act. Hence, the expenditure to the tune of Rs. 1,80,51,163/-(amount paid to subcontractor) was disallowed and added to the income of the assessee.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer.
Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
The ld. Counsel for the assessee submitted before the Bench that the assessee is a job worker and in order to execute the work the assessee hires the temporary labourers / individual labourer to whom the assessee pays the labour charges. The labourers are not the contractors. The assessee paid during the A.Y. 2008-09 to all the individual labourers to the tune of Rs. 1,80,51,163/- but the amount paid to each labourer does not exceed Rs. 50,000/- therefore the provision of section 40(a)(ia) of the Act, does not apply to the assessee. The assessee paid nearly 375
3 Smt. Madhumita Basu Assessment Year:2008-09 labourers and each payment to labour is below the threshold limit prescribed u/s 194C of the Act. Therefore, the TDS obligation does not arise on the assessee. The ld. Counsel also submitted that the provision of clause “k” of Section 194C(1) of the Act came into effect from A.Y. 2008-09 and it is the first time the provisions of the Act were applicable to the assessee. The Counsel also submitted before us that the ld. Assessing Officer has not challenged the veracity of the expenses, therefore, disallowance made by Assessing Officer and sustained by ld. CIT(A) should be deleted.
On the other hand, the ld. D.R. for the revenue submitted that the assessee all along has been maintaining that he was making the payment to sub-contractors and at the time of appellate proceedings the assessee has changed its stand that she was not making payment to sub-contractors, which is not tenable. The ld. D.R. also pointed out that the payment in case of each individual exceeds Rs. 50,000/- therefore there is anobligation on the assessee to deduct the TDS at source u/s 194C of the Act. Since the assessee did not deduct the TDS u/s 194C of the Act therefore the addition made by the Assessing Officer should be sustained.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld CIT(A) and other materials available on record. We note that the assessee is an individual and engaged in the business of civil works and resale of construction materials under the name & style of M/s S.J. Consultant & Contractor. During the scrutiny proceedings, the Assessing Officer noticed that the assessee had debited a sum of Rs. 1,80,51,163/- as having been paid to sub-contractors but she had not deducted the tax at source while making the payment therefore, the Assessing Officer had disallowed the entire expenses of Rs. 1,80,51,163/-. We note that the assessee is engaged in executing the job work and for that she hires the individual labours and makes the payment from time to time. During the assessment year
4 Smt. Madhumita Basu Assessment Year: Assessment Year:2008-09 2008-09 the assessee had received from job work Rs. 5,74,94,676/ 09 the assessee had received from job work Rs. 5,74,94,676/ 09 the assessee had received from job work Rs. 5,74,94,676/- and paid the labour charges to the tune of Rs. 1,8 labour charges to the tune of Rs. 1,80,51,163/- which is evident from the work which is evident from the work contractor’s account for the year ended 31.03.2008 which contractor’s account for the year ended 31.03.2008 which reproduced reproduced below:
The ld. Counsel submitted before us The ld. Counsel submitted before us that the assessee is engaged in doing the job that the assessee is engaged in doing the job work for others and in order to execute the job work, the assessee hires the work for others and in order to execute the job work, the assessee hires the work for others and in order to execute the job work, the assessee hires the individual labourers and she paid individual labourers and she paid nearly 375 labourers during the year. The ly 375 labourers during the year. These labourers are not permanent staff of the assessee. The assessee hires the labourers labourers are not permanent staff of the assessee. The assessee hires the labourers labourers are not permanent staff of the assessee. The assessee hires the labourers as and when required for job work as and when required for job work. We note that it is admitted fact that the . We note that it is admitted fact that the assessee had received assessee had received from job work to the tune of Rs. 5,74,94,676/ job work to the tune of Rs. 5,74,94,676/-, and in executing the job work, the assessee ha ob work, the assessee had incurred labour charges to the tune of incurred labour charges to the tune of Rs. 1,80,51,163/-. At this juncture, the ld. Counsel pointed out that in order to . At this juncture, the ld. Counsel pointed out that in order to . At this juncture, the ld. Counsel pointed out that in order to execute the scheduled job work the assessee needs to hire the labourers and the execute the scheduled job work the assessee needs to hire the labourers and the execute the scheduled job work the assessee needs to hire the labourers and the labour charges paid by the as labour charges paid by the assessee prima facie appears to be correct considering appears to be correct considering the involvement of the job work the involvement of the job work as mentioned in the above noted job contract as mentioned in the above noted job contract account. The assessee has . The assessee has receivedincome from job work charges at Rs. job work charges at Rs. 5,74,94,676/- whereas it incurred labour charges, to e whereas it incurred labour charges, to execute the job work to the xecute the job work to the extent of Rs. 1,80,51,163/ ,51,163/- which is normal expenditure to execute the job work to execute the job work, therefore the veracity of the expenses cannot be doubted. therefore the veracity of the expenses cannot be doubted.
We note that the Assessing Officer has also not disputed that the assessee has he Assessing Officer has also not disputed that the assessee has he Assessing Officer has also not disputed that the assessee has not incurred the labour charges. incurred the labour charges. The main grievance of the Assessing Officer was The main grievance of the Assessing Officer was 5 Smt. Madhumita Basu Assessment Year:2008-09 that during the assessment stage, the assessee had herself admitted that she violated the provisions of section 40(a)(ia) of the Act. We note that there is no estopple against the law. What is not otherwise taxable cannot become taxable merely because of admission of assessee. Nor can there be any waiver of the right otherwise admissible to the assessee in law. The chargeability is not dependent on the admission of or waiver by assessee. The chargeability is dependent on the charging section, which needs to be strictly construed. We note that during the assessment stage the assessee herself admitted that there is violation of provisions of section 40(a)(ia) of the Act, does not mean that there should be violation of provisions of section 40(a)(ia) of the Act and entire expenses of the assessee should be disallowed. If there is no need to deduct TDS on Labour charges then these labour charges cannot be disallowed merely because assessee had admitted during the assessment stage. Right expenditure ought to be allowed and right income ought to be taxed. Therefore, we do not agree with the stand taken by Assessing Officer during the assessment proceedings. In order to execute the job work it is necessary to incur the labour charges and the same had been incurred and which had been disclosed in the work contract account (mentioned above)for the year ended on 31.03.2008 as noted above.
Coming to the second limb of the argument of ld. D.R. that the assessee has paid the labour charges to each labourer exceeding Rs. 50,000/- therefore, the assessee is under an obligation to deduct the TDS on payment of labour charges. We note that the assessee has paid 375 labourers vide PB page no. 17 to 41 which is filed by the assessee before the lower authorities as well, wherein we notice that the individual / labourer was getting below Rs. 50,000/- in a year therefore none of the labourer falls under the ambit of section 194C of the Act and hence there is no requirement to deduct TDS. Apart from this, the assessee also submitted the ledger account of labour charges (vide PB page no. 42 to 50) wherein we noticed that the none of the payment exceeds Rs. 50,000/- therefore TDS obligation does not arise. Therefore, considering the factual position as 6 Smt. Madhumita Basu Assessment Year:2008-09 narrated above, we are of the view that the assessee does not have any obligation to deduct the TDS, hence the addition made by the Assessing Officer and confirmed by the ld. CIT(A) needs to be deleted. Therefore, we delete the addition of Rs. 1,80,51,163/-.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 26.02.2020