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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B” , HYDERABAD
Before: SHRI R.K. PANDA & SHRI LALIET KUMAR
O R D E R PER LALIET KUMAR, J.M.
This appeal is filed by the Revenue feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 13.07.2023 for the AY 2019-20 on the following grounds :
2. The grounds raised by the assessee reads as under :
“1. The Ld. CIT(A) erred in law and on facts by considering that the second proviso to Sec. 40a(ia) of the I.T. Act is applicable in the case of the assessee.
The Ld. CIT(A) failed to appreciate that the first proviso to Sec. 201(1) of the l.T. Act is applicable only to the persons who fail to deduct the whole or any part of the tax in accordance with the provisions of Chapter-XVII-B.
3. The Ld. CIT(A) erred in law and on facts in considering that the first proviso to Sec. 201(1) of the I.T. Act is applicable in the case of the assessee and accordingly accepting that it is not deemed to be an assessee in default as per the second proviso to Sec. 40a(ia) of the I.T. Act.
4. The Ld. CIT(A) erred in ignoring the fact that the assessee had itself considered the contract payments to its constituents as liable for TDS u/s 194C of the I.T. Act and deducted tax at source.
5. The Ld. CIT(A) erred in law and on facts in granting relief by not considering the fact that the case of the assessee is not that of non- deduction on contract payments but a case of tax deducted at source and not fully deposited within the due date specified in Sec. 139(1) of the I.T. Act.
6. The Ld. CIT(A) erred in not considering the fact that two of the recipients have claimed full credit for the tax deducted at source by the assessee in their returns of income filed.
7. The Ld. CIT(A) erred in not considering that the facts in the decisions cited are distinct from that of the case of the assessee.
The brief facts of the case are that the assessee is a Joint Venture filed its return of income on 31-10-2019 admitting loss of Rs. 44,31,979/-. Thereafter, the return was processed by CPC, Bengaluru on 28-05-2020 by determining the total income at Rs. 64,54,51,470/- after making a disallowance u/s 40a(ia) of the I.T. Act resulting in a demand payable of Rs.22,67,75,433/-. The reason for the addition is that tax deducted from sub-contract payments of Rs. 216,62,75,506/- amounting to Rs.5,02,59,864/- was not remitted to government account before the due date of filing of the return of income u/s. 139(1) of the Act. Hence, CPC, Bangalore has disallowed an amount of Rs. 64,98,82,562/-, being 30% of such sub-contract payments u/s 40(a)(ia) of the Act to the loss returned by the assessee in the return.
3.1. Feeling aggrieved by the intimation under section 143(1) of the Act passed by CPC, Bangaluru, assessee preferred appeal before the ld.CIT(A), who granted partial relief to the assessee by observing as under :
“4.4 It is an admitted fact that the payment were made to the partners of the appellant Joint Venture on back to back contract basis to execute the work of JV. Therefore, contractor and contractee relation does not exist in the present case. Further, decisions of Hon’ble Jurisdictional ITAT, Hyderabad in a number of cases as pointed out by the appellant in its written submission is applicable in this case. The sum and substance of all the decisions of Jurisdictional Hon’ble ITAT, Hyderabad which have been relied upon by the appellant is that “disallowance u/s 40(a)(ia) cannot be made if the assessee is not deemed to be an assessee in default under the first proviso to section 201(1) of the Act. The first proviso to subsection (1) of section 201 provides that a person who is liable to make TDS but fails to do so, shall not be deemed to be an assessee in default, if the recipient has furnished his return of income under section 139 and has offered the income and has paid taxes thereon and has furnished a certificate”. 4.5 Further, after the decision Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverages Pvt. Ltd (163 Taxman 355(SC), it is a settled position of law that if the tax deductor has satisfied that taxes due have been paid by the deductee-assessee, it will not be considered as assessee in default. However, this will not alter the liability to charge interest under Section 201 (1A) of the Act till the date of payment of taxes by the deductee-assessee. In the instant case, the appellant had paid the interest under Section 201 (1A) of the Act and there is no dispute that the tax due had been paid by deductee-assessee i.e. partners of appellant Joint Venture. The certificate in this respect uploaded by the appellant is on record. 4.6 In view of the above discussions and judicial pronouncements, the addition of Rs. 64,98,82,562/- being the 30% of amount disallowed on payment to the sub contractor without TDS u/s 40(a)(ia) by the CPC is deleted. Thus, Ground no. 2 and 3 of the appeal on this issued are allowed.”
Feeling aggrieved with the order of ld.CIT(A), Revenue is now in appeal before us.
The ld. DR had submitted that the assessee has not deducted the TDS while making the payment to JV Constituents and the ld.CIT(A) has wrongly held that the payment made to the JV Constituent was not the payment made to sub-contractor. Joint Venture. But it was the payment made to the partner / associated Joint Venture. The ld. DR also submitted that as per the case of the assessee it had carried out the work and payments were made to JV Constituent on back-to-back basis. Further, the said JV Constituent / Sub-Contract has disclosed the contract income in the return of income for A.Y. 2019-20. 5.1. In support of its case, the ld. DR filed the following written submissions. The relevant portion of the same reads as under: “5. It is submitted that the order of the CIT(A) is wrong as he misled himself to believe that it is a case of non-deduction of TDS, therefore he
agreed that the assessee is not in default in view of section 201 (1), accepted the Certificates of the CA in Form 26A and relied on the decision of the Apex Court in Hindustan Coca Cola (supra). Assessee has not correctly presented the facts before the CIT(A) visa-vis the Form 3CD filed by itself along with the return of income. The following issues are brought to the notice of the Hon 'ble ITAT, the final fact finding authority. (i). The members / constituents of the assessee are Sushee Infra & Mining Limited (AACCS8560Q) and Prasad & Company (Project Works) Pvt. Ltd. (AABCP2299L) with 80% and 20% sharing ratio respectively. As per the Profit and Loss account, the gross receipts from the revenue operations are shown at Rs. 303,39,57,762/- and the amount paid to the sub- contractors are claimed at Rs. 303,70,06,533/-. The break-up of the total contract payments u/s 194C of the I.T. Act made by the assessee during F.Y. 2018-19 are as under: Name of the PAN Contract Percentage of Party Amount contract amount (in Rs.) aid Sushee Intre & AACCS85600 1939433989 63.86 Mining Limited Prasad& AABCP2299L 817344630 26.91 Company (Project Works) Pvt. Ltd. AVR 280227914 9.23 Constructions Total 3037006533
Thus, it is noticed that the assessee JV had made contract payments not only to its constituents but to a third party also. Therefore the argument of the appellant that it has made payments to only to constituents and therefore the recipients cannot be considered as sub-contractors is not correct. Non-constituent of the JV also executed part of the contract received by the JV from the government. The agreement between the JV and partners, terms the parties as sub-contractors and the accounts of assessee JV also show the parties as sub-contractors. (ii) The assessee JV, on its own had considered the contract payments liable for tax deduction at source u/s 194C of the I.T. Act and accordingly, deducted tax at source. However, it had remitted only a part of such TDS to the Government account before the due date u/s 139(1) of the I.T. Act and the balance TDS amount is remitted after the due date specified u/s 139(1) of the I.T. Act, thus attracting the provisions of Sec. 40a(ia) of the I.T. Act. The details of the amounts on which TDS deducted but was not remitted within the specified due date are as under: Name of the Party Amount on which TDS TDS deducted deducted but not remitted but remitted within the due date after the due date of filin the return Sushee Intre & Mining 1401206642 32996981 Limited Prasad& Company 512421802 12212844 Pro' ect Works Pvt. Ltd. AVR Constructions 252647062 5050039
TOTAL 2166275506 50259864
The assessee had deducted the tax as required u/s 194C of the Act but failed to remit the same before the due date of filing the return u/s 139(1) of the Act. This is not a case of non deduction of tax, but it is a case of retaining the government funds beyond the time allowed under the Act. Proviso to section 201(1) deals with case of non deduction and lays down that the receiving party admits the receipts and pays tax on the income there in, then the payer will not be considered assessee in default. As this is a case of non remittance after deduction within time allowed, the case of the assessee attracts the conditions of the first proviso to Sec. 40a(ia) of the I. T. Act and not the second proviso of this sub-section. iii. The following details are noted from the copies of the returns of income and Form 26AS of the payees:
Name of the As per TDS schedule of the As per Form 26AS of the payee Return of income filed by the Recipient for AY 2019-20 recipient for AY 2019-20 Income TDS credit Total amount Total TDS offered claimed credited deducted Sushee Infra & Minin Limited Prasad& Company (Project Works) Pvt. Ltd. AVR Constructions TOTAL
It is evident from the details in the above table that the recipients i.e. payees except AVR Constructions have claimed the credit for the entire TDS made by the assessee in their returns of income. In fact, M/S Sushee Infra & Mining Limited had claimed credit for entire TDS of Rs. 4,40,71,811 made on credits totaling to Rs. 220.28 crore though it has offered income of only Rs. 193.94 crore. Thus, the two payees did not remit any taxes on their own but claimed credit of TDS made by the assessee, though a part of the amount was not deposited into the government account. (iv). Further, as seen from the e-filing portal, the assessee had filed the original return for A.Y. 2020-21 on 08.02.2021 declaring loss of Rs. 40,00,275 and then filed a revised return of income on 26.03.2021 declaring loss of Rs. 64,94,51,745. Thus, the assessee filed the revised return of income for A. Y. 2020-21 claiming the expenditure ofRs. 64,54,51,470, disallowed u/s 40a(ia) of the I.T. Act for A.Y. 2019-20 in the intimation. Thus, the assessee has taken the benefit of the first proviso of Sec. 40a(ia) of the I.T. Act in the subsequent year. (v). The decisions relied upon by the assessee and accepted by the CIT(A) relate to cases where the tax was not deducted at source. Hence, the facts of the assessee's case are different from the decisions cited in the order of the CIT(A) order. (vi). The facts in the case of the assessee are clearly distinguishable from those in the decision of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs CIT (163 Taxman 355). The issue before the Hon'ble Supreme Court was in respect of order passed by a TDS Assessing Officer wherein demand was raised u/s 201(1) of the I.T. Act for short deduction of tax at source.
5. Based on the above issues discussed, it can be concluded that the CIT(A) has erred both on law the facts in granting relief to the assessee by deleting the disallowance made u/s 40a(ia) of the I . T. Act, wrongly understanding the facts of the case. Further, the assessee has already revised the return for the following AY i.e.2020-21 claiming the amount disallowed in the present AY 2019-20. Therefore, an appeal file by the department may kindly be allowed.
Per contra, ld. AR has submitted that the assessee has furnished the details of the tax paid by the Joint Venture and also has given certificate issued by the CA. He had drawn our attention to Para 8 at Page 3 of the Written Submissions filed before the ld.CIT(A), which is to the following effect :
“8. It is also brought to the kind notice of the AO that, there is no relationship between the contractor and contractee to apply the provisions or chapter XIIVB for deduction of Tax at source. In order to establish a relationship of contractor and sub-contractor, in addition to a formal agreement, it is necessary to show that the parties have acted in such a manner conducive to uphold a contractor-sub contractor relationship when there is a strong case of interlacing of finance and funds, interdependence or responsibilities, interconnection of activities. It is very difficult to come to a conclusion that the assessee is acting in the status of contractors vis- à-vis sub-contractors. A more rational finding would be that the parties were executing the contracts through joint effort, as a group of partners. When there is no basis for coming to a conclusion that there existed a relationship of contractor vis-a-vis sub-contractor, it is useful to look into the principle embodies in section 20 of the Indian Contract Act of 1872. This section provides that where both parties to an agreement are under a mistake as to a matter of fact, essentially to the agreement, the agreement is void. In the present case, the question is mainly focused on the con contractual relationship of the assessee and its partners. This principle embodies in the section 20 of the Indian Contract Act has great relevance. It turns out that the formats of the agreement entered into with the partners and the styling of the formats prepared by them are products of mistakes of fact, and therefore, the agreement is not to be relied on to hold that the assessee is acting in the status of contractors vis-a-vis sub- contractors. Therefore, it is to be seen that the question of TDS in the present case cannot be considered only on the basis of the agreements entered into between the assessee and its partners.”
We have heard the rival submissions and persued the material on record. Admittedly, in the present case, as per the certificate issued by the CA at pages 10 to 16 the assessee has deducted the TDS while making the payment to the Constitute of JV on the dates mentioned in the certificate. However, the case of ld.DR before us is that the assessee, after deducting the TDS, had not deposited the same with the Government of India account within the due date as provided by the Act.
7.1 The CIT(A) has granted the relief to the assessee on the pretext that the payee had deposited the taxes while filing the return of income. The relevant paragraphs are reproduced hereinabove for the above said purposes, where the Ld. CIT(A) had relied upon the provision to section 201 and section 40(a)(ia) of the Act
On perusal of the said written submissions and the Annexure - A, (page 10to 16 of PB) it is clear that the payment made by the assessee to a Constitute JV was in the nature of payments made to the sub-contractors, as discernible from column no.1 of Annexure A. However, contrary to the above, the ld.CIT(A) held that the payment made was not in the nature of payment made towards work contract but was in the nature of payments made to partner of Joint Venture.
As per para 4.1 of the order of ld.CIT(A), the assessee had made a total payment of Rs.303,70,06,533/- to the sub-contractor and it was also noticed that an amount of Rs.216,62,75,506/- was paid by the assessee without proper deduction of TDS. However, for the remaining amount, the assessee has deducted the TDS. The CPC, Bangalore has disallowed 30% of the amount paid by the assessee without deducting the TDS and quantified it for Rs.64,98,82,562/-. The assessee in the written submissions and also in the profit and loss account mentioned that the gross receipts from the Revenue operations was Rs.303,39,57,762/- and the amount paid to the sub-contractors was Rs.303,70,06,533/-. Thus, as per the case of the assessee, it has paid more amount to the sub-contractor than the amount received from the Revenue operations. The assessee in the written submissions also submitted that no activity has been carried out by the assessee and the Joint Venture was only to secure the orders from the Government Agencies and the contractors have to be executed by the partners of the JV on back-to-back as contract basis. The ld.CIT(A) in Para 4.2. of his order, had dealt with the issue of consequences and failure to deduct TDS as mentioned in Section 40(a)(ia) of the Act r.w.s. first Proviso of Section 201(1) of the Act. The ld.CIT(A) has also held that in case the payee referred to in the first proviso to section 201(1) of the Act and had taken into account such return of income, then the assessee (Payee) shall not be deemed to be an assessee in default. It was held by the ld.CIT(A) that the payee have furnished the return of income and has taken into account the payment received from the assessee and the taxes were paid by the said payees . In the light of these facts, the ld.CIT(A) has decided the issue in favour of the assessee and held that the disallowance of 30% was unwarranted.
Section 40 provides as follows Amounts not deductible. 40. Notwithstanding anything to the contrary in sections 30 to 41[38], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",— (a) in the case of any assessee— 42[(i)43 44any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,— (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid 45[on or before the due date specified in sub-section (1) of section 139 ] : 46[Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] Following second proviso shall be inserted after the existing proviso to sub-clause (i) of clause (a) of section 40 by the Finance (No. 2) Act, 2019, w.e.f. 1-4-2020 : Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee referred to in the said proviso. Explanation.—For the purposes of this sub-clause,— (A) "royalty" shall have the same meaning as in Explanation2 to clause (vi) of sub-section (1) of section 9; (B) "fees for technical services" shall have the same meaning as in Explanation2 to clause (vii) of sub-section (1) of section 9; 47(ia)48 49[thirty per cent of any sum payable50 to a resident], on which tax is deductible at source50 under Chapter XVII-B and such tax has not been deducted or, after deduction, 51[has not been paid50 on or before the due date50 specified in sub- section (1) of section 139 :] 52[Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, 53[thirty per cent of] such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid :] 54[Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the 54a[resident] payee referred to in the said proviso.] Explanation.—For the purposes of this sub-clause,— (i) "commission or brokerage" shall have the same meaning as in clause (i) of the Explanation to section 194H; (ii) "fees for technical services" shall have the same meaning as in Explanation2 to clause (vii) of sub-section (1) of section 9; (iii) "professional services" shall have the same meaning as in clause (a) of the Explanation to section 194J; (iv) "work" shall have the same meaning as in ExplanationIII to section 194C; 55[(v) "rent" shall have the same meaning as in clause (i) to the Explanation to section 194-I ;
(vi) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9 ;] Section 194C provides as under :-
Payments to contractors. 16a194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to— (i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family; (ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein. (2) Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source— (i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or (ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice. (4) No individual or Hindu undivided family shall be liable to deduct income-tax on the sum credited or paid to the account of the contractor where such sum is credited or paid exclusively for personal purposes of such individual or any member of Hindu undivided family. (5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed thirty thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds one lakh rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section. (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum.
(7) The person responsible for paying or crediting any sum to the person referred to in sub- section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. Explanation.—For the purposes of this section,— (i) "specified person" shall mean,— (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society; or (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any university established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (j) any Government of a foreign State or a foreign enterprise or any association or body established outside India; or (k) any firm; or (l) any person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, if such person,— (A) does not fall under any of the preceding sub-clauses; and (B) has total sales, gross receipts or turnover from business or profession carried on by him exceeding one crore rupees in case of business or fifty lakh rupees in case of profession during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor; (ii) "goods carriage" shall have the meaning assigned to it in the Explanation to sub-section (7) of section 44AE; (iii) "contract" shall include sub-contract; (iv) "work" shall include— (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods or passengers by any mode of transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in clause (b) of sub-section (2) of section 40A, but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer.
Section 201 of the Act provides as under:-
Consequences of failure to deduct or pay.15 16 201.17[(1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: 18[Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a 18a[payee] or on the sum credited to the account of a 18a[payee] shall not be deemed to be an assessee in default in respect of such tax if such 18a[payee]— (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed19:] Provided20[further] that no penalty shall be charged under section 221 from such person, unless the Assessing Officer is satisfied that such person, without 21good and sufficient reasons, has failed to deduct and pay such tax.] 22[(1A) Without prejudice to the provisions of sub-section (1), if any such person21, principal officer or company as is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall21 be liable to pay simple interest,— (i) at one per cent for every month23 or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid, and such interest shall be paid before furnishing the statement in accordance with the provisions of sub- section (3) of section 200:] 20[Provided that in case any person, including the principal officer of a company fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a 23a[payee] or on the sum credited to the account of a 23a[payee] but is not deemed to be an assessee in default under the first proviso to sub-section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such 23a[payee].]
First of all, we examine whether there is an obligation on the part of the assessee to deduct the taxes while making the payment to the contractor or not. Bare reading of Section 194C r.w. Explanation make it abundantly clear that if any sum is paid or credited for carrying out any work of the Central / State Government, then there is an application on the part of the contractor to deduct the TDS in accordance with Section 194C of the Act.
Undoubtedly, as per the written submissions reproduced by the ld.CIT(A) in the order and the certificate filed by the assessee at page 10 to 16 of the paper book, it is admittedly clear that the payments were made by the assessee to the sub-contractors for carrying out the development work assigned to it by the State Agency namely, Palamuru Ranga Reddy Lift Irrigation Scheme. Thus, in our view, the assessee has made the payment to sub- contract and therefore, as per the definition of section 194C of the Act, there is an obligation on the part of the assessee to deduct the taxes before making any payment or credit any amount in the account of such sub-contractor.
Having held that the amount was required to be deducted by the assessee now the question is whether the assessee has deducted the amount or not. As per the case of the assessee, the assessee has not deducted the amount before making payment of Rs.216625506/-. However, it is the case of the ld.CIT(A) that the recipient namely, the payee had paid taxes while taking into account the amount received from the account in the profit and loss account while filing the return of income. The certificate to that effect was also filed by the assessee at the appellate stage, where at pages 10 to 16 it was so mentioned. 14. The CPC had noted that the assessee after deducting the tax, while making the payment to the payee had partly deposited the taxes with the government of India within the time granted by the act. The assessee while filing the paper book before us as well as before the Ld. CIT(A) had acknowledged that the payments were made after deducting the taxes (page 10 to 16 of the paper book ). At page 10, 11, 14 & 15 of the Paper Book, the certificate issued by the CA confirm that the TDS account was deducted at the time of payment to subcontractors. Page 10,11, 14 & 15 are reproduced herein below:
However there is no denial that the taxes are deposited by the assessee in the subsequent assessment years, for that the assessee had filed the revised return of income and had claimed the deduction as mentioned by the ld.DR .
For the purposes of invoking the benefit of section 201 (1), it was required to prove that the assessee had not deducted the TDS and the other payee (deductee) had shown the income in the profit and loss account and paid the due taxes. In the present case it is not the case of the assessee that the assessee had not deducted the TDS while making the payment to the payee however it is the case before us, is that the assessee after deducting the amount, had not deposited the due taxes with the statutory authority within the time frame granted by the act. Therefore, in our considered opinion, the provisions of section 201, per se are not applicable . In the light of the above the appeal of the revenue is required to be allowed and we allow the same.
16 Furthermore, as pointed out by the ld. DR in oral and written submissions that the assessee in the subsequent year has paid the due taxes and claimed the TDS credit in the A.Y. 2020-21 after filling the return of income . In our view, assessee is entitled to take the benefit in one assessment year i.e., the year in which the taxes were paid. Admittedly, the taxes were paid and deposited in two years namely in the year under consideration and in the subsequent assessment year ,therefore, as per the 2nd proviso of section 40a(ia) of the Act, the assessee is entitled to the benefit in the years of deposit. Since this issue is not a subject matter of the present appeal, therefore no further finding is required.
In the result, the appeal of the revenue is allowed