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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI N.K. SAINI & SHRI A.T. VARKEY
(PAN : AAGFN5916L) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Naveen Gupta, Advocate REVENUE BY : Smt. Anima Barnwal, Senior DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal, at the instance of the assessee, is filed against the order of CIT (Appeals), Rohtak dated 26.06.2015 for the assessment year 2010-11. 2. The grounds of appeal taken by the assessee read as under :- “1. That the order of the Ld. CIT (Appeals) is against law and facts.
2. That the Ld. CIT (Appeals) erred in confirming the disallowance of Rs.5,53,981/- u/s 40(a)(ia) of the I T Act on account of various expenses i.e. Rs.2,62,485/- out of Pathai expenses, Rs.1,10,867/- out of Bharai expenses, Rs.1,04,629/- out of Nikasi expenses and Rs.76,000/- out of Jalai expenses.
3. That the Ld. CIT (Appeals) erred in confirming the disallowance of Rs.5,53,981/- u/s 40(a)(ia) of the I T Act, although all the payments are already paid and provisions of Sec. 40(a)(ia) are applicable on payable expenses only.
4. That the Ld. CIT (Appeals) erred in confirming the disallowance of Rs.6,000/- u/s 40(b) of the Act on account of salary paid to partner Sh. Jitender Singh.
That the appellant craves leave to add or alter any of the Grounds of Appeal.”
3. Grounds No.1 & 5 are general in nature and do not require any adjudication. Ground No.4 is not pressed.
4. Ground Nos.2 & 3 are against confirming the following disallowances on various expenses u/s 40(a)(ia) of the Income-tax Act, 1961 (hereinafter ‘the Act) :-
(i) Pathai expenses : Rs.2,62,485/- (ii) Bharai expenses : Rs.1,10,867/- (iii) Nikasi expenses : Rs.1,04,629/- (iv) Jalai expenses : Rs. 76,000/- Rs.5,53,981/-
5. The assessee is running Brick Klin at village Ladrawan, Tehsil Bahadurgarh, Jhajjar. The return of income was filed on 16.09.2010 at Rs.17,850/-. The case was selected for scrutiny and statutory notice u/s 143(2) was issued on 27.09.2011. The AO observed that the above expenses were paid to the employees through the incharge of various types of works like, Jalai, Bharai, Nikasi, and Pathai etc. Since, the persons incharge, who were also employees of the assessee, were called as thekedar, the AO took them as contractor and made the aforesaid disallowances u/s 40a(ia) of the Act. However, the assessee argued that this was not a payment made to a labour contractor; hence, no TDS was made. The assessee produced the complete books of accounts maintained by it. The AO observed that the assessee had opened separate accounts for all these heads and all expenses related to that head were debited to that account i.e. under the head pathai were Rs. 5,30,450/- and out of that a sum of Rs.2,62,485/- were paid to labourers for the period January to March, 2010. The AO accepted the amount paid for the period from April to December but disallowed the amount of Rs.2,62,485/- paid from January to March, 2010. Similarly expenses under the head Bharai, Nikasi and Jalai expenses were Rs.2,12,802, Rs.2,04,630/- and Rs.1,48,000/- respectively and out of that a sum of Rs.1,10,867/-, 1,04,629/- and 76,000/- were paid to different labourers for the period January to March, 2010. The AO accepted the amount paid for the period from April to December but disallowed the amounts paid from January to March, 2010. Accordingly, the AO made a disallowance of Rs.5,53,981/- (Rs.2,62,485/- + Rs.1,10,867/- + Rs.1,04,629/- + Rs.76,000/-) paid to contractors. The ld. CIT (A) upheld the disallowance.
Ld. AR for the assessee submitted that the wages paid under each head was debited to respective heads and the assessee had filed details of the same before the AO and also before the ld. CIT (A). He submitted that the details clearly show that there was no violation of section 40(a)(ia) of the Act. The ld. AR further submitted that the assessee is from rural background and did not know much about implication of each word; and the accounts were also written by a part timer who was also not a qualified accountant. He submitted that the payments were made to the employees of the assessee and not to any contractor and as such provision of section 40a(ia) of the Act is not applicable to the facts of the case. Ld. AR further submitted that the assessee’s case is covered by a case on similar facts by the Tribunal of a co-ordinate Bench ‘SMC-2’, New Delhi in Randhir Singh & Sons in for AY 2010-11 dated 09.11.2015. Accordingly, he pleaded that the orders of the authorities below be set aside and the assessee’s appeal be allowed.
Ld. DR, on the other hand, relied on the orders of the authorities below and wants us not to interfere with the orders of the authorities below. 8. We have heard both the sides on the issue and perused the material on record. After going through the material available on record, we find that the payments in question, i.e. wages, have been directly paid to the workers and the same was paid under the supervision of the incharge called thekedar. We further find that this is not a case where the thekedar can be considered as a labour contractor. The revenue has also not brought out any evidence in support of their finding that the thekedar is in fact a labour contractor whereas the assessee has produced ample evidence in support of the claim that the wages are paid directly to the labourers. Hence, the provisions of section 194C are not applicable to the facts of this case and consequently, there cannot be any disallowance u/s 40(a)(ia) of the Act. Further, we also find support from the order of the Tribunal in Randhir Singh & Sons (supra), relied upon by the ld. AR, wherein the facts are similar to the present case. Therefore, we delete the additions and allow the grounds no.2 & 3 of the assessee’s appeal. 9. In the result, the appeal of the assessee is allowed. Order pronounced in open court on this 3rd day of February, 2016.