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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against
the order dated 21.04.2016 of the Commissioner of Income Tax [hereinafter referred to as CIT(A)]-2, Chandigarh. The assessee has taken following grounds of appeal:
That the Ld. CIT(A) has erred in confirming the addition of Rs. 101093/- under section 40(a)(ia) on account of non-deduction of TDS on interest payment to L&T Finance Ltd.
That the Ld. CIT(A) has wrongly sustained addition of Rs. 8000/- u/s 40A(3) on account of consolidated wages paid to daily wagers though Head jamadar cum one of daily wager Mr. Ram Pal.
That the Ld. CIT(A) has wrongly sustained addition of Rs. 991325/- u/s 40a(ia) on account of consolidated wages paid to daily wagers through
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Head Jamadars namely Nanhey Labour Jamedar, Sher Singh Labour Jamedar, Vijay Binder Labour Jamader & Jawant Sahu Labour Jamader.
That the Ld. CIT(A) & Ld. Assessing officer has wrongly treated the Head Jamadars as sub contractors without appreciating the fact that the head jamaders are only daily wagers employed by the appellant and payment has been made to labour through them and there is no relationship between head jamaders and labours employed by the appellant and also failed to appreciate the fact that all jamaders and labours are daily wagers and employees of appellant.
Ground No.1 is against the disallowance of Rs. 1,01,093/- u/s 40(a)(ia) of the Income-tax Act, 1961 (in short 'the Act') on account of non-deduction of TDS on interest payment to L&T Finance Ltd.
The Ld. Counsel for the assessee, at the outset, has submitted that though the assessee had not deducted the TDS on the interest payment made to L&T Finance Limited, however, the payee has taken into account the payment received from the assessee while returning the income for assessment year under consideration. The Ld. counsel has further invited our attention to the second proviso to section 40(a)(ia) of the Act, which has been inserted by the Finance Act, 2012 w.e.f. 1.4.2013 providing that where an assessee fails to deduct the tax in accordance with the provisions of Chapter XVII-B, but is not deemed to be assessee in default, under the first proviso to sub section (1) to section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deduced and paid the tax on such sum on the date of furnishing of return of income by such payee. It is pertinent to point out here that apart from disallowance
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of expenditure as provided under the proviso to section 40(a)((ia) of
the Act, there are separate penalty provisions for non-deduction of
TDS under section 201 of the Income Tax Act. However, the first
proviso to section 201 which has been inserted by Finance Act 2012
w.e.f. 1.7.2012 states that is if a person fails to deduct TDS on an
amount paid to a resident as per the provisions of the Income Tax
Act, he shall not be deemed to be assessee in default, if the payers
has furnished his return of income u/s 139 of the Act and has also
taken into account such sum so received for computing income in the
said return of income and has paid the tax due on the income
declared by him in the said return of income and the payee furnishes
a certificate to this effect from Accountant in such form as may be
prescribed. The Ld. counsel has further invited our attention to the
decision of this Tribunal in the case of M/s Kurukshetra Darpan (P)
Ltd, Kurukshetra Vs. Addl CIT in ITA No. 877/Chd.2008 vide order
dated 16.11.2015 wherein the Tribunal while relying upon the
decision of the Hon'ble Delhi High Court in the case of CIT Vs.
Ansal Landmark Township (P) Ltd in ITA No. 160 / 161 of 2015
order dated 26.8.2015 has held that the second proviso to section
40(a)(ia) of the Act is declaratory and curative in nature and should
be given retrospective effect form 1.4.2005 being the date from
which sub clause (ia) of section 40(a) of the Act was inserted by
Finance (No.2,) Act 2004.
The Ld. DR has fairly admitted that the issue is now squarely
covered by the decision of the Hon'ble Delhi High Court (supra) and
also with the decision of the Coordinate Bench of the Tribunal. She,
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however, has submitted that the assessee has not placed on file the
Certificate from the payee that he has taken into account the amount
received form the assessee while furnishing the return of income.
At this stage, the Ld. Counsel for the assessee has submitted
that the issue be restored to the file of the Assessing officer. That the
assessee will produce the required certificate before the Assessing
officer. In view of this, the issue is restored to the file of the
Assessing officer to examine as to whether the payee had taken into
account the amount received from the assessee in his return of
income and has paid the taxes thereupon. If the contention of the
assessee is found correct on this issue, then no disallowance should
be made on this issue.
Ground Nos. 2 to 4 are relating to the disallowance made by the
Assessing officer under the provisions of section 40A(3) of the Act
for making the payments in cash of the amount more than the
prescribed limit (Rs. 20,000/- a day) and also on account of
disallowance u/s 40a(ia) for making payments to the contractors
without deducting TDS.
The Ld. Counsel, at the outset, has submitted that the assessee
did not make any payments to the contractors. That the assessee is a
government contractor engaged in construction of roads and bridges
for the government. That the payments were not made to any
contractor but to the daily wagers / labourers. That, as a matter of
convenience, the payments were used to be made to the ‘Head
Jamadars’ who further used to distribute the same to the individual
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labourers. The Ld. Counsel in this respect has also relied upon the
wage sheets and muster rolls etc. He has further submitted that the
assessee has been doing the business in the area of Himachal Pradesh
and interiors of Himachal Pradesh and the payments to the poor
labourers were made in cash on daily basis.
The Ld. DR could not point out from record any falsity in the
above contention of the assessee. A perusal of the orders of the
lower authorities reveals that the lower authorities have assumed that
the payments made to the ‘head jamadars’ were in fact payments to
the contractors. Considering the nature and business of the assessee,
and in the absence of any evidence that such persons to whom
payments were made in fact were contractors, we are of the view that
no disallowance is called for on this issue also. In view of above
discussion, in our view, the provisions of section 40A(3) and 40a(ia)
of the Act are not attracted on the payments made by the assessee to
the labourers. Ground Nos. 2 to 4 are therefore, allowed.
Ground No. 5 is general in nature and does not require any
adjudication.
In the result, the appeal of the assessee is treated as allowed
for statistical purposes.
Order pronounced in the Open Court
Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 17.04.2018 Rkk
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Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR