2013 (12) TMI 295 - AT - Income Tax

Construction firm wins appeal against disallowance under Income Tax Act for Assessment Year 2008-09

BIRAJA CONSTRUCTION Versus ASSTT COMMISSIONER OF INCOME TAX

The Tribunal ruled in favor of the appellant, a construction firm, in an appeal against disallowance under section 40(a)(ia) of the Income Tax Act for the ... Disallowance u/s 40(a)(ia) – The assessee has made a payment of Rs. 6.58 Crores as labour charges without deucting tax at source - Held that:- The labour charges were paid to sub contractors for the labour procured by them and to individual labourors amount paid was less than Rs.50,000 cannot be held as a payment to sub-contractor and thus payment to them reached the benchmark of Rs.50,000 – The provisions of Section 194C could not be invoked because the labourors were not the same at the different sites – Decided in favour of assessee. Credit of prepaid taxes – Held that:- The payments have been received by the firm so the tax deduction would not be in the hands of partners – The claim can be verified from the information submitted by the deductors – When income is accepted in the hands of firm then the claim of advance tax should also be given to the firm and not to the partners – Decided in favour of assessee. Issues:1. Disallowance under section 40(a)(ia) of the Income Tax Act.2. Refusal to give credit for Prepaid Taxes in the form of TDS.Analysis:1. The appellant, a construction firm, appealed against the disallowance of Rs.30,10,250 under section 40(a)(ia) for the Assessment Year 2008-09. The Assessing Officer disallowed the amount as payments exceeding Rs.50,000 were made to Sardars of laborers without deduction of tax under section 194C. The appellant argued that the payments were made to Sardars, not individual laborers, and were for convenience, not as part of a contract. The Tribunal held that the disallowance was unjustified as the payments were not subject to section 194C and directed the amount to be deleted.2. The appellant also contested the refusal to give credit for Prepaid Taxes in the form of TDS amounting to Rs.26,71,771. The CIT(A) had verified Form 26-AS and allowed the deletion of an additional amount received from a division. The appellant claimed that TDS certificates were filed along with the return, but the credit was not given. The Tribunal directed the Assessing Officer to verify the TDS certificates and give credit to the appellant in accordance with the Income Tax Act, 1961.In conclusion, the Tribunal allowed the appeal of the appellant, ruling in favor of the appellant on both issues raised regarding disallowance under section 40(a)(ia) and the refusal to give credit for Prepaid Taxes in the form of TDS.