TaxTMI 
TaxTMI 
2012 (5) TMI 5
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....x Act is not applicable in the case of payments to Calcutta Dock Labour Board. 3. The issue in appeal lies in a very narrow compass of material facts. The assessee is engaged in the business of rendering stevedoring and CFS (container freight station) services. During the course of assessment proceedings, the Assessing Officer noted that the assessee has made payments aggregating to Rs. 2,22,58,795, on account of stevedoring expenses, to Calcutta Dock Labour Board (CDLB, in short) , but neither the assessee deducted any tax at source from these payments, nor did the assessee furnish any 'no deduction certificate' issued by the income tax department in favour of the CDLB. The Assessing Officer did take note of the assessee's explanation that as CDLB is a government body, and, therefore, no tax is required to be deducted from the payments to CDLB. He, however, rejected the said explanation by stating that "...it has been observed in the case of Vishakhapatnam Dock Labour Board that no deduction certificate has been issued to them by the income tax department and same was produced to the different parties for no deduction of tax" and, "thus, in my opinion, if Vishakhapatn....
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....oard is not an employer of the workers and the workers are employed by the stevedores [Calcutta Dock Labour Board v. Wages Authority & Ors 1981-92 (86)CWN 113 dated 20.8.1981]. This position is a reiteration of the Hon'ble Apex Court's judgment in the case of Vizagapatnam Dock Labour Board v. Stevedores Association [1969] 2 SCC 801. This judgment further observes that the Dock Labour Board is operating as an agent of stevedores, who are actual employers. Perusal of these two judgments, relevant portions of which have been incorporated above, reveals that there is no contractual relationship between the appellant and Calcutta Dock labour Board. As such, in my opinion, the provisions of Section 194 C does not apply to the appellant in this case. The disallowance under section 40(a)(ia) of the Income Tax Act is, therefore, deleted. 5. Aggrieved by the relief so granted by the learned CIT(A), the Assessing Officer is in appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case in the light of the applicable legal position. 7. We find that there is no dispute that, in view of the specific provisions....
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.... 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 [seventy-five] thousand 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 a....
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....; 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, 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.] 8. A plain reading of this Section makes it clear that "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 " is required to deduction of tax at source under section from the amounts so paid or payable. There is no dispute that the assessee has paid the amounts for "supply of labour" for carrying out work. The impugned relief is, however, given on the basis that the payments have not been made "in pursuance of a con....
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....ovisions of Section 194 C because these are payments made for 'supply of labour' which are specifically covered by Section 194 C(1). CDLB is an agent of the stevedores like the assessee in the sense that the labour is recruited by the assessee through CDLB, but then this fact does not affect the nature of payment by the assessee to the CDLB which is admittedly in the nature of payment for supply of labour. The reasoning adopted by the learned CIT(A), though somewhat impressive at first glance, is fallacious. There is no cause and effect relationship between workers assigned by the CDLB having employer workman relationship with the assessee, and the payments being made by the assessee to CDLB being not in the nature of 'payment for supply of labour' . 9. In view of the above discussions, in our considered view, the reasoning adopted by the CIT(A) in granting impugned relief is indeed devoid of legally sustainable merits. It does not meet our approval. However, in all fairness, we must point that while the CIT(A) has been fairly generous in reproducing all the submissions of the assessee, remand report by the AO on these submissions, and even assessee's rejoind....