TaxTMI 
TaxTMI 
2015 (7) TMI 122
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....s. 69,23,135/- debited to the profit and loss account. He therefore asked the assessee to explain as to why the assessee has not disallowed the same at the time of filing of the return as the said labour charges debited to the profit and loss account is not allowable u/s.40(a)(ia). It was accepted by the assessee that no TDS was made in respect of the labour charges and also the said labour charges were not disallowed at the time of filing of return. The Assessing Officer, therefore, disallowed an amount of Rs. 69,23,135/- to the total income of the assessee u/s.40(a)(ia) of the I.T. Act. (similar disallowance has been made by the Assessing Officer amounting to Rs. 43,05,047/- in A.Y. 2009- 10). 3. Before CIT(A) it was submitted that provisions of section 40(a)(ia) are not applicable as no amount was outstanding at the end of the year. For the above proposition the assessee relied upon the decision of the Visakhapatnam Special Bench of the Tribunal in the case of Merilyn Shipping and Transports Ltd. reported in 145 TTJ 1. However, the Ld.CIT(A) following the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Sikandar Khan N. Tunvar order dated 02-05-2013 and the d....
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....nsel for the assessee at the outset submitted that the issue regarding the disallowance u/s.40(a)(ia) when no amount is payable at the end of the year is decided against the assessee by the decisions of the Coordinate Benches of the Tribunal. However, referring to Ground of appeal No.3 he submitted that the job work contracts given by the assessee to other parties did not involve the transfer of any obligations or risks attached to the principal contract received and therefore the said contracts were not in the nature of sub-contract and therefore the assessee is not required to deduct TDS u/s.194C(2). 5.1 Referring to the decision of the Pune Bench of the Tribunal in the case of Shri Premprakash Vishwakarma vide ITA No.325/PN/2013 order dated 30-06-2014 he submitted that under identical circumstances, the Tribunal has deleted the disallowance made by the Assessing Officer u/s.40(a)(ia) and upheld by the CIT(A). He submitted that although this argument was not raised before the lower authorities, however, since this is a legal ground and assessee denies its liability for deduction of tax u/s.194C(2), therefore, the matter may be set aside to the file of the Assessing Officer wit....
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....see and the labour contractor and the original customer is not at all involved in the same. In case, the labour contractor does not carry out the job or does a faulty job, the assessee is liable to the ultimate customer and not the labour contractor. Accordingly, that the labour contract given by the assessee is in the nature of separate contract of work and therefore, assessee was not liable to deduct TDS under the provisions of section 194C. 3.4 The assessee is fully responsible for executing the main contract and the labour contractor has no relation with the principal Jinabakul Forge Pvt. Ltd. One of the main features for a contract to qualify as a subcontract is that the subcontractor should be eligible not just for the rewards but also risk associated with the execution of the main contract of the principal. The main element of risk of the alleged subcontract is missing in assessee's case and therefore, the payments made by the assessee to various labour contractors for above mentioned works could not said to be as payment to subcontractor. The provisions of section 194C(2) deals with payments to contractors. Accordingly, in case any person responsible for paying any s....
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....: "5. Having heard the rival contentions and having perused the material on record, we find that the assessee was awarded the contract on the basis of participation in various tenders. For executing the contract, the assessee had to engage the services of outside parties in various works. To be precise, the assessee engaged the services of outside parties for centring, tiling and fabrication work and tiling works, for which payments exceeded Rs. 50,000 in each case. The assessee is carrying on civil work in individual capacity. 5.1. The provisions of section 194C(2), deals with payments to contractors . Accordingly, in case any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract between the contractor and 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 tax at source as stipulated under the provisions of section 194(2) of the Act. The provisions of section 40(a)(ia) deals with the deductibility of amount deductible and relevant clause reads as under: "....
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....e of R.R. Carrying Corporation vs. ACIT, 126 TTJ 2240(/CTK), it has been held by the Tribunal that the AO has to establish that relationship was that of a contractor and subcontractor. There was no written nor real agreement to substantiate the view taken by the AO and therefore, it cannot be held to be a contract. We are aware of the fact that the agreement can be oral but the essence of contract lies on the fact whether assessee had the control of the work i.e. the manner in which the work has to be done. In case it lies with the assessee then it is not the subcontract so as to attract the provisions of section 194C(2) of the Act and subsequently the rigour of section 40(a)(ia) would not come into play for executing centring, tiling and fabrication through different persons. In instant case, the control lies with the assessee and the alleged subcontractor are merely executing the work of centring and fabrication under the full control of the assessee itself. Even nomenclature used by parties as subcontract does not change the real spirit of contract. Under facts and circumstances, revenue authorities were not justified in making disallowance by invoking provisions of section 40(a....
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....sessing Officer shall give due opportunity of being heard to the assessee. We hold and direct accordingly. Ground of appeal No.3 by the assessee is accordingly allowed for statistical purposes. 8. Since the Ld. Counsel for the assessee has conceded that the issue of disallowance u/s.40(a)(ia) when no amount is payable at the end of the year is against the assessee, therefore, ground of appeal No.4 by the assessee is dismissed. 9. Grounds of appeal No. 1, 2 & 5 being general in nature are dismissed. ITA No.1655/PN/2013 (A.Y. 2009-10) : 10 The grounds raised by the assessee are as under : "The following grounds are taken without prejudice to each other - On facts and in law, 1. The learned CIT(A) erred in confirming the disallowance of Rs. 43,05,047/- u/s 40(a)(ia) made by the learned A.O. on the ground that the assessee ought to have deducted TDS on the labour charges paid of Rs. 43,05,047/-. 2. The Ld.CIT(A) ought to have appreciated that the disallowance u/s.40(a)(ia) can be made only in respect of the amount payable as at the year end and hence the same may be restricted to the amount payable as on 31-03-2009. 3. The appellant craves leave to add, alter, a....