1990 (6) TMI 220

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....hat of a contractor. 2. Whether on the facts and in the circumstances of he case, the Tribunal was justified in holding that the payment of wages to the Biri workers by the assessee company though Munshis did not came within the purview of s. 194C of the IT Act and consequently the assessee was not required to deduct tax under the provision of s. 194C of the IT Act from the payment made to the Munshis . 3. Whether on the facts and in the circumstances of he case, the Tribunal was justified in cancelling the penalty under s. 221 r/w s. 201(1A) of the IT Act, levied by the ITO on the assessee company ?" 2. The assessment year involved in 1973-74. The facts relevant for his purpose as set out in the statement of case are as follows....

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....on to certain finding of the CIT(1A). The Tribunal confirmed the finding of the CIT(1A). In this case the Tribunal had found that the employer found difficulty to control so many workers and, therefore, he used to engage some one as Sardar or Munshi to check up and supervise the activities of the large number of workers to avoid any difficulty while making payments to them. Considering the role of Munshi, it cannot be said that their function is aking to that of a contractor. The levy of interest was, therefore, deleted. Although, the Bench has only raised some presumption about the nature of Biri employer without looking into the contract entered into between the manufactures and the Munshis and has not expressed any opinion on the liabili....

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.... state of affairs as will follow from the aforesaid documents. If the assessee was actually not liable to deduct the tax under s. 194C in respect of payments made to other labourers, the question of charging any interest or levy of penalty under s. 221 would not arise. We, therefore, are prima facie of opinion that the order of the CIT(A) in question need not be disturbed. The departmental appeals accordingly fail and are hereby dismissed. The assessee's cross objections are allowed and it is held that he asessee was not liable to deduct tax at source under s. 194C at all. 3. In this connection our attention was drawn to the Circular No. 487, dt. 8th June, 1987, issued by the CBDT in which it is provided' "2. Board have receiv....