2010 (2) TMI 989 - AT - Income Tax

TDS u/s 194C - Payments to the representative of the labourers - HELD THAT - As we have noted above that the assessee has filed complete details and it is noted that the assessee instead made payments to labourers rather the assessee has made payment to the representative of the labourers through their mukadum, who are employees of the assessee. The individual payment is not exceeding the prescribed limit and once this is not the case, the assessee is not supposed to deduct tax under section 194C. Accordingly, this issue of the Revenue's appeal is dismissed. Payment made to labourers in cash - violation of section 40A(3) - CIT(A) deleted the addition - HELD THAT - We find that the facts has already been discussed in the above ground, the labour payment is not exceeding the prescribed limit for deduction of tax, i.e., above Rs. 20,000. Accordingly, we are of the view that this issue is covered by the decision of the above ground. Accordingly, this issue of the Revenue's appeal is dismissed.

Summary

Issues:
1. Whether the addition on account of payments made to Mukadams, falling within the ambit of section 194C of the Income-tax Act, was rightly partly deleted by the Commissioner of Income-tax (Appeals)?
2. Whether the addition of payments made to labourers in cash, in violation of section 40A(3) of the Act, was correctly deleted by the Commissioner of Income-tax (Appeals)?

Issue 1 Analysis:
The first issue in the Revenue's appeal was related to the deletion of an addition on payments made to Mukadams, which was argued to fall under section 194C of the Income-tax Act. The Assessing Officer treated the assessee as a defaulter under sections 201 and 201(1A) read with section 194C, as TDS was not deducted. The Commissioner of Income-tax (Appeals) allowed the claim of the assessee, stating that the payments were received by representatives of the labourers, who were mostly employees of the company. The Commissioner found an employer-employee relationship and directed the deletion of the demand raised under sections 201(1) and 201(1A) for the relevant assessment years. The Tribunal upheld this decision, noting that the payments were made to labourer representatives, not exceeding the prescribed limit for tax deduction under section 194C.

Issue 2 Analysis:
The second issue in the Revenue's appeal concerned the deletion of an addition of payments made to labourers in cash, violating section 40A(3) of the Act. The Tribunal found that since the payments were made to labourer representatives and did not exceed the prescribed limit for tax deduction, the issue was covered by the decision on the first issue. Therefore, the Tribunal dismissed this issue as well. As a result, the Tribunal dismissed all the Revenue's appeals, upholding the decisions made in favor of the assessee by the Commissioner of Income-tax (Appeals). The Tribunal's order was pronounced on February 11, 2010, in the open court.