2015 (11) TMI 266 - AT - Income Tax

TDS u/s 194C or u/s 192 - payment to Self Help Groups (SHG) - whether no contractual relationship between the payees, i.e. the Self Help Groups (SHG) and Greater Hyderabad Municipal Corporation (GHMC) and consequently payments made to the SHGs are not liable for TDS? - Held that - TDS provisions are not applicable. See Greater Municipal Corporation, Central Zone Hyderabad 2015 (10) TMI 2320 - ITAT HYDERABAD wherein held that it is clear that the allotment of work by the assessee to the SHGs is not by way of contract but is engagement of workers for a fixed period. The workers are being paid as per the agreed terms and conditions and the aggregate amount is paid to the group and not to any particular person. Therefore, as rightly held by the CIT (A), there is no contractor-contractee relationship but is more in the nature of employee-employer relationship as the assessee is also making contributions to the EPF and ESI and as rightly pointed out by the ld CIT (A), the payments made to an individual is not exceeding the prescribed limit u/s 192 of the I.T. Act, the TDS provisions are not applicable to the facts of the case - Decided in favour of assessee.

Summary

Issues:
Revenue appeals for A.Y 2011-12 - Whether payments to Self Help Groups (SHGs) by Greater Hyderabad Municipal Corporation (GHMC) are liable for TDS u/s 194C of the Act.

Analysis:
The Revenue contended that the CIT (A) erred in holding that there was no contractual relationship between the payees, i.e., the SHGs and GHMC, thus claiming that payments to SHGs are not subject to TDS under section 194C of the Income Tax Act. The AO found that GHMC had not complied with TDS provisions for payments to SHGs, treating GHMC as "assessee in default" u/s 201(1) and imposing interest u/s 201(1A). The AO observed that the work allotted to SHGs was on a trial basis and that the payments were made to the SHGs as contractors, not employees. The AO concluded that a contractual relationship existed, warranting TDS. The CIT (A) granted relief to GHMC, prompting the Revenue's appeal.

The DR supported the AO's orders, while the assessee's counsel backed the CIT (A)'s decision. The counsel referenced a previous Tribunal decision involving GHMC, asserting that SHGs were engaged as workers, not contractors, and thus TDS provisions did not apply. The Tribunal, in line with the previous decision, found that the payments to SHGs were not subject to TDS provisions, as the relationship was akin to an employee-employer one, with GHMC making EPF and ESI contributions. Consequently, the Revenue's appeals were dismissed, affirming that TDS was not applicable to the payments made to SHGs by GHMC.

In summary, the Tribunal upheld the CIT (A)'s decision, ruling that the payments to SHGs by GHMC were not liable for TDS under section 194C of the Income Tax Act. The Tribunal emphasized that the relationship between GHMC and SHGs resembled an employee-employer dynamic, with GHMC treating the SHGs as workers rather than contractors. This judgment aligned with a previous Tribunal decision, reinforcing the exemption of TDS provisions for such payments.