2017 (1) TMI 1603 - AT - Income Tax

TDS u/s 194C - addition u/s 40(a)(ia) - TDS not deducted on payment to labour representative (Mukadams) - Held that - AO did not establish the aspect by bringing any evidence that assessee made the payment in pursuance of a contract and simply jumped to the conclusion that these payments were contractual payment despite the deposition (affidavit) of Mukadams confirming the fact that they were employee of the assessee. CIT(A) fairly concluded that he did not find any indication which may suggest that the payments were made under the contract in fact the payment were received by the laborers from the assessee. All the payments made to the laborers were below to 50, 000/-. There is no evidence that labour were engaged on regular basis which may give rise to the fact that there was a contract in existence and deleted the disallowances. We have seen that the ld. CIT(A) passed the order after considering the entire fact affidavit of Mukadams and the nature of payment. In view of the above discussion we do not find any reason to interfere in the findings of ld. CIT(A). - Decided against revenue

Summary

Issues:
Appeal against deletion of addition under Sec. 40(a)(ia) of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the order of the Ld. Commissioner of Income-tax (Appeals) for Assessment Year 2008-09, challenging the deletion of an addition made under Sec. 40(a)(ia) of the Act amounting to ?91,90,424. The assessment was initially completed under Sec. 143(3) of the Act, and subsequently, a revision order was passed under Sec. 263 directing the Assessing Officer to examine the contractual relationship between the assessee and the 'Mukadams'. The AO disallowed ?52,90,424 under Sec. 40(a)(ia) for non-deduction of TDS on labor charges. However, the CIT(A) deleted the entire disallowance, stating that the labor representatives (Mukadams) did not retain any amount and the provisions of Sec. 194 were not applicable. The Revenue contended that the payments to Mukadams were contractual payments subject to TDS under Sec. 194C, while the assessee argued that the AO's addition lacked substance and evidence. The Mukadams affirmed their status as employees of the assessee. The CIT(A) found that the AO failed to establish a contractual relationship between the assessee and Mukadams, and concluded that the payments were received by laborers directly from the assessee, not under a contract. The CIT(A) considered affidavits of Mukadams and payment nature, leading to the deletion of the disallowance. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of evidence supporting a contractual relationship and the absence of regular engagement of laborers, resulting in the dismissal of the Revenue's appeal.

In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition under Sec. 40(a)(ia) of the Act.