2019 (2) TMI 118 - HC - Income Tax

TDS u/s 194C - payment in excess of the wage liability to the workers employed by the assessee - assessee engaged manual labour for the stuffing and de-stuffing - whether no contract between the assessee and the association/firm - Held that - The assessee s contention lay more emphasis on the absence of a written contract as such. The First Appellate Authority correctly found that there is no requirement for a written contract. There is definitely an implied contract, since it is for the purpose of maintaining industrial peace and ensuring parity in employment of manual labour, that the Association of Stevedore has devised a measure, by which its members employ persons from the two agencies, in which the different manual labourers are enrolled. There is definitely an implied contract and we cannot absolve the assessee from the liability to deduct tax at source merely on the ground of there existing no written contract. We are of the opinion that the payments made by the assessee clearly come under the rigor of Section 194C of the Act. We do not find any reason to interfere with the order of the Tribunal and we also do not discern any question of law as arising from the order of the Tribunal. - Decided against assessee

Summary

Issues: Tax deduction at source under Section 194(C) of the Income Tax Act, 1961 for payments made to agencies supplying manual laborers.

In this case, the appellant, a stevedore engaged in stuffing and de-stuffing containers at Cochin Port, made payments to two agencies, 'USA Pool' and 'Hash Agencies', for supplying manual laborers. The appellant contended that there was no direct contract with the agencies, and the payments were for the workers' wages distributed by the agencies. However, the First Appellate Authority found that the payments exceeded the workers' wage liability, indicating a profit for the agencies. The court noted that while there was no written contract, an implied contract existed to maintain industrial peace and ensure parity in employment. The court held that the appellant was liable to deduct tax at source under Section 194C of the Act due to the implied contract, rejecting the appeal and upholding the Tribunal's order without identifying any legal question for consideration.

The main issue in this case revolved around whether the appellant was required to deduct tax at source under Section 194C of the Income Tax Act, 1961 for payments made to agencies supplying manual laborers. The appellant, a stevedore at Cochin Port, engaged workers through two agencies, 'USA Pool' and 'Hash Agencies'. The appellant argued that there was no formal contract with the agencies, and the payments were merely for the workers' wages distributed by the agencies. However, the First Appellate Authority found that the payments exceeded the actual wage liability of the workers, indicating a profit margin for the agencies. The court emphasized the existence of an implied contract, even in the absence of a written agreement, to ensure industrial peace and equality in labor allocation. Consequently, the court held that the appellant was obligated to deduct tax at source under Section 194C of the Act. The court affirmed the Tribunal's decision, finding no legal question for review, and dismissed the appeal, leaving the parties to bear their respective costs.