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2015 (2) TMI 400 - AT - Income TaxNon deduction of TDS u/s 194 C - violation of sec. 40 a (ia) - assessee hired subcontractors to complete the work - Held that - From the facts mentioned it clearly emerges that by main contract with Principal Next Retail India assessee was barred by hiring any subcontractor. We are unable to subscribe to the AOs view that as the labourers were orally employed or the salaries were disbursed through senior workman constitute adverse facts to lead to a conclusion that assessee hired subcontractors to complete the work. Similarly no adverse inference can be derived from auditors remark as it is only statement of fact about wages and in any case auditors vague remarks cannot be construed as a conclusive statement. This is the job of AO to peruse the facts, circumstances and material in entirety and not to resort to piece meal observations. In view of the above, we find no infirmity in the order of CIT(A) holding that assessee was not liable to deduct TDS u/s 194 C, his order on merits is upheld. Since we hold that there is no liability u/s 194C there is no violation of sec. 40 a (ia), there is no need to adjudicate about the Merylin shipping issue 2012 (4) TMI 290 - ITAT VISAKHAPATNAM . - Decided against the revenue.
Issues:
1. Alleged oral contract between the assessee and workers 2. Applicability of provisions under section 40(a)(ia) of the IT Act 3. Deletion of addition made by the AO based on payment amounts Issue 1: Alleged oral contract between the assessee and workers The case involved a dispute regarding the existence of an oral contract between the assessee and casual laborers. The AO contended that the assessee should have deducted TDS under section 194C(3) for payments made to these laborers. The assessee argued that there was no oral contract and the payments were made on a daily wage basis without any formal agreement. The ld. CIT(A) examined the submissions and case laws cited by the assessee, ultimately ruling in favor of the assessee. The ld. CIT(A) held that there was no employer-employee relationship and the provisions of Section 194C and Section 40(a)(ia) of the Act were not applicable. The deletion of the addition by the ld. CIT(A) was based on the lack of evidence supporting the existence of an oral contract. Issue 2: Applicability of provisions under section 40(a)(ia) of the IT Act The AO disallowed the amounts paid by the assessee to casual laborers under section 40(a)(ia) of the IT Act due to non-deduction of TDS. The ld. CIT(A) analyzed the nature of the payments, the absence of formal contracts, and the specific tasks assigned to the laborers. The ld. CIT(A) referred to relevant case laws and held that the provisions of section 40(a)(ia) were not applicable to the amounts outstanding at the end of the year. The ld. CIT(A) also considered the ITAT special Bench decision in Merilyn Shipping & Transports case and a decision by the ITAT Jaipur Bench. The Revenue challenged the ld. CIT(A)'s decision, arguing that the casual workers were actually subcontractors and should have been subjected to TDS under section 194C. Issue 3: Deletion of addition made by the AO based on payment amounts The AO had made an addition to the assessee's income based on the payments made to casual laborers, alleging that the payments exceeded the threshold for TDS deduction. The ld. CIT(A) examined the details of the payments, the nature of work, and the absence of formal contracts to determine that the payments were not subject to TDS deduction. The Revenue contended that the payments were made to subcontractors and should have attracted TDS under section 194C. The ld. Counsel for the assessee argued that the laborers were not subcontractors and the payments were made based on daily wages without any formal contracts. The tribunal upheld the ld. CIT(A)'s decision, emphasizing the lack of evidence supporting the existence of subcontractor relationships and the absence of TDS liability under section 194C. In conclusion, the Appellate Tribunal ITAT Jaipur ruled in favor of the assessee, dismissing the Revenue's appeal. The judgment highlighted the absence of formal contracts, the nature of payments made to casual laborers, and the specific tasks assigned to them as crucial factors in determining the applicability of TDS provisions and the deletion of the addition made by the AO. The decision underscored the importance of assessing the facts comprehensively and considering the specific circumstances of each case in determining tax liabilities and obligations.
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