9911796707
TMI Blog1991 (8) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... were made by the assessee to the various contractors (sister concerns) it had engaged for the manufacture of shoes or for processing of leather:---- Assessment year Name of the contractor Amount paid 1987-88 India Shoes Accessories, AJ 15, Anna Nagar, Madras-40 Rs. 8,55,480 1988-89 M/s Eastern Chrome Tanning Corpn. Rs. 43,31,162 United India Shoe Corpn. Rs. 14,93,612 India Shoe Accessories Rs. 8,49,728 Anaikar Shoe Co. P. Ltd. Rs. 7,89,049 -------------------------------- Rs. 74,63,551 -------------------------------- 1989-90 Abdulla Tanning Co. Rs. 9,13,815 Flora Footwear Pvt. Ltd. Rs. 2,68,920 Abdul Razhak Sons Rs. 61,711 Saffarin Leather Exports Rs. 5,71,692 Tabasiya Tanning Industries Rs. 18,00,397 Unico Shoe Accessories Rs. 9,09,566 -------------------------------- Rs. 45,26,101 -------------------------------- 1990-91 Flora Footwear P. Ltd. Rs. 1,91,257 Saffarin Leather Exports Rs. 3,76,404 Eastern Chrome Tanning Corpn. Rs. 3,07,28,087 -------------------------------- Rs. 3,12,95,748 -------------------------------- While making the above payments to the parties named above for each of the assessment years under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by them. The associate concerns of the assessee besides being regular income-tax assessees were also paying advance tax. According to the assessee the nature of relationship existing between it and its associate concerns and others does not fall under section 194C. The assessee could not be taken to be an assessee at default even after the tax determined as per assessments completed for these assessment years were duly collected from the payees. Since the tax due from the payee for each of these assessment years was already paid by them, any tax deduction on the payees account from the assessee would only result in refund due to the payees, which is unwarranted and unjustified. It was contended before the Commissioner (Appeals) that processing of each leather is a separate contract and the value of the same is less than Rs. 10,000 and therefore it comes as an exempted expenditure laid down in section 194C(3)(i) and therefore there was no obligation to deduct TDS while making any of the payments to the payees. It was contended that under section 191 in cases where provision is not made under Chapter XVII for deducting income-tax at the time of payment and in any case where income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the tax as required by the Act without prejudice to any other consequences, which he or it may incur be deemed to be an assessee in default in respect of tax. He held that the scheme of deduction of tax and its payment is so self-contained that the Act had provided penal action to be taken in case of failure against the persons responsible for deduction and payment of tax to the Revenue. He further found that in the present case the assessee had given job work of substantial quantity to several of its own sister concerns continuously without any break for several years. The payees are quite distinct from the assessee apart from the fact that they are also separate taxable entities. Therefore this was a case where the assessee was clearly liable to deduct tax under section 194C of the Income-tax Act. He recorded a finding that the assessee knowingly contravened the provisions of the Act by not deducting the tax at source. The explanation of the assessee was held to be not at all convincing. He had applied the ratio of the decision of the Tribunal in the case of Pay Accounts Officer (EW) v. ITO [1989] 28 ITD 403 (Delhi). In that case the Income-tax Officer made a short deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in a statute and as far as possible such a construction must be adopted where two seemingly hostile provisions would harmoniously exist side by side and one is not redundant because of the other. Now, as regards the argument concerning section 201(2) it is neither here nor there. That provision is intended to point out in what cases the tax deducted at source shall constitute a charge on the assets of the payer. In that connection the Parliament in its wisdom had felt that it is but justifiable to make the tax deducted at source but which was not paid to the Revenue should be made charge upon all the assets of the payer. Perhaps the Parliament felt it to be unjustifiable to fasten the charge upon the properties of the payer in a case where he failed to deduct the tax at source when making the payment to the payee. We are certain in our minds that the provisions of section 201(2) do not help the assessee to contend that only in cases where tax was deducted at source but was not remitted the payer can be considered to be an assessee in default but not in a case where the payer did not deduct the tax at source at all. Section 201(1) covers both the situations. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educt tax at source while making a payment, the payer cannot escape the liability of being treated as an assessee in default towards the tax failed to be deducted. As for the contention of the assessee that when in the regular assessments all the payees pay the whole of the taxes payable by them or the payees even before the completion of their assessments, made substantial payments towards advance tax and also paid substantial amounts towards self-assessment tax under section 140A and therefore, it was no longer necessary to treat the assessee as an assessee in default, as regards the tax omitted to be deducted at source, we have already held that the assessee cannot evade its liability under section 201(1). 4. The next question as to in what amount the assessee should be taken as the assessee in default, whether there are any mitigating circumstances in that regard and whether there is any scope for any principle of equity to operate and whether the subsequent events can be taken into consideration while determining the amount in which the assessee should be declared to be an assessee in default, under section 201 of the Income-tax Act, is according to us quite a different and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a particular sum of money as charges for either manufacturing of shoes or processing of unfinished leather into finished leather. According to the contract the charge is for each piece of work turned out by the contractor and since the contracted piece rate is less than Rs. 10,000 the assessee is entitled to exemption under section 194C(iii) of the Income-tax Act. As regards this contention we have to hold that the assessee failed to prove it. When there is no written contract what are the actual terms of contract on which the work is assigned to the contractors are only known to the assessee and to the payees, who are none other than the subsidiaries of the assessee-company. Except raising a mere plea in this regard the assessee did not substantiate what is the piece rate at which the contract is entered into and no entries in the account books either of the assessee or the payee companies were produced before us to substantiate this plea. However, it would appear that there is a running account between the assessee on the one hand and each of the payees on the other and once in a year the account is settled and the amount is paid. Therefore, we have to hold that whenever the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
