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TMI Blog2011 (2) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... s) that atleast 10% of the total payment of Rs.52,22,500/- would have been incurred by way of labour charges by the respective owners, cannot be accepted when indisputably Section 194-I of the Income Tax Act came to provide for making the TDS in respect of machinery/ equipments only with effect from 1.6.2007 and the relevant assessment year is 2005-06, there was no scope at all to find fault with the respondent assessee for any violation of Section 40(a)(ia) of the Income Tax Act. - 1282 of 2010 - - - Dated:- 1-2-2011 - Mr. Justice F.M. IBRAHIM KALIFULLA, Mr. Justice N. KIRUBAKARAN, JJ. For Petitioner : Mr. K.Subramaniam JUDGMENT F.M. IBRAHIM KALIFULLA, J. The revenue seeks to challenge the order of the Tribunal d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer as well as the Commissioner of Income Tax (Appeals) took the view that, out of the total hire charges of Rs.52,22,500/-, if 10% is treated as charges paid towards labour element involved and the TDS not having been deducted as required under Section 40(a)(ia) of the Income Tax Act, the whole of the sum of Rs.52,22,500/- was to be disallowed and consequently treated as income and liable to be taxed. 3. The Tribunal, on the other hand, found that the sum of Rs.52,22,500/- paid by the assessee was only by way of hire charges for the Millers and Rollers taken on hire by the respondent - assessee and therefore, the relevant TDS provision applicable was only Section 194-I and not 194-C of the Income Tax Act, that the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est that there was any contract between the respondent-assessee and those individuals, by way of a composite contract for labour as well as hiring of the vehicles. Thus, it cannot be disputed that the respondent-assessee as a contractor for laying of the road engaged his own men for that purpose. Hiring of the miller and roller as a machinery/equipment was apparently needed for the purpose of carrying out the contract of laying of the road. Both the equipments viz., Millers and Rollers had to be necessarily operated by the owner of the respective machineries/equipments. Therefore, that by itself cannot be a ground to state that it was a composite contract for supply of labour in the course of hiring of machineries/equipments. Inasmuch as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act. 8. Apart from the above conclusion based on facts, the Tribunal has also stated that when the basis for the assessment was by way of applying the net profit rate on gross receipts, there was no scope for making any other addition, in view of Section 44AD of the Income Tax Act, which was accepted by the department. In this respect, we find every justification in the grievance expressed by the learned Standing Counsel that Section 44AD will not apply, if the total turnover or gross receipts in the previous year exceeds Rs.40 lakhs. In the case on hand, the income of the assessee from contract business at the rate of 8% of the contract receipts, was determined at Rs.14,48,480/-. Therefore, the contract receipts would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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