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TMI Blog2011 (5) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... in favor of aseessee. - ITA 717 OF 2009 - - - Dated:- 31-5-2011 - SHAILENDRA KUMAR YADAV, AND G.S. PANNU, JJ. C.H. Naniwadekar for the Appellant. S.C. Shivagunde for the Respondent. ORDER G.S. Pannu, Accountant Member This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals), Kolhapur dated 22.3.2009 which, in turn, has arisen from an order dated 17.12.2008 passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961 (in short "the Act"), pertaining to the assessment year 2006-07. 2. In this appeal, the assessee has raised the following three Grounds of appeal: "1. The ld CIT(A) erred on fact and in law in not considering ground No. 1 specifically raised before him relating to addition of Rs. 3,74,903/- on account of alleged low GP especially when detailed written submissions were made before him. He ought to have held that the said addition is not warranted on the facts of the case and when the AO has categorically asserted that the book results are not rejected. 2. The ld CIT(A) erred on facts and in law in confirming the disallowance of Rs. 33,34,903/- u/s 40(a)(ia), being payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax (Appeals), the claim of the assessee was that such payments did not require deduction of tax at source under section 194C of the Act. It was explained that the assessee was engaged in the business of executing road contracts even in far-flung areas and casual labour was hired locally. It was explained that some labour come for work for a few days and after that, the labour would depute some other person on his behalf or his immediate family members and sometimes all the family members from one family are engaged as labourers. In such cases, payment for the labour charges was received by the head of the family, although such payment reflected labour charges of more than one person. It was pointed out that business is conducted in remote places and, in this regard, payments made to one person being head of the family may exceed Rs. 50,000/- in a year so as to invite section 194C of the Act, but in actuality, according to assessee, such payments are composite payments made for multiple labourers and the payment for each labour would not exceed Rs. 50,000/- during the year and in any case the recipients are not regular employees, but casual labourers and under these circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a year to some of the persons and, therefore, the same was liable for deduction of tax at source under section 194C of the Act, which was not done by the assessee. In our considered opinion, having regard to the orders of the authorities below, one aspect that clearly emerges undisputably is to the effect that the impugned payments are for labour charges. The assessee has explained the circumstances in which such payments have been made. The claim made is that a number of persons from one family work as labourers at the site on daily wage basis and the record is maintained by the site supervisor. It is further explained that the payment is usually made on weekly basis and the head of the family receives the money on behalf of all the family members. It has also been explained in the written submissions filed before the lower authorities that due to practical difficulties for preparing the individual vouchers for each labour payment, only one voucher is prepared in the name of the person who receives the money and if the individual labourers are taken into consideration, the payments do not exceed Rs. 50,000/- in a year to each person. It has also been pointed out that the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing expenditure is untenable. We hold so. 11. In the result, on this Ground, order of the Commissioner of Income-tax (Appeals) is set aside and the Assessing Officer is directed to delete the addition. 12. The last Ground raised by the assessee relates to a disallowance of Rs. 12,17,005/- representing payments for hire of tractor and trolleys, which has been disallowed by the Assessing Officer by invoking section 40(a)(ia) of the Act. 13. The background of the dispute is that that the Assessing Officer found that a sum of Rs. 12,17,005/- was debited under the head 'Transport and octroi charges' representing payments to nine persons exceeding Rs. 50,000/- per annum, as per details in para 7 of the assessment order. As per the Assessing Officer, the said payments were transportation charges which required deduction of tax at source as per section 194C of the Act. As the assessee did not deduct the requisite tax at source in terms of section 194C of the Act, the Assessing Officer disallowed the corresponding expenditure by invoking section 40(a)(ia) of the Act. 14. The claim of the assessee before the Assessing Officer as well as before the CIT(A) was that the impugned payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 194-I of the Act are not applicable in the instant case, as the same have been brought on the statute with effect from 13.7.2006 requiring deduction of tax at source on machinery hiring charges. Under these circumstances, it has been submitted that the authorities below have erred in making the disallowance by invoking section 40(a)(ia) of the Act. In the course of the hearing, reliance has been placed on the following decisions: (i) Dy. CIT v. Satish Aggarwal Co. [2010] 122 ITD 35 (Asr.) (ii) CIT v. Poompuhar Shipping Corpn. Ltd. [2006] 282 ITR 3 (Mad.) 16. On the other hand, the ld Departmental Representative has relied upon the orders of the authorities below in support of the case of the Revenue. As per the ld Departmental Representative, assessee has itself debited the impugned payments under the head 'Transport and octroi charges' and therefore, the invoking of section 194C read with 40(a)(ia) in order to disallow the impugned expenditure is fair and proper. 17. We have carefully considered the rival submissions and perused the orders of the authorities below as well as other material placed in the Paper Book to which our attention has been drawn in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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