9911796707
TMI Blog2012 (5) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... contract charges to Devshree Network, TDS should have been deducted u/s 194 (2) of the IT Act. But since it was not done, the amount is required to be disallowed u/s 40(a) (ia) of the IT Act. The AO has further analyzed as to why the assessee's argument that TDS was to be deducted only on payable amount and not paid amount could not be entertained. Detailed reasoning for turning down assessee's arguments is given on page 9 of the assessment order. The matter went up to the Addl. CIT, Range-9 through an application filed u/s 144A by the assessee who vide his letter dated 30-12-2008 directed to disallow the expenditure as proposed by the AO. Before the learned CIT(A) it was argued that the AO has simply termed the assessee's receipt from its cable network subscribers as the amount liable to TDS. It was further asserted that there was no payment to customer instead it was receipts and there was no question of payment. Further, the assessee argued that (a) provision of section 194C (1) of the IT Act are applicable only from 01-06-2007 and the case for adjudication pertains to period 01-04-2005 to 31-03-2006 and (b) section 40(a) (ia) of the IT Act applies to the amount payable and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from them. So both the appellant and Devshree Network are subcontractors and therefore any payment made to them is liable to TDS. The last argument that 194 (c) has made individuals liable to TDS only from 01.06.2007 also has no merit. Because, even before the new amendment which came in to effect from 01.06.2007, there was a proviso in the said section inserted by the Finance Act 2002 with effect from 1st June 2002, which had clearly stated that "an individual or Hindu Undivided family, whose total sales gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44 AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the subcontractor shall be liable to deduct income tax under this sub section." The appellant thus is squarely covered and the disallowance u/s 40 A (ia) to the extent of Rs.33,27,188/- is as per law and hence fully justified. It is pertinent to mention here that I have perused another case cited by the appellant through supplementary submission ACIT v/s Infosys Technologies Ltd. ITAT 'B' Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edabad Bench in the case of Shri Prashant H. Shah vs ACIT in ITA No.17/Ahd/2011 dated 08-07-2011. 5. On the other hand, the learned DR relied upon the orders of the authorities below and submitted that since the amount in question was paid as contract charges to M/s. Devshree Network Pvt. Ltd., therefore, TDS should have been deducted u/s 194 C (2) of the IT Act and since it was not done, therefore, the amount was rightly disallowed u/s 40 (a) (ia) of the IT Act. The learned DR relied upon the decision of the Hon'ble Punjab and Haryana High Court in the case of Kurukshetra Darpans (P) Ltd. vs CIT 217 CTR 326 in which it was held as under: "Sec. 194C creates an obligation on a person responsible for paying any sum specified therein to a person for carrying out any work, to deduct the tax at source. In terms of Expln. Ill, it is provided that expression 'work' shall include, inter alia, broadcasting and telecasting including production of programmes for such broadcasting and telecasting. By way of such Explanation, it is evident that where the payment is for a work involving broadcasting and telecasting, the same shall be subject to deduction of tax at source in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee in the rejoinder submitted that in the case of Kurukshetra Darpans (P) Ltd. (supra), the issue was with regard to the expression "work" as provided under Explanation III of the proviso to section 194C (2) of the IT Act. He has submitted that in that case the licensor and the assessee were the companies and it was held by the Hon'ble High Court that section 194 C of the IT Act creates an obligation on a "person responsible" for paying any sum specified therein to a person for carrying out any work, to deduct the tax at source. He has, therefore, submitted that the facts of the assessee's case are clearly distinguishable being the status of the assessee an individual. The learned Counsel for the assessee did not make any further submission. 7. We have considered the rival submissions and material on record. The provisions of section 194 C relevant to the assessment year under appeal read as under: "[Payments to contractors and sub-contractors 194C. (1) Any person responsible for paying any sum to any resident(hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (b) of section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the sub-contractor, shall be liable to deduct income-tax under this sub-section.] [Explanation I:- For the purposes of sub-section (2), the expression "contractor" shall also include a contractor who is carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and the Government of a foreign State or a foreign enterprise or any association or body established outside India.] [Explanation II]:- For the purposes of this section, where any sum referred to in sub-section (1) or sub-section (2) is credited to any account, whether called "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] [Explanation III:- For the purposes of this section, the expression "work" shall also include- (a) advertising; (b) broadcasting and telecasting incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of the assessee, the status of the assessee is individual and he is proprietor of M/s. Balaji Cable Network and has made a contract with M/s. Devshree Network Pvt. Ltd. The amount in question was paid by the assessee to M/s. Devshree Network Pvt. Ltd. for giving cable transmission. The provisions of section 194C of the IT Act had undergone certain vital changes. The main purpose of introduction this section in the Act was to make provisions for deduction of tax at sources from the payment made to contractors and sub-contractors in certain cases. Income tax is deductible at source form the income comprised in payments made by a person specified in this section. As per the original section 194 C(1) of the IT Act, any person responsible for paying any sum to any contractor for carrying out any work in pursuance of a contract is required to deduct TDS. However, as per section 194 C (2) of the IT Act, any person being a contractor responsible for any sum to any sub-contractor in pursuance of a contract with the sub-contractor for carrying out any work is required to deduct tax at the time of payment. Sub-section (2) has later on made a provision according to which any indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make provisions for deduction of tax at source from payments made to contractors and sub-contractors in certain cases. Income tax is deductible at source from income comprised in payments made by the persons specified in this section. As per the original section 194C(1) any person responsible for paying any sum to any contractor for carrying out any work in pursuance of a contract is required to deduct 2% TDS. However, as per section 194C(2), any person being a contractor responsible for paying any sum to any subcontractor in pursuance of a contract with the subcontractor for carrying out any work is required to deduct tax @ 1% at the time of payment. Sub section (2) has later on made a provision according to which an individual or HUF, whose total sales exceeds the monitory limit prescribes u/s.44AB shall be liable to deduct income tax at the time of payment to a sub-contractor. It is further important to mention that vide an amendment with effect from 1/6/2007 an individual or HUF have also been inducted vide sub-clause (k) in section 194C (1) of the IT Act. At this juncture, it is worth to hold that as far as the AY in hand is concerned, i.e. AY 2007-08, this latest amendment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding tax deduction at source have been clarified and therein one of the questions was about the payment to transports and the clarification was as under:- "Question 9: In case of payments to transports, can each GR be said to be a separate contract, even though payments for several GRs are made under one bill? Answer: Normally, each GR can be said to be a separate contract, if the goods are transported at one time. But if the goods are transported continuously in pursuance of a contract for a specific period of quantity, each GR will not be a separate contract and all GRs relating to that period or quantity will be aggregated for the purpose of the TDS." 8. In the context of above clarification issued by the CBDT, if we examine the issue in hand, then in terms of the provisions of section 194C(2) of the Act conditions to be satisfied are (i) that the assessee should be a contractor, (ii) that the assessee should enter into a contract with a sub-contractor,(iii) that the sub-contractor should carry out any part of the work undertaken by the contractor and (iv) that the payment should be made for the work done. In a case, when a "contract" is assigned, gene ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
