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TMI Blog2015 (5) TMI 640X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee contractor. In the absence of the same, there was no sub-contract between the parties and hence, no requirement for deduction of tax at source where the assessee in order to execute its work orders had engaged the services of Labourers through Jamadar, the same cannot part take the nature of sub-contract in the absence of any obligation or responsibility being fastened upon the said Jamadar or Labourers. There is no merit in the orders of authorities below. Accordingly, we hold that the assessee is entitled to the claim of deduction of ₹ 1,03,72,141/-. In view of our holding that the understanding between the assessee was not sub-contract and there being no requirement of deduction of tax at source, the issue of applicability of section 40(a)(ia) of the Act becomes academic and the same is dismissed. - Decided in favour of assessee. Addition made being "gross receipt" - Non dis-closer of receipts - 26AS form e-TDS shows the receipt - Held that:- find merit in the plea of the assessee that in order to execute any work contract, the assessee has to incur certain expenditure in order to earn the said remuneration. In respect of the said contract with M/s. Flagship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,03,72,141 made by the Assessing Officer invoking the provisions of s. 40(a)(ia) r.w.s. 194C(2) of the Act. The provisions of s. 40(a)(ia) r.w.s. 192C(2) are nto applicable to the facts of the case in the absence of any oral or written agreement being mandatory requirement as has been held judicially by various appellate forums to apply s. 194C(2) of the Act. The disallowance being illegal and without jurisdiction be deleted. 2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in not following properly the interpretation of s. 40(a)(ia) starting the non-obsente clause Nothwithstanding anything to the contrary in s. 30 to 38 and s. 40(a)(ia) being applicable in respect of deductions claimed without TDS. Since the payments claimed are direct expenditure under s. 28 29 therefore, disallowance made by A.O. and confirmed by the CIT(A) is illegal and without jurisdiction. The disallowance be quashed. 3. On the facts and in the circumstances of the case and in law the disallowance made of ₹ 1,03,72,141 invoking provisions of s. 40(a)(ia) r.w.s. 194C(2) for non-deduction of tax at source was not proper. It is contrary to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Account Number (PAN) and due to nonavailability of PAN, TDS could not be deducted. The Assessing Officer noted that the assessee had made sub-contract payments above the prescribed limits without deducting the tax at source and, hence, had violated the provisions of section 194C of the Act. It was thus held by the Assessing Officer that the provisions of section 40(a)(ia) of the Act were squarely applicable and in view thereof, the entire expenditure of ₹ 1,03,72,141/- was added to the income of the assessee. 5. The CIT(A) noted that the claim of the assessee was that the impugned payments were directly made to the labourers and there was no contract, either oral or written, between the assessee and the labourers to attract the provisions of section 194C(2) of the Act warranting the deduction of tax at source from such payments. The CIT(A) noted that the sum of ₹ 82,80,000/- was paid to Aurangabad Road sub-contractor payment and was debited as such to the Profit Loss account. Another entry made by the assessee to the Profit Loss account was of Aurangabad Site labour payment at ₹ 6,69,190/-. The CIT(A) in this regard observed that in case other amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the ratio laid down by the Hon'ble Kerala High Court in Raja Co. v. CIT (Central) [2011] 335 ITR 381. Since no tax was deducted at source under section 194C from the payments made to various parties, the disallowance of ₹ 1,03,72,471 was made in the hands of the assessee by invoking the provisions of section 40(a)(ia) of the Act. 6. The assessee is in appeal against the said disallowance of the expenditure. It was pointed out by the A.R. for the assessee that it had taken work order from Ashoka Build Con from whose receipts tax was deducted at source. The Assessing Officer employed labour and also machinery and tools and executed the contracts by employing labourers. Reliance was placed on the ratio laid down by the Hon'ble Gujarat High Court in CIT v. Prashant H. Shah . Further, it was pointed out by the A.R. that since the assessee had executed the work on its own, there was no liability to deduct tax at source. Reliance in this regard was placed upon the ratio laid down in CIT v. Vishnudutt Sharma. Our attention was drawn to work order placed at Pages 3 to 10 of the paper book. It was vehemently argued by the A.R. that there was no work contract with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payments were made to the labourers through Jamadar i.e. the headman in-charge of the labourers. The wages were paid in cash to all the persons as they were working at the site and had no PAN numbers. During the year under consideration, the assessee incurred expenditure of ₹ 1,03,72,141/- on account of aforesaid payments being made to the labourers. 10. The case of the Revenue was that the assessee had entered into a sub-contract with the said persons and as such, the provisions of section 194C(2) of the Act were attracted. Since the assessee had failed to deduct tax at source out of said payments being made to the said persons, the provisions of section 40(a)(ia) of the Act were attracted and in view of non-deduction of tax at source, the said amount was not allowable as an expenditure. 11. The case of the assessee on the other hand was that, he was only responsible for the execution of the work and no part of such liability was fastened on the workers who were employed by the assessee on daily wages. As the relationship of contractor and subcontractor was missing, there was no liability to deduct tax at source. The assessee claims that the work was contracted by M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng out the said work or part of the work or for supply of labour, who in turn is enshrined with certain duties and responsibilities, such person is the sub-contractor of the work and in case of such an arrangement between a contractor and sub-contractor, the provisions of section 194C(2) of the Act are attracted. The contract between the two persons entails the sharing of responsibilities and obligations. On the other hand, if labour is engaged for the purpose of carrying on the work and there is no responsibility on the labour, except to do its work within the stipulated day or night, then such employment of labourers cannot part take the nature of sub-contract in the hands of the contractor, who has engaged the said persons to carry out a particular work in the manner the contractor so desires. 14. The case of the assessee before us was that it had been given certain work orders by M/s. ABL and in order to execute the said work orders which were purely labour oriented, it had engaged various labourers through Jamadar for carrying out the work to whom, the payments on day-to-day basis were being made, does not establish a sub-contract between the assessee and such labourers or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and the tax at source was deducted by M/s. ABL out of the payments made to the assessee. However, where the assessee had employed the labourers in order to carry out its obligations without fastening any responsibility and/or obligations on the said labourers, for executing the work order, except to carry out the work at its direction, does not establish the existence of sub-contract between the assessee and such labourers or the provider of the labourers. Merely because the Jamadar in-charge of the labourers was collecting payments from the assessee and distributing the same to the labourers, does not establish the existence of sub-contract between the assessee and such Jamadar/labourers. The assessee was solely responsible for the execution of the work order and no part of such responsibility was fastened upon the Jamadar or labourers. The assessee had only availed the services of such Jamadar/Labourers for carrying out the job work and it in no way was case of relationship between the assessee contractor and the Jamadar/Labourers in the capacity of sub-contractor. In the absence of any understanding or contract between the parties, whether oral or written, there is no r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue that the assessee had booked the expenses not on account of wages but on account of the various sub-contracts carried on by it. Our attention was drawn to the first entry i.e. The Aurangabad Road Sub Contractor Payment of ₹ 82,80,000/- and the Aurangabad Site Labour Payment of ₹ 6,69,190/-. No bout, that the assessee had booked the expenses under various sub-heads of the job work carried on by it, but that itself does not establish the case of the Revenue that it is a case of sub-contractor. Merely, in order to better manage its affairs vis- -vis the different work orders received by it and such works being carried out at different places on account of different works, does not establish that the assessee had transferred any part of its responsibilities and obligations to the said persons. Merely because, the services of the labourers through Jamadar were utilized by the assessee does not establish that there was an understanding for transfer of responsibilities through the said persons to carry out any part of the job work, which was the sole responsibility of the assessee contractor. In the absence of the same, there was no sub-contract between the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said company and estimated net income of ₹ 15,54,248/- was shown in the revised return filed on 29.11.2010. The assessee accepted that by mistake and oversight, the income from the above contract was not included in the original return of income filed. However, revised return of income was being filed. The Assessing Officer observed that the assessee had to furnish the said return of income within prescribed period and the assessee himself has accepted that it had received the said contracts receipts from Flagship Infrastructure Pvt. Ltd. Since the assessee had closed its books of account on 31.03.2008 and all the expenses were already booked, the entire contact receipts of ₹ 1,55,42,485/- was added as income of the assessee under section 69C of the Act. The CIT(A) upheld the order of Assessing Officer. 22. The assessee is also aggrieved by non-grant of opportunity by the CIT(A) before taxing the gross of receipts vide ground of appeal No.6. The learned Authorized Representative for the assessee pointed out that the gross receipts could not be taxed in the hands of the assessee and only the profit element out of the said receipts to be taxed. 23. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract, the assessee has to incur certain expenditure in order to earn the said remuneration. In respect of the said contract with M/s. Flagship Infrastructure Pvt. Ltd., the gross receipts for the year under consideration were ₹ 1,55,42,485/- and the entire receipts cannot be income of the assessee. We find no merit in the plea of the authorities below that the total expenditure has been booked by the assessee, in the absence of any details being brought on record to the effect. Accordingly, we are of the view that the expenditure relatable to such receipts is duly allowable in the hands of the assessee and the entire receipts cannot be brought to the tax in the hands of the assessee. In the entirety of the above facts and circumstances, we hold that estimation of income has to be made on account of such receipts by applying NP rate of 20% as against the plea of the assessee that NP rate of 10% be applied. The assessee failed to bring on record the complete evidence in this regard and accordingly, we are constrained to estimate the income in the hands of the assessee by applying NP rate of 20%. The ground of appeal No.4 is thus, partly allowed. 25. The issue in ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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