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TMI Blog2015 (8) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the 4% margin retained by the main contractor cannot be said to be in the nature of commission but the margin/profit retained by the main contractor for having subcontracted work to the assessee. It is also established on record that the assessee never makes any payment to the main contractor. On the contrary, the main contractor makes the payment to the assessee after receiving the payments from the Government. Therefore, as there is no payment by the assessee to the main contractor, only because the assessee has debited the amount to its P&L A/c, it cannot be inferred that commission to that extent was paid by the assessee to the main contractor thereby attracting the provisions of section 194H. In the aforesaid facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer noticed that for getting sub-contract from the main contractor, the assessee paid a sum of ₹ 25,56,326/- which was debited to P L A/CIT(A) under the head Main Contractor Commission . The Assessing Officer was of the view that since the payment made was in the nature of commission, the assessee was required to deduct tax at source u/s.194H of the Income Tax Act, 1961 (Act). However, since the assessee had not deducted any tax on such payments, the Assessing Officer called upon the assessee to show cause as to why the payment made should not be disallowed u/s.40(a)(ia). Though, the assessee submitted before the Assessing Officer that after getting sub-contract from the main contractor, it starts execution of work and on perc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of buying or selling of goods or in relation to any transactions relating to any asset, valuable article or thing other than securities. On the aforesaid basis, the Assessing Officer dis-allowed the amount of ₹ 25,56,326/- by applying the provisions of section 40(a)(ia). Being aggrieved of such dis-allowance, assessee preferred an appeal before the Ld. CIT(Appeals). Before the Ld. CIT(Appeals) it was contended that the assessee was merely a sub-contractor for the main contractor and it had not made any payment to the main contractor. Explaining the nature of debit to the P L A/c of ₹ 25,56,326/-, it was submitted the main contractor had neither provided any service to the assessee nor received any payment from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal contractor and the retention of the 4% is not in the nature of payments referred to in section 194H. The appel lant was entitled to the net amount out of gross receipts af ter deduction of 4% and the debiting of this amount as commission to the P L A/CIT(A) does not change the nature of the transactions between the principal contractor and the appel lant. The dis-al lowance u/s.40(a) ( ia) is, therefore, directed to be deleted since there was no l iabil ity cast on the appel lant for deduction u/s.194H . 3. We have heard the submissions of the parties and perused the orders of the Revenue authorities as well as other materials on record. As can be seen from the facts on record, the assessee has executed the work as a sub-contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission to that extent was paid by the assessee to the main contractor thereby attracting the provisions of section 194H. In the aforesaid facts and circumstances, we are of the view that Ld. CIT(Appeals) was justified in deleting the addition made by the Assessing Officer. Accordingly, we uphold the order of Ld. CIT(Appeals) by dismissing the grounds raised by the Department. In the result, the appeal of the Department is dismissed. 5. The cross-objections of the assessee merely supports the order of Ld. CIT(Appeals). In view of our decision in department s appeal (supra), upholding the order of Ld. CIT(Appeals), assessee s Cross-Objection has become infructuous and accordingly dismissed. In the result, both the department s ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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