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TMI Blog2016 (3) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, the contract stands concluded when the assessee asked M/s. Garvit Stonex and others to do the edge cutting and sawing of granite blocks and convert them into marble tiles for it for a consideration. The moment the said contractors/persons doing the sawing and edge cutting of the marble blocks, the said persons are entitled for the amount required to be paid as per the bills raise by them. In fact, in the present case after doing the edge cutting and sawing, the charges were even paid by the assessee, in our understanding, a contract has come into existence between the assessee and M/s. Garvit Stonex and others. In our view, the assessee is responsible for paying the amount to such persons i.e. contractor for carrying out the specific work. Therefore, the assessee is liable to deduct the tax on such payments. Since the assessee has failed to deduct the tax on the amount paid by it to such persons/contractor, the assessee is duty bound to deduct the tax, and non deduction of tax by the assessee, attracts the provisions of section 40(a)(ia). We will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40 which is very unambiguous the denial of deduction by the learned CIT (A)/AO of the payments for non deduction of tax thereon, Ld. CIT(A) only be of those payments covered u/s 30 to 38 and for failure to deduct tax on payments other than sec. 30 to 38, there are other consequences like interest and penalty in terms of section 201 of the Act and not the disallowance u/s 40 (a)(ia) of the Act. 2. The appeal has been filed with a delay of 211 days. The ld. A/R for the assessee has requested to condone the delay and decide the appeal on merits. In support of his request to condone the delay, the ld. A/R furnished Affidavit of the assessee explaining the reason for delay. We are satisfied with the reasons given by the assessee, therefore, the delay caused is condoned. 3. Brief facts of the case are that the assessee derives income from trading of marble tiles and slabs. The marble blocks are purchased and converted into marble tiles and slabs and then sold to various parties i.e. directly to the consumers as well as to retailers. It is the case of the assessee that for the purposes of converting the marble blocks into marble tiles, the job is required to be done outside on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made. The AO on the basis of above said conclusion has made the addition of ₹ 7,51,322/- by resorting to section 40(a)(ia) of the IT Act. 4. Feeling aggrieved by the order passed by the AO, the assessee has preferred appeal before ld. CIT (A), who vide his order dated 27.02.2012 has confirmed the order passed by he AO and has mentioned as under :- AO has rightly observed that payments of sawing charges and edge cutting charges to the three parties are liable for deduction of TDS, because the payments are in the nature of contractual payments. There is no requirement that a contract has to be in writing. The presence of contract has to be inferred from the nature of transactions. In view of facts mentioned by AO in the assessment order it is clear that the payment re covered by Sec. 194C and appellant was liable to make deduction of tax. As the same was not done, AO has rightly made disallowance u/s 40(a)(ia) and her action is confirmed. Addition of ₹ 7,51,322/- is confirmed. Ground No. 1 of the appeal is thus dismissed. 4.1. The assessee has preferred rectification application under section 154 of the IT Act before ld. CIT (A). The contention of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act 1961 requires a person responsible for paying any sum to any resident who is a con tractor for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person, to deduct tax at the prescribed rates. The Hon ble Supreme Court considered the scope of section 194C in the following 2 cases. 1.Asociated Cement Co. Ltd. v. IT(1993) 201 ITR 435(SC) 2.Birla Cement Works vs. CBDT (20012) 248 ITR 216(SC) In the first mentioned case, it was held by the Apex Court that a contract could be a contractor for supply of labour for carrying out any work. In the case of the appellant only labour charges were paid as being processing charges so as to make the goods (Marble Blocks) marketable by converting the same into slabs or making them as marble tiles and since there was nothing to suggest that any agreement had taken place between the appellant and the aforesaid 3 parties and hence it cannot be said that any payment was made to the contractor so as to make the appellant liable to deduct Income tax on payments made to them. It is also submitted that Section 40 with clauses (a)(b) and(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 40(a)(ia) of the Act would apply only to the amount which remained payable at the end of the relevant financial year and could not be invoked to disallow the amount which had actually been paid during the previous year without deduction of tax at source. The order of the Special Bench has since been put under interim suspension by the Andhra Pradesh High Court. 3.1 The Hon'ble Calcutta High Court and Hon'ble Gujarat High Court in the case of Commissioner of Income-tax, Kolkata-XI v. Crescent Export Syndicate [2013] 33 taxmann.com 250/216 Taxman 258 and CIT-IV v. Sikandarkhan N Tunvar [2013] 33 taxmann.com 133/[2014] 220 Taxman 256 (Gujarat) respectively, have held that section 40(a)(ia) of the Act would cover not only the amounts which are payable at the end of the previous year but also which are payable at any time during the year. 3.2 The Hon'ble High Courts have further held that the intention of the legislation was to disallow certain types of expense, subject to provisions of Chapter XVII-B, which is payable at any time during the year but no tax was deducted at source or if deducted was not paid within the stipulated time. There is no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted fact that the marble blocks are purchased by the assessee and the same marble blocks are sent to M/s. Garvit Stonex, M/s. Chanda Marbles M/s. Nidhi Granites for the purpose of sawing and edge cutting with a view to convert the marble blocks into marble tiles. In the assessment year under consideration, the assessee has paid a sum of ₹ 1,54,711/- to M/s. M/s. Garvit Stonex, ₹ 3,92,711/- to M/s. Chanda Marbles ₹ 2,28,700/- to M/s. Nidhi Granites totaling ₹ 7,76,122/- for edge cutting and sawing charges on various dates. From the details given, the AO and the ld. CIT (A) has worked out the average cutting and sawing charges of more than ₹ 2155/- per day paid to the said M/s. Garvit Stonex, M/s. Chanda Marbles M/s. Nidhi Granites. In our view, the said firms/companies are doing the edge cutting and sawing on regular basis and are also having business relationship with the assessee. The regular bills were being raised by the said concerned persons on the assessee and the assessee had been making the payment to the said persons. We do not agree with the contention of the assessee that there is no written contract or oral contract with the said per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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