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TMI Blog2016 (11) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... t was framed by ITO, Ward-33(2), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2009-10 vide his order dated 30.12.2011. 2. The only issue to be decided in this appeal is as to whether the ld CITA is justified in deleting the disallowance made u/s 40(a)(ia) in the sum of ₹ 2,04,79,685/ -in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a partnership firm and engaged in the business of civil contract under category I under the name and style of M/s Kwality Construction of all Government Jobs either state level or central level like railways and other Government undertakings since 1982-83. The ld AO observed that the assessee in its profit and loss account debited an amount of ₹ 2,04,79,685/- towards labour charges and details of the same were furnished by the assessee. The ld AO directed the assessee to explain why the labour payments made to 14 labour contractors should not be disallowed u/s 40(a)(ia) of the Act as the same were paid without deduction of tax at source . The assessee submitted the total number of labours working under each labour contractor / labou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was argued that there was no contract entered into by the assessee. The ld CITA deleted the disallowance by observing as under:- 4.7. That section 40(a)(ia) requires that unless tax is deducted according to section 194C on payment to contractors or sub-contractors, which includes supply of labour for carrying out any work, it will attract disallowance of expenditure. The Hon ble supreme court in Birla Cement Works Vs. CBDT (2001) 248 ITR 216 has laid down the conditions precedent for attracting the provisions of section 194C, viz. (i) there must be a contract must be for carrying out of any work, (iii) the work is to be carried through the contractor, (iv) the consideration for the contract should exceed the amount fixed by section 194C and (v) that the payment is made to the contractor for the work carried out by him. Therefore, section 40(a)(ia) cannot be read in isolation or to the exclusion of section 194C. In the instant case, the controversy was regarding the payments made for disbursement of labour charges to labour sardars. The appellant had specifically stated before the AO that there was no contract between the appellant and the labour sardars. Keeping in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that there is no difference between labour sardars and labour contractors with regard to the payment of labour charges. Accordingly he argued that the order of the ld AO need not be interfered with. In response to this, the ld AR argued that the ledger accounts of entire labour charges for each labour contractors / labour sardars were furnished before the ld AO. In the said ledger, the payments made to labour sardars towards their commission portion is reflected separately in the said ledger account and hence the primary evidences were indeed submitted by the assessee. He argued that the wage registers as called for by the ld AO would be maintained only for permanent labourers and not for temporary labourers. There is no direct contract entered into by the assessee and hence the payments made by the assessee is outside the ambit of provisions of section 194C of the Act. He placed reliance on the following decisions in support of his contentions :- (a) Order of Hon ble Calcutta High Court in the case of CIT vs Stumm India in ITA No. 127 of 2009 dated 16.8.2010. (b) Decision of this Tribunal in the case of Samanwaya vs ACIT reported in 34 SOT 332 in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Basanti, South 24 Parganas 190 16,95,090.00 30,260.00 17,25,350.00 1.79 9. SURABUDDIN SEIKH Basanti, South 24 Parganas 110 11,59,480.00 15,800.00 11,75,280.00 1.36 10. ABUL KAHAR MOLL Basanti, South 24 Parganas. 120 11,96,685.00 23,750.00, 12,20,435.00 1.98 11. MD KHAJABUDDIN Kaliachak, Malda. 180 18,53,830.00 31,750.00 18,85,580.00 1.71 12. PARI MAL DAS Golabari, South 24 Parganas 140 13,85,585.00 23,100,00 14,08,685.00 1.67 13. SAHAJAHAN GHARAMI Canning, South 24 Parganas 125 12,55,795.00 20,20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of provision of section 40(a)(ia) is outside the scope and ambit of such enactment. In view of the matter, we are of the considered opinion that section 194C(2) being not applicable in this case, the disallowance of ₹ 74,33,210/- made by the Assessing Officer by invoking section 40(a)(ia) of the Income Tax Act, 1961 and sustained by the ld CIT(A) is hereby deleted. This ground of the assessee is allowed. 7.3. We also find that the decision of this tribunal in the case of ACIT vs Supreme Construction in ITA No. 1252/Kol/2013 dated 7.9.2016 had held as under:- 9. We have heard rival contentions of both the parties and perused the materials available on record. At the outset, we find that AO has called the labour contractors by issuing summons u/s. 131 of the Act and their statements were duly recorded. The AO failed to bring anything on record that the labour charges were paid in pursuance of contract either in writing or the oral with the labour sardar. The AO has held that the assessee has not complied the provision of Sec. 194C r.w.s. 40(a)(ia) of the Act on the presumption and surmise. There is no evidence that the payments have been made to the contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trovert the submission of the assessee in this respect-Even before the Tribunal, the Department could not bring out any evidence by producing cogent material in respect of any contract between the assessee and the labour Sardars to contradict the submission of the assessee that there was no contract between the assessee and the labour Sardar-A contractor or a sub-contractor is engaged on the basis of a contract which is the most important essence of a contract job and is a primary requirement for the application of s. 194C-Labour Sardars in the present case has no locus standi as labour contractor as a labour Sardar and a labour contractor are as different as chalk and cheese-There was no contract between the assessee and the labour Sardars for supply of labourers and without which there cannot be any application of s. 194C and as such the invocation of provision of s. 40(a)(ia) is outside the scope and ambit of such enactment Relying in the aforesaid decisions we find that there is nothing on record to suggest that the payment to labourers were paid to the contractors. On the contrary, assessee has made payment to labourers directly and in support of its claim, Ld. AR of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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