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TMI Blog2020 (2) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 (in short, the Act) on 21/03/2014, the A.O. made, inter alia, disallowance of labour charges of Rs. 81,45,754/- U/s 40(a)(ia) of the Act for want of TDS. The ld. CIT(A) vide its order dated 07/01/2016 confirmed the disallowance made by the A.O. On further appeal, this Tribunal vide order dated 26/10/2017 set aside this issue to the record of the ld. CIT(A) for deciding the same afresh after considering the submissions of the assessee. Thus, this is second round or appeal after the ld. CIT(A) again made a disallowance of 20% of the labour charges as against the entire labour charges of Rs. 81,45,754/- made in the first round of litigation. 3. We have heard the ld AR of the assessee as well as the ld. DR and considered the relevant material on record. The ld AR of the assessee has submitted that the ld. CIT(A) in the set aside proceedings have given a finding that the wages paid by the assessee are not subjected to TDS U/s 194C of the Act. However, a further disallowance of 20% of the expenses were made by the ld. CIT(A) while passing the impugned order which is beyond the scope of set aside proceedings as directed by the Tribunal. Thus, the ld AR has submitted that the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance made U/s 40(a)(ia) of the Act by treating the payment as a contractual payment and not merely a payment of wages to the labourers. Thus, the issue which was set aside by the Tribunal to the ld. CIT(A) is only regarding the disallowance U/s 40(a)(ia) of the Act and not the correctness of claim of expenditure. The ld. CIT(A) in the set aside proceedings while passing the impugned order has clearly held that the payment in question does not attract provisions of Section 194C(1) of the Act and therefore, not liable for any deduction of tax at source. The relevant finding of the ld. CIT(A) in para 3.3. as under: "3.3 I have carefully considered the observation made by the Assessing officer in the assessment order, submission rejoinder filed by the A'R of the appellant and remand report of the Assessing Officer. I find that the Assessing officer made disallowance u/s 40(a)(ia) of the I.T. Act of Rs. 81,45,754/- making detail observation in the assessment order. I find that the Firm engaged labour's on daily wage basis and a daily wage ranging from Rs. 300 per day to Rs. 400 per day were paid. They were paid at flat rates on the basis of number of days. The total wages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant that no sub contract was executed by the appellant. The A/R also relied upon the following case laws. The issue of treating the casual labour employed as 'Contract labours' has arisen in the past and has been addressed by various courts. We produce the relevant judgments relating to the issue for your ready reference:- In the complete identical case of ITO vs. Tulsi ram Modi (Appeal No. 960(JP) of 2011) the Honorable ITAT, Jaipur bench, Jaipur has held "We have heard the rival contentions and perused the material available on record. From the facts mentioned above it clearly emerges that by main contract with Principal Next Retail India assessee was barred by hiring any subcontractor. We are unable to subscribe to the AOs view that as the labourers were orally employed or the salaries were disbursed through senior workman constitute adverse facts to lead to a conclusion that assessee hired subcontractors to complete the work. Similarly no adverse inference can be derived from auditor's remark as it is only statement of fact about wages and in any case auditor's vague remarks cannot be construed as a conclusive statement. This is the job of AO to peruse t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d above, it is clear that the Assessing Officer has disallowed the payment on the presumption that the payment was made to the contractors and the assessee had kept the payments below Rs. 20,000/- deliberately in order to circumvent the provisions of section 194C of the Act. The provisions of section 194C are applicable in respect of a person responsible for paying any sum to any resident referred to as resident being a contractor for carrying out any work including supply of labour for carrying out any work in pursuance of the contract between the contractor and the person specified in section 194C(1) of the Act. The expression used is "any sum". Therefore, if the payment has been made to a contractor, the payer has to deduct tax at source on even amounts less than Rs. 20,000/-. There is nothing on record to suggest that the payments on account of labour charges were made to contractors. On the contrary the assessee had made payment to labourers directly. Therefore, the provisions of section 194C of the Act are not applicable. The Assessing Officer had made disallowance on ad hoc basis out of total labour charges of Rs. 10,14,365/-. Since no material has been brought on record, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consultant doctors. The assessee's appeal was, accordingly, dismissed." The honorable Delhi High Court has directly dealt with this point in the case of CIT vs. Dewan Chand (2009) 173 Taxman which has direct bearing on the facts of present case, holding therein that where the payment was made directly to the labors in the form of daily wages it was held that such payments were not in the nature of payments under contract, but had character of wages. Hence section 194C is not applicable in the case. The ITAT bench Kolkata in a complete identical case Ratna Mukherjee (ITA559/Ko1/2013) has held that as per the provisions of section 17(1) of the Act salary includes wages and therefore conceptually there is no difference between salary & wages. Wages are treated just like salary and are taxable on same basis. So, wages are covered under section 192 of the Act. Therefore the provisions of section 194C are not applicable on wages. The similar Proportion has been laid down in various cases, some of which are as follows:- (iii) Laxmi Protein Products Pvt. Ltd., ITAT Ahemdabad, Bench 'A', Ahemdabad ITA no.3244/Ahd/2009 (iv) Tapas Paul ITAT Kolkata, Bench 'A', ..... X X X X Extracts X X X X X X X X Extracts X X X X
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