Dcit 13(3), Mumbai vs Department Of Income Tax

The present appeal has been preferred by the assessee against the order dated 03.06.2009 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2006-07. The assessee has taken the following grounds of appeal.

"1. The learned DCIT has erred in disallowing the wages payment u/s 40(a)(ia) of the I.T. Act, 1961.

2. The learned DCIT has erred in adding wages payment to the returned income for want of details even though full particulars of the same were submitted during the assessment proceedings."

2. The assessee has agitated the confirmation of disallowance of Rs.2,84,08,853/- under section 40(a)(ia) of the Income Tax Act, 1961. The brief facts of the case are that the assessee firm is engaged in the business of 2 ITA No.6552/M/2009 M/s. Vighnaharta Enterprises

loading and unloading of cargo. The Assessing Officer (hereinafter referred to as the AO) noticed that the assessee during the year had debited labour charges of Rs.3,13,20,955/- in the P& L Account. After going through the details submitted by the assessee, the AO held that the work for which the said expenditure had been incurred, was in the nature of 'work contract' and hence was liable to TDS. He also observed that labour charges of Rs.23,38,574/- were paid to individual with gross payment of less than Rs.50,000/-. He after excluding the said amount out of the total labour charges debited to P&L Account, made a disallowance of Rs.2,84,08,853/- under section 40(a)(ia) of the Income Tax Act. Though it was submitted by the assessee that TDS was deducted on certain payments, but the assessee failed to submit any proof/ document in this respect. The Ld. CIT(A) also confirmed the said disallowance.

3. Before us, the Ld. A.R. has submitted that the said expenditure was not relating to any work contract rather the payments were made to different workers through one representative. Though all the payments were made through head of the team of workers, but in fact he was not the labour contractor but just the representative of the workers/labourers. He just collected the payments for the sake of convenience on behalf of others and distributed the same to them thereafter. He has further submitted that even otherwise the TDS was duly deducted on certain payments and remitted to the Govt. treasury but belatedly due to certain reasons. He has submitted that after deducting the expenditure on which the TDS was deducted and paid to Govt., at the most disallowance could be on the remaining amount of Rs.99,20,267/- only and not of Rs.2,84,08,853/- .

On the other hand the ld. D.R. has contended that the nature of payments to one person reveals beyond doubt that the said payments were made to the 3 ITA No.6552/M/2009 M/s. Vighnaharta Enterprises

labour contractor on whose behalf the labour work was got done through labourers. He has also submitted that any remittance of TDS after due date also invites disallowance.

4. We have heard the arguments of Ld. Representatives of both the sides and also perused the relevant material available with us. In the case in hand the assessee has claimed that though it had not deposited the TDS before the due date as was prescribed u/s 40(a)(ia) of the Act, however, he had deposited the TDS before the due date of filing of return. Admittedly, the section 40(a)(ia) of the Act has been amended by the Finance Act, (2010) to the effect that the due date for deposit of tax will be the due date as prescribed in sub section (1) of section 139 of the Act i.e due date for filing of return of income. The Ld. Authorised Representative (AR) of the assessee has invited our attention to the decision of the Hon'ble Delhi High Court in the case of "CIT vs. Naresh Kumar" (2013) 262 CTR (Del) 389 wherein the Hon'ble Delhi High Court has held that the amendment made to section 40(a)(ia) of the Act vide Finance Act, 2010 which states that the due date of deposit of TDS will be the date of filing of return u/s 139(1) is applicable retrospectively. While holding so, the Hon'ble Delhi High Court has relied upon another decision in the case of "CIT vs. Rajinder Kumar" (ITA No. 65/2013) and further in the case of "CIT vs. Jagannath Steel Corporation" to hold that where the statute is curative or merely declaratory of previous law, retrospective operation is generally intended. In view of the above decision of the Hon'ble Delhi High Court and in the absence of any decision to the contrary of our Hon'ble jurisdictional High Court of Bombay, it is to be held that the amendment to section 40(a)(ia) of the Act made vide Finance Act, 2010 is applicable retrospectively and if the payments have been deposited before the due date of filing of return, then it cannot be said to be a case of violation of provisions of 4 ITA No.6552/M/2009 M/s. Vighnaharta Enterprises

section 194C of the Act inviting disallowance u/s section 40(a)(ia) of the Act. Since the challan representing the payment of Rs.2,22,214/- was not produced before the lower authorities, hence , subject to the verification of the payment, we direct that the assessee's claim be allowed towards payment to the extent it exhibits payment of corresponding TDS by the due date of furnishing the return for the relevant year.

5. So far so the contention of the Ld. A.R. that even disallowance was not attracted since the payments were not made to the labour contractor but to the representative of the workers/labourers who had collected the payments for the sake of convenience and thereafter distributed the same to them, is concerned, we find that the issue needs fresh examination at the hands of AO. The AO is directed to give proper opportunity to the assessee to produce evidence in this respect including examination/cross examination of team leader or the respective payees as may be produced by the assessee for justification of its claim and then to decide the issue a fresh in accordance with law.

6. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 07.01.2015.

Sd/- Sd/- (R.C. Sharma) (Sanjay Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 07.01.2015. * Kishore, Sr. P.S.

Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai 5 ITA No.6552/M/2009 M/s. Vighnaharta Enterprises

The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.