Greater Hyderabad Municipal ... vs Department Of Income Tax

Page 1 of 5 ITA Nos 506 to 513 of 2014 GHMC Hyderabad

Date of Pronouncement : 24.04.2015

ORDER

Per Smt. P. Madhavi Devi, J.M.

These are the Revenue appeals for the A.Ys 2009-10 and 2010-11 respectively against the order of the CIT(A), Vijayawada, dated 20.12.2013, in deleting the demand raised by the AO u/s 201 and 201(1A) of the I.T. Act.

2. Brief facts of the case are that the assessee is a Municipal Corporation. The assessee was deducting the TDS u/s 194C in respect of all contract payments as per the rates applicable. However, during the year under consideration, the GHMC Municipal Commissioner issued a circular on 12.11.2008 directing the DDOs of all the zones to deduct the TDS only on the contract margin of the contractors and not on the gross bills paid to the sanitation contractors. In view of the circular, the DDOs have not deducted the TDS on the amounts paid to the sanitation contractors. During the inspection conducted by the TDS Officers on the GHMC, these particulars were noticed. The AO held that as per the provisions of section 194C of the I.T. Act, the TDS has to be deducted on the gross amounts paid to the Contractors and not on the profit margin of the contractors. Assessee was therefore, requested to furnish the details of the gross amount paid to the sanitation contractors on which the TDS is not deducted or the TDS is deducted at a lower rate. Accordingly the assessee filed details of the amount on which the TDS is not deducted. After considering the details furnished by the assessee, AO held that the TDS was deductible on such payments and for failure to deduct the TDS, assessee is in

Page 2 of 5 ITA Nos 506 to 513 of 2014 GHMC Hyderabad

"assessee in default" u/s 201(1) and is also liable to pay interest u/s 201(1A) of the I.T. Act. He accordingly brought the amounts to tax.

3. Aggrieved, the assessee preferred appeals to the CIT (A) and the CIT (A) allowed the same holding that the amounts paid by the assessee to the sanitation workers is nothing but wages and its contribution to EPF and ESI and therefore, the provisions of section 194C have no application to the facts of the case. She held that the relationship is more in the nature of employee- employer relationship governed by section 192 of the Act. Against the relief given by the CIT (A), Revenue is in appeal before us.

4. The ld DR, supporting the orders of the AO, submitted that the GHMC i.e. assessee herein has been outsourcing the sanitation work and has been awarding the contracts to the self help groups in Andhra Pradesh and therefore, the payments made to the SHGs are nothing but contract amount liable for deduction of tax at source u/s 194C of the Act. He submitted that due to failure of the assessee to deduct tax at source and remit the same to the government account, assessee has been rightly treated as "assessee in default" u/s 201 and is also liable for interest u/s 201(1A) of the I.T. Act.

5. The ld Counsel for the assessee, on the other hand, submitted that the assessee has been engaging the members of the SHGs for carrying out sanitation work and the payments made to the SHG is nothing but the consolidated amount of all the workers put together and is not a payment made to any contractor for the work. The ld Counsel for the assessee has filed

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before us paper book which consists of proceedings of the assessee alloting the work to various SHGs and the bills for payment of wages to the workers for the months of May, 2009 to demonstrate that the payments were wages only and also the assessee's contribution to EPF and ESI and there was no profit element in any contract. The ld Counsel further submitted that the AO had made a similar disallowance in the case of Municipality at Mahaboobnagar and on further appeal to the CIT (A), the CIT (A) had called for a remand report from the AO who in the remand report accepted that the payments made to the SHGs was not liable to TDS provisions, based on which the CIT (A), had granted relief to the assessee therein. He submitted that the Revenue has not preferred any appeal against the said order of the CIT (A) and therefore, the orders of the CIT (A) before us need to be confirmed by following the principles of uniformity.

6. Having heard the rival contentions and the relevant material on record, we find that the main issue is as to whether the SHGs can be called as contractors. The GHMC has engaged and issued the poceedings in favour of the SHGs by lots and work has been allotted per unit by fixing the wages per person and also specifying the number of workers to be engaged for each unit and per shift. The working hours of the workers as well as the shifts are also specified in the notification. From the bills paid to the SHGs also, it is seen that the payment is made on the basis of number of mandays and wages per day and is not a fixed amount per month. Thus, it is clear that the allotment of work by the assessee to the SHGs is not by way of contract but is engagement of workers for a fixed period. The workers are being paid as per the agreed terms and conditions and the aggregate

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amount is paid to the group and not to any particular person. Therefore, as rightly held by the CIT (A), there is no contractor- contractee relationship but is more in the nature of employee- employer relationship as the assessee is also making contributions to the EPF and ESI and as rightly pointed out by the ld CIT (A), the payments made to an individual is not exceeding the prescribed limit u/s 192 of the I.T. Act, the TDS provisions are not applicable to the facts of the case before us. In view of the same, we do not see any reason to interfere with the order of the CIT (A) in all these appeals.

7. In the result, Revenue appeals are dismissed.

Order pronounced in the Open Court on 24th April, 2015.

Sd/- Sd/- (P.M. Jagtap) (P. Madhavi Devi) Accountant Member Judicial Member

Hyderabad, dated 24th April, 2015.

Vnodan/sps Copy to:

1. DCIT, Circle 14(2) (TDS), Range-14, IT Towers, 4th Floor, B Block Hyderabad

2. GHMC, Central Zone, Khairatabad, Hyderabad

3. GHMC, West Zone, Serilingampally, Near MRO Office, Serilingampally, Hyderabad 500019

4. GHMC, South Zone, Charminar, Hyderabad

5. GHMC, North Zone, East Marredpally, Secunderabad

6. GHMC, East Zone, Dilsukhnagar, Hyderabad

7. The CIT(A), Vijayawada

8. The CIT ( TDS) Hyderabad

9. The DR, ITAT, Hyderabad

10. Guard File

By Order

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