Ito Wd 3- Haldia, Purba Medinipur vs Assessee

I .T.A . N o. 16 18 / KOL ./ 20 1 2 Ass es sm e nt ye a r: 2 00 8- 2 00 9

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IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA 'A' BENCH, KOLKATA

Before Shri P.K. Bansal, Accounta nt M em be r a nd Shri Rajpa l Yadav, Judicia l Membe r

I.T .A. No . 161 8 /KOL/ 2 01 2 Assess ment year : 2008 -2 00 9

Income Ta x Offic er,........ .............................. ..................Ap p ella nt Wa rd -3, Hald ia , Vill. - Ba su d evp ur, P.O. Kha nja nc ha Ha ld ia, Purba Med inipu r-721 602

-Vs.-

Sh ri Bija y Krishna Ja na ,....... ............... ..........................Resp ond e nt Ja sora , Ta mlu k, Purba Med inipu r-721 641 [PA N : A CN PJ 9103 G]

Appeara nces by : Shri Anjan P rasad Ro y, JCIT, Sr. D.R., for the Department N o n e, f or the as sessee

Dat e of concluding t he hearin g : April 29, 201 5 Dat e of pr onouncing th e order : 06 /05/2015

Per P.K. Bansal:

This app eal h as b een filed by the Revenue again st the ord er o f ld. Commissioner of Income Tax (App eal s)-XXXIII, Kolkata in Appeal No. 77/CIT(A )-XXXIII/ITO, Wd-3, Hal/10-1 1 dated 02.08.2 012 for the as se ssm ent year 2008-09 by taking th e followin g eff ective g round s of app eal:-

(1) That on the facts and in circumstances o f the case, th e ld.

CIT(A), Kolkata err ed in deciding th e a ppeal in contrav ention o f Ru le 46A of the I.T. Rules, 1962.

(2) That on the facts and in circumstances o f the case, th e ld.

CIT(A), Ko lkata erred in del eting th e disallowance of Rs.18,07 ,585/- made u/s. 40(a)(ia) of th e In come Tax Act, 1 961 for clear violation of section 194C of the Act.

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2. None app eared on behalf of the as sessee, even though the notice was duly served. We, therefore, decided to dispose of the ap peal af te r hea rin g the ld. D.R.

3. In resp ect of the G roun d No. 1, which rel ates to th e cont ravention of Rule 46A, the Bench is sp eci fically asked the ld. D.R. what fresh ev id ence h as be en sub mitted by the asses se e befo re th e ld. CIT(App eals). Ld. D.R. could not convince us about the f re sh evidence bein g p roduced before the ld. CIT(Appeals) so that i t co uld be held that there is a co ntrav en tion of Rule 46A. W e, therefo re, dismiss thi s ground.

4. Gro und No. 2 relates to the disallowa nce of Rs.18,07,585/- made under s ection 40 (a)(ia) of the Inco me T ax Act, 1961.

5. Brief facts relatin g to this ground are that the Asses sin g Offi ce r durin g the co u rs e of ass es sment proc eedings noted th at the asses see h ad mad e pay ment of wages and labour cha rge s amountin g to Rs.26,0 7,585/-. Out of the said su m, a sum of R s. 18,07,585/- has been p aid by the as se sse e throu gh five Lab our Sardars. The Assessin g Office r wa s of the view that the Labour Sard ars we re the sub-co ntracto rs and, therefo re, the provision of s ection 194C was clearly applicable an d th e assessee wa s liable to deduct TDS. Since th e asse ss ee ha s not deducted TD S, the Assessing Officer, therefo re, disallowe d a sum of Rs.18,07,5 85/- under sect ion 40(a)(i a) of the Act. Being aggri eved, the asses see went in appeal before the ld. CIT(App e als).

6. Ld. CIT(Appeals) d elet ed the di sallowan ce by o bservin g as u nder:-

"3. 2. I have consid er ed the f acts of the cas e. The dis all owance m ade by the As ses sing Of f icer was on the pr em is e that the f ive pers ons und er cons ider atio n wer e labour contractors of the appellant. However, the appellant has vehemently argued that the said persons were not labour contractors but labour sardars.. It may be mentioned here that labour sardar is different from labour contractor. The 'former term refers to leader of a group of labourers. Such a person is not a contractor providing labourers but he himself is a labourer. It is only because of some leadership I .T.A . N o. 16 18 / KOL ./ 20 1 2 Ass es sm e nt ye a r: 2 00 8- 2 00 9

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trait that he may act as a representative for the group of labourers. Employers often find it convenient to deal with such labour sardars instead of dealing with a large number of labourers directly. In such a case, employer generally makes aggregate payment of wages to the labour sardar, who distributes the sum among individual labourers. The material on record indicates that five persons under consideration fall in this category. In fact, perusal of the register of wages produced before the assessing officer and the undersigned shows that the names of the five persons, viz. Sri Sanat Kr. Maiti, Sri Radhakanta Samanta, Sri Sailen Guriya, Sri Ashok Ray & Sri Amit Jana figure in the list of labourers. In the register, on the first page for each month and site, the first name appearing in the list is ef one ::;T :he said five persons. They have accordingly received their wages by signing on wages reqister like other labourers. This clearly indicates that the said persons are themselves part of group of labourers, albeit as leaders. The jurisdictional bench of ITAT has held in the case of Samanvaya vs.ACIT,Cir.-2, Burdwan 34 SOT 332(Kol.) that payments to labour leaders / sardars are not in nature of payments to labour contractors and therefore, not liable to TDS u/s. 194C.

No evidence has been brought on record that payments to the five persons, viz. Sri Sanat Kr. Maiti, Sri Radhakanta Samanta, Sri Sailen Guriya, Sri Ashok Ray & Sri Amit Jana were in pursuance of any contract. It has been held in a number of decisions in the case of C.I.T Vs. United rice Land Ltd, (2008) 217 CTR (Punj & Har) 332, followed by several judicial authorities, including the jurisdictional High Court in the case of CIT vs Stumm India in ITA No.127 of 2009, that provisions of section 194C come into picture only if there some evidence to show that there was a contract, either written or oral, between the assessee and the payee. In the appellant's case no such evidence is present. On the contrary, the material on record indicates that the payments were not to labour contractor but to labour sardars and moreover was disbursed among labourers engaged by the appellant. Thus, the payment was in nature of wages. As stated earlier, jurisdictional bench of tribunal has held in the case of Samanvaya (supra) that labour . sardar are not contractors and, therefore, payment made to them is not liable labour at source under section 194C.

Respectively following the ratio of jurisdictional bench of Tribunal as well as other judicial authorities cited above. I hold that the payments to the five persons were not liable to deduction of tax at source. As a consequence, the provisions of section 40(a)(ia) are also not attracted in respect of the same. The disallowance is accordingly deleted".

7. We have heard the ld. Depa rtmental Represent ative and carefully co nsidered the same. We have also gone throu gh the orders of tax authorities belo w. We no ted th at the ld . CIT(Appeals) h as giv en a findin g of fact that the wages were p aid to the various persons th rou gh the Lab our Sard ars and the Sardars can no t be regard ed to sub-co ntracto r. Lab our Sard ar himself i s a labou r and is rep resent ative of th e grou p of labou rers. Th e issu e involv ed in this app eal is d uly cov ered by the decision of the Ko lk ata Bench of ITA T in the case of Samanvaya - vs.-

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ACIT, Circl e-2, Burdwan report ed in 3 4 SOT 332 (Kol.), in which it wa s held that the paym ent s to labour lead ers/ Sard ars are not in n ature of pay ment s to labour contracto rs an d, t herefo re, not liable to TDS unde r sect ion 194C. Ld. D.R. even though v ehem ently relied on the order of the Assessing Officer but could not p roduc e any evidenc e o r decision, which has t ak en a co ntrary v iew. W e, therefo re, co nfirm the o rder of th e ld. CIT(App eals).

8. In the result, the appeal filed by the Revenue stand s di smissed.

Orde r p ronounced in th e open Co urt on 06 t h May, 20 15.

Sd/- Sd/ - Rajpal Yadav P.K. Bansa l (Judi cial Member) (A ccounta nt M ember) Kolkata, th e 06 t h day of May , 2015

Co pies to : (1) Income Ta x Office r, Wa rd -3, Hald ia , Vill. - Ba su d evp ur, P.O. Kha nja nc ha Ha ld ia, Purba Med inipu r-721 602

(2) Sh ri Bija y Krishna Ja na , Ja sora , Ta mlu k, Purba Med inipu r-721 641

(3) Comm iss ioner of Income-tax (Appeal s) (4) Com mis sioner of Incom e Tax (5) The Depar tmental R epr es entative (6) Guard Fil e

B y order

Assistant Registrar Income Tax App ellate Tribunal Kolkata Ben ch es, Kolkata Laha/Sr. P.S.