Someshwat Real Estate Pvt.Ltd., ... vs Department Of Income Tax

Income-tax Officer, Ward Vs Someshwar Real Estate Pvt. 8(2), Ahmedabad. Ltd., 19, Sunvila Bunglows, Thaltej-Shilaj Road, Ahmedabad. (Appellant) (Respondent) PA No.AAHCS 8333A

Appellant by Shri M. K. Singh, Sr.DR Respondent by Shri Umaidsingh Bhati, AR

Date of hearing: 10/06/2015 Date of pronouncement: 12/06/2015

ORDER

PER N. S. Saini, Accountant Member.

This is an appeal filed by the Revenue against the order of CIT(A) -XIV, Ahmedabad, dated 25/07/2011.

2. Ground No.1 of the appeal is directed against the order of CIT(A) deleting disallowance of Rs.1,35,000/-made by the AO under section 40(a)(ia) of the Act on account of payment towards carting expenses.

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3. Brief facts of the case are that the AO observed that assessee made payment of Rs.57,000 to Hemaji Gopaji and Rs.78,000 to Jaruba Bharwad by cheques for carting of sand. This being expenses in nature of contract for labour, provision of section 194C was applicable. The assessee was asked by AO as to why TDS was not deducted from the above payments. The assessee submitted that the amount were credited on different dates and each amount did not exceed Rs.20,000/- hence TDS was not deducted. The AO invoking the provisions of section 194C held that though the amount credited did not exceed Rs.20,000 but at the time of payment the amount was paid in excess of Rs.20,000 and there were no separate contract and hence threshold limit of Rs.20,000 was applicable to the said payment. Accordingly he disallowed Rs.1,35,000/- under section 40(a)(ia) of the Act.

4. On appeal before the CIT(A) assessee produced vouchers for sand purchases and submitted that the payment was for purchase of sand and not for carting of sand. The assessee relied upon the decision of Hon'ble Gujarat High Court in CIT vs. Girnar Food & Beverage Pvt. Ltd. 306 ITR 23 where it was held that where there was a contract for supply of material i.e. sale of materials it cannot be termed as contract for work or labour and, therefore, the ITA No2474/Ahd/2011 3 Asst. Year 2005-06

provisions of section 194C were not applicable. The assessee also relied on the Board's Circular No.715.

5. The CIT(A) after considering the submissions of the assessee observed that since the payments were made for purchase of sands as evidenced by vouchers of sand purchases produced by the assessee which were ignored by the AO, it was a contract for supply of material and not for work or labour. Considering the decision of Hon'ble Gujarat High Court in the case of CIT vs. Girnar Food & Beverage Pvt. Ltd. (supra) where it was held that in case of contract for supply of material i.e. sale of material provisions of section 194C does not apply. Therefore, the CIT(A) deleted the addition.

6. The DR relied on the order of AO and the AR of the assessee supported the order of CIT(A).

7. We have heard the rival submissions and perused the orders of lower authorities and material available on record. The AO by invoking the provisions of section 40(a)(ia) of the Act made addition of Rs.1,35,000 on the ground that the assessee had made payment towards carting of sand and, therefore, assessee was liable to deduct TDS under section ITA No2474/Ahd/2011 4 Asst. Year 2005-06

194C of the Act which the assessee failed to do. The CIT(A) after examining the vouchers for purchase of sand submitted by the assessee before him was satisfied that the payments were towards purchase of sand and, therefore, the provisions of section 194C were not applicable to the assessee and deleted the addition by placing reliance on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Girnar Food & Beverage Pvt. Ltd.(supra) where it was held that in a case of contract for supply of material provision of section 194C are not applicable. The DR simply relied on the order of A.O. He could not point out any specific error in the order of CIT(A). He also could not bring any material to show that the payment of Rs.1,35,000 made by the assessee was towards carting of sand and not for purchase of sand. In absence of any such material being available on record, we find no good reason to interfere with the order of CIT(A) which is confirmed and the ground of Revenue is dismissed.

8. Ground No.2 is directed against order of CIT(A) deleting disallowance of Rs.7,60,095 made by AO under ection 40(a)(ia) of the Act.

9. Brief facts of the case are that the AO observed that the assessee had debited transport expenses of ITA No2474/Ahd/2011 5 Asst. Year 2005-06

Rs.10,92,702/- on which no TDS was deducted. From the details furnished by the assessee the AO observed that the following payments made to transporters were in excess of Rs.20,000 :-

Sl.No. Name of party Amount 1. Hitesh Transport 42000 2. Gayatri Transport 30625 3. Shreenath Transport 21300 4. Narendra V. Patel 37925 5. Bharat Merabhai Mudhva 36000 6. Gopiji Piraji Vanjara 38500 7. Shree Ganesh Earthmovers 32320 8. Hitesh Transport 42000 9. Nagraj Transport 23300 10. Nikul Transport 33000 11. Yogeshwar Fertilisers 21400

12. Shree Chamunda Transport Co. 22500

13. -do- 22500

14. Raxit Transport 32375

15. Harshad Transport 24050

16. -do- 24050

17. Hemaji Gopiji 30000

18. Shiv Transport 33300 ITA No2474/Ahd/2011 6 Asst. Year 2005-06

19. Shri Harshad Transport Co. 36975

20. Jay Vanzari Transport 41625

21. Rtilal B. Bharward 27000

22. Laxmanbhai B. Bharward 45975

23. Rajvi Transport 32375

24. Ganesh Transport Co. 29000 Total 760095

The AO, therefore, disallowed Rs.7,60,095/- by invoking provisions of section 40(a)(ia) for non-deduction of TDS under section 194C from the payments made to the transporters.

10. On appeal before CIT(A) the assessee submitted that proviso to section 194C (5) provides that no TDS was required to be deducted from the payments made if the amount of any single sum credited or paid or likely to be credited or paid to the contractor does not exceed Rs.20,000 and that the aggregate amount of such sum credited or paid or likely to be credited or paid does not exceed Rs.50,000. It was also submitted that sub-section (2) of section 194C provides that liability of TDS arises at the time of credit or payment whichever is earlier. In the case of the assessee both the conditions are fulfilled. In view of proviso to section ITA No2474/Ahd/2011 7 Asst. Year 2005-06

194C (5) the individual credits of the assessee company in each account does not exceed Rs.20,000 and the total payment in a year does not exceed Rs.50,000 hence no TDS is applicable in view of section 194C.

11. The CIT(A) after considering the submissions of the assessee held that in the case of the assessee it is noticed that individual credit in each account does not exceed Rs.20,000 and the total payment/credit in a year does not exceed Rs.50,000. The assessee had also produced copies of accounts of each person to whom transport expenses had been paid. In view of this factual position, no disallowance can be made under section 40(a)(ia) as the assessee was not supposed to deduct tax u/s 194C and deleted the disallowance.

12. The ld. DR supported the order of AO and pointed out from page 3 & 4 of the assessment order that payments made to all the 24 parties are also by single cheque exceeding Rs.20,000/- so the CIT(A) was not justified in deleting the disallowance. So his order may be set and that of the AO be restored.

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13. On the other hand submitted that disallowance or payment made to Hitesh Transport of Rs.84,000 may be confirmed as the payment made during the year exceeded Rs.50,000 and in the case of other parties he submitted that the addition was rightly deleted by the CIT(A).

14. A perusal of section 194C as was in force at the material time shows that a person was liable to deduct tax at source when payment in pursuance of a contract for work exceeds or likely to exceed Rs.20,000/-. Further it was also provided that if aggregate of the payment for work to a person exceeds Rs.50,000/- during the year then also the person responsible for making the payment is liable to deduct tax at source. Thus in our considered view if the assessee in pursuance of a single contract for work is required to pay Rs.20,000/- or more then the assessee is liable to deduct TDS or when payment in respect of a single contract for work does or does not exceed Rs.20,000/- but the aggregate of payment for work to a person during the year exceeds Rs.50,000/- then the assessee is also liable to deduct TDS. In other words if the aggregate payment for different contract for work exceeds Rs.20,000/- but does not exceed Rs.50,000/- in a year and the payment for a single contract for work does not exceed Rs.20,000/- then the assessee is not legally obliged to deduct tax at source.

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15. We find that aggregate of payment for work made to

Hitesh Contractor during the year was Rs.84,000/- and

therefore, the deletion of disallowance by the CIT(A) was not

justified.

16. In respect of the balance amount of Rs.6,70,095/- we find that the Revenue could not bring any material on record to show that in the above cases payment in respect of single contract was of an amount more than Rs.20,000/- or the aggregate payment for different contract for work exceeded Rs.50,000/-. Thus we do not find any good reason to interfere with the order of the CIT(A) in respect of deletion of Rs.6,70,095/-. We, therefore, modify the order of the CIT(A) to the extent mentioned hereinabove and partly allow this ground of appeal of Revenue.

17. In the result, the appeal of Revenue is partly allowed.

Order pronounced in the open Court on 12/06/2015

Sd/- Sd/-

(Rajpal Yadav) (N. S. Saini) Judicial Member Accountant Member

Dated : 12/06/2015

Mahata/- ITA No2474/Ahd/2011 10 Asst. Year 2005-06

Copy of the order forwarded to: 1. The Appellant 2. The Respondent 3. The CIT concerned 4. The CIT(A) concerned 5. The DR, ITAT, Ahmedabad 6. Guard File BY ORDER

Dy.Registrar, ITAT, Ahmedabad

1. Date of dictation:11/06/2015

2. Date on which the typed draft is placed before the Dictating Member:11/06/2015 other Member:

3. Date on which approved draft comes to the Sr. P. S./P.S.:

4. Date on which the fair order is placed before the Dictating Member for pronouncement: __________

5. Date on which the fair order comes back to the Sr. P.S./P.S.:

6. Date on which the file goes to the Bench Clerk: 12/6/2015

7. Date on which the file goes to the Head Clerk:

8. The date on which the file goes to the Assistant Registrar for signature on the order:

9. Date of Despatch of the Order: