Trig Steels Pvt. Ltd., New Delhi vs Department Of Income Tax

ITO Vs. Trig Steels Pvt. Ltd. Ward-16(4) 586/6,Govindpuri, Kalkaji New Delhi New Delhi

(Appellant) (Respondent)

Assessee by : Sh. J.P.Chandrakar, Sr. DR Revenue by : None

Date of hearing : 10.02.2015 Date of Pronouncement : 13 .02.2015

ORDER

PER N.K.SAINI, A.M. :

This appeal by the department is directed against the order dated 07/03/2011 of C.I.T.(A) - XIX, New Delhi .

. 2 ITA No. 2719/Del/2011

2. During the course of hearing, nobody was present on behalf of the assessee neither any adjournment was sought. The notice of hearing was issued to the assessee vide RPAD on 15.10.2014. We, therefore, proceeded ex- parte qua the assessee and the appeal is decided on merit after hearing the Ld. DR. The only effective ground raised in this appeal reads as under :-

"On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 14,90,000/- made by the AO u/s 40(a) (ia) by incorrectly holding that the payment was made for purchase of sand and was not a contractual payment to a contractor for filling and leveling of land with sand."

3. Facts of the case in brief are that the assessee was engaged in

the business of assets stripping, trading in old machinery and scrap sale.

The return of income was filed on 26.10.2007 declaring an income of Rs.

40,400/-. Later on the case was selected for scrutiny during the course of

assessment proceedings. The A.O. noticed that the assessee had claimed

expenses of Rs.14.90 lakhs under the head 'direct expenses', he asked the

assessee to explain as to why provisions of Section 40(a) (ia) of the I.T.

Act 1961 (here in after referred as the 'Act' in short) should not be

applicable on this payment. The assessee submitted that it had acquired

land at Kavi Nagar Industrial Area, Ghaziabad valuing Rs. 3 crore from

Hon'ble Delhi High Court and thereafter incurred the expenses on the

development of land to make it saleable and in the process incurred an . 3 ITA No. 2719/Del/2011

expenditure of Rs. 14.90 lakhs for the purchase of sand which was used to

fill the land, hence provisions of Section 40(a) (ia) of the Act were not

applicable in its case. The AO, however, did not find merit in the

submissions of the assessee by observing that the assessee had used the

services of the contractor for getting this job done therefore the provisions

of Section 194-C of the Act were applicable and the assessee had not

deducted the TDS, therefore, the provisions of Section 40(a) (ia) of the Act

were applicable. He accordingly made the addition of Rs. 14,90,000/-.

4. Being aggrieved the assessee carried the matter of the Ld.

CIT(A) who deleted the addition by observing in paras 6.2, 6.3 and 7 of the

impugned order as under :-

"6.2 The Assessing Officer has disallowed the above amount of Rs. 14.90 lakh for purchase of sand on account of the fact that the TDS has not been deducted on the payments made for purchase of sand as per the provisions of section 40a(ia).

6.3 The assessee purchased the sand from the following persons/ parties and made the payments;

1. M/s Hindon Forge Pvt. Ltd.

2. M/s S.R.Industries

3. Shri Mohd. Khalid Qureshi

7. The AR stated that the AO is not correct in invoking provisions of Section 40a(ia) as the purchase of sand is direct purchase and there is no contract for carrying out any work (including supply of labour or carrying out any work) as envisaged in provisions of Section 40a(ia) and TDS provisions. The AO presumed that there is contract for getting the job of supplying of sand and made the disallowance. It is seen that the purchase of sand is on principal to principal basis, which does not require any TDS on the payments made for purchase . 4 ITA No. 2719/Del/2011

of sand. After careful consideration of the facts, there is no case for invoking provisions of S. 40a(ia) since there is no payment in terms of any contract for supply of labour and payment thereon. The facts of the case do not warrant application of provisions of TDS and disallowance u/s 40(a)(ia). The action of the AO is not justified."

5. Now the department is in appeal. The Ld. DR strongly supported

the order of the AO and reiterated the observations made in the

assessment order dated 14.12.2009. We have considered the

submissions of the Ld. DR and perused the material available on the

record. In the present case it appears that the assessee purchased the

sand for leveling land from the following parties.

"1. M/s Hindon Forge Pvt. Ltd.

2. M/s S.R.Industries

3. Shri Mohd. Khalid Qureshi"

The AO considered the above parties were contractors and was

of the view that the job was completed by the assessee through

contractors. However, nothing was brought on record to substantiate that

the purchase of sand was not direct or there was any contract for carrying

out any work. On the contrary, the purchase of sand was on principal to

principal basis which did not require any deduction of tax at source on the

payments made for purchase of sand. Therefore, the provisions of Section

40(a) (ia) read with Section 194C of the Act were not applicable and the . 5 ITA No. 2719/Del/2011

addition made by the AO was rightly deleted by the Ld. CIT(A). In that view

of the matter, we do not see any merit in this appeal of the Department.

In the result appeal of the department is dismissed.

( Order pronounced in the open court on 13 / 02/2015. )

Sd/- Sd/-

(I.P.Bansal) (N.K.Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated 13 Feb. 2015 B.Rukhaiyar

Copy forwarded to: - 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. CIT (ITAT), New Delhi