Punjab-Haryana High Court
Commissioner Of Income-Tax vs Ess Kay Construction Co. on 7 August, 2003
Equivalent citations: [2004]267ITR618(P&H)
Author: Jasbir Singh
Bench: Jasbir Singh
JUDGMENT V.K. Bali, J.
1. By this common order we propose to dispose of Income-tax Cases Nos. 33, 36, 39, 40, 46, 48, 55, 56 and 57, all of the year 1989 as common questions of fact and law arise in all these cases. For facility of reference, the facts are being taken from I. T. C. No. 33 of 1989.
2. This is a petition under Section 256(2) of the Income-tax Act, 1961 (in short "the 1961 Act"), for the assessment year 1981-82. The petitioner herein seeks determination of the following questions, which are stated to be arising out of the Tribunal's consolidated order dated June 24, 1988, in I. T. A. Nos. 643 to 651/Chandi of 1985 for the assessment years 1981-82 to 1984-85 :
"(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that no consideration was paid and there was no contract and as such the provisions of Section 194C(2) of the Income-tax Act, 1961, could not come into play ?
(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the case was not intended to fall within the computation provisions of Section 201(1A) of the Income-tax Act, 1961, and the charging provisions of this section became inapplicable ?
(iii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that there was no sub-contract between the main firm and the recipient firm ?
(iv) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in deleting the penalty imposed under Section 221 of the Income-tax Act, 1961 ?"
3. The brief facts of the case are that the respondent herein is a firm and is stated to have entered into a contract with MES for construction of certain buildings. It allotted wholly/partly the construction work to M/s. Ess Kay Construction Co., Unit-II, M/s. Manoj Hemant Trust (MHT) and M/s. Shalini Mohit Trust (SMT), which are stated to have completed constructions and received payments in lieu thereof. The assessee being the contractor received the contract from MES, from which the tax was deducted by the former under the 1961 Act. The assessee did not deduct any tax from the payments made to MHT, SMT and Ess Kay Construction Co., Unit-II, as is required by the provisions of Section 194C(2) of the 1961 Act. On the premise aforesaid, the Income-tax Officer held the assessee to be a defaulter under Section 201(1A) of the 1961 Act and levied penalty under Section 221 of the 1961 Act vide three separate orders of default dated February 7, 1985. Being aggrieved by the aforesaid orders, the assessee filed appeals, which were dismissed by the Commissioner of Income-tax (Appeals). The second appeal of the assessee before the Income-tax Appellate Tribunal was allowed vide impugned order dated June 24, 1988. The applicant being aggrieved by the order aforesaid, prayed to the Tribunal for referring the questions of law as reproduced above but the said application was rejected. Hence, the present application under Section 256(2) of 1961 Act.
4. Before we may proceed any further in the case, it will be appropriate to reproduce Section 194C(2) of the 1961 Act, under which rule penalty has been imposed upon the assessee. The same reads thus :
"Any person (being a contractor and not being an individual or a Hindu undivided family), responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent, of such sum as income-tax on income comprised therein."
A finding of fact has been recorded by the Income-tax Appellate Tribunal that none of the units, namely, M/s. Ess Kay Construction Co., Unit-II, M/s. Manoj Hemant Trust and M/s. Shalini Mohit Trust had any contract with the assessee, i.e., the main firm. It was only by way of mutual arrangements that the aforesaid concerns executed some works and received payment in lieu thereof. It is not denied that so far as the assessee is concerned, with regard to work executed by it or by its sister concerns, tax was paid under Section 194C(1) of the 1961 Act. For arriving at the aforesaid conclusion in I. T. A. No. 646, it has been mentioned that the arrangement was between Ess Kay Construction Company (Ganga Nagar Works) on the one hand and Shalini Mohit Trust on the other hand as is apparent from page No. 24 of the paper book. Ess Kay Construction Company was not registered with MES authorities and did not enter into any contract. This concern was not a contractor within the meaning of Section 194C(1) of the 1961 Act and, therefore, the question of default in sub-contract did not arise.
5. A further finding of fact has been recorded that the assessee did not charge any commission from its alleged sub-contractors and as mentioned above, whatever tax was payable has since been paid by the main concern, i.e., the assessee, under Section 194C(1) of the 1961 Act.
6. Mr. N. L. Sharda, learned counsel appearing for the Department, however, vehemently contends that there was a contract between the assessee and its sister concerns and that being so, the provisions of Section 194C(2) of the 1961 Act would be attracted to the facts of this case. He is absolutely unable to substantiate this plea on any material that may have been brought on the record of the case. He is also unable to show from any material on the record that the assessee had charged any commission from its sister concerns. As to whether there was a contract between the assessee and its sister concerns, in our view, otherwise also is a question of fact. Once a finding has been recorded that there was no contract between the assessee and its sister concerns, there shall be no applicability of Section 194C(2) of the 1961 Act. The particular question in the present case appears to be a question of fact. Once we are upholding the findings recorded by the Income-tax Appellate Tribunal, no question of law as framed in these cases arise. Dismissed.