Itta/52/2003 Of D.ramakotaiah And Co.vij v. Asst.commi.of Income Tax Vij

* HON’BLE SRI JUSTICE L. NARASIMHA REDDYAND HON’BLE SRI JUSTICE CHALLA KODANDA RAM +I.T.T.A. Nos.24 OF 2002 & 52 OF 2003 %23.07.2014 I.T.T.A. No.24 OF 2002: M/s. D. Ramakotaiah & Co., And ..... Appellant Assistant commissioner of Income Tax, Circle-2, Vijayawada .....Respondent ! Counsel for the appellant: Sri A.V. Krishna Kaundinya ^ Counsel for respondent : Sri J.V Prasad < Gist: Head Note: ? Cases referred: Nil HON’BLE SRI JUSTICE L. NARASIMHA REDDYANDHON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. Nos.24 OF 2002 & 52 OF 2003 COMMON JUDGMENT:-(per Hon’ble Sri Justice Challa Kodanda Ram) These two appeals are filed under Section 260A of theIncome Tax Act (for short, ‘the Act’), by the assessee, raising thefollowing common questions of law said to be arising from theorders dated 29.03.2001 of the Income Tax Appellate Tribunal (forshort, ‘the Tribunal’), Visakhapatnam, in I.T.A.No.1902/Hyd/1994and I.T.A.No.1903/Hyd/1994, for the assessment years 1988-89 and 1989-90 respectively. “Whether on the facts and the circumstances of thecase, the Tribunal is right in holding that theappellant/assessee is not entitled to the credit of taxdeducted at source on the amounts paid on sub-contract works.” 2) Since question of law is common to different assessmentyears, relating to the same assessee, it is being dealt with, in acommon judgment. 3) The brief facts leading to filing the present appeals are that,the assessee was a Civil Contractor and during the assessmentyears 1988-89 and 1989-90, he was assessed with respect toincome, arising from the works executed by himself as well as theworks executed by the Sub-Contractor, on his behalf. A sum ofRs.89,032/- for the assessment year 1988-89 and Rs.2,88,048/-for assessment year 1989-90 was credited to the account of theassessee in the form of Tax Deduction at Source (for short, ‘theT.D.S’) made by the principal. If the works were executed by thesub-contractor, the assessee was entitled only to 2% royalty onthe gross receipts. 4) The Assessing Officer initially sought to bring to the tax, theentire turnover relating to the contract, to the extent it wasexecuted by the subcontractors and was also assessed in thehands of the subcontractors, treating the same as the receipts ofthe assessee. In appeal and further appeals, the issues came tobe settled finally by the order dated 29.03.2001 of the Tribunal,whereby the turnover relating to the subcontracts corresponding tothe T.D.S amounts were deleted. 5) While passing consequential orders to give effect to the order of the Tribunal, the assessing officer treated the T.D.Samount as income of the assessee and brought the same to tax. Assessee filed C.I.T appeals and the same were allowed. Revenue filed further appeal and the Tribunal found the order ofthe C.I.T is erroneous and thereby restored the order of theassessing officer. As against this order, the assessee is in appealunder Section 260A of the Act raising the substantial question oflaw referred in para No.1. 6) Heard Sri A.V. Krishna Kaundinya, learned counsel for theassessee and Sri J.V. Prasad, learned counsel for the revenue. 7) Facts are not in dispute. The crucial aspect of the matter isas to whether the treatment accorded to the sum of Rs.89,032/- forthe assessment year 1988-89 and Rs.2,88,048/- for theassessment year 1989-90, as T.D.S in the assessment of theincome of the assessee for the respective assessment years; issustainable in law. The contention of the assessee is that in theproceedings for the earlier assessment years, such amounts werenot treated as income, and the dispute has been settled throughthe orders of the Tribunal; and thus the T.D.S amounts arerequired to be given credit, as such. 6) Heard Sri A.V. Krishna Kaundinya, learned counsel for theassessee and Sri J.V. Prasad, learned counsel for the revenue. 7) Facts are not in dispute. The crucial aspect of the matter isas to whether the treatment accorded to the sum of Rs.89,032/- forthe assessment year 1988-89 and Rs.2,88,048/- for theassessment year 1989-90, as T.D.S in the assessment of theincome of the assessee for the respective assessment years; issustainable in law. The contention of the assessee is that in theproceedings for the earlier assessment years, such amounts werenot treated as income, and the dispute has been settled throughthe orders of the Tribunal; and thus the T.D.S amounts arerequired to be given credit, as such. 8) On the other hand, the contention of the learned counsel forthe revenue is to the effect that the disputed amounts are requiredto be treated as part of the income, liable for assessment and thesame cannot be treated as tax paid, on behalf of the assessee, butdeserve to be treated as corresponding income. 9) We have considered the rival submissions and we do notfind any error in the orders of the Tribunal. The crucial aspect ofthe matter is that at the time when the amounts were deducted by the principal while making payments to the subcontractors, theseamounts were deducted at 2% towards T.D.S under Section 194(C) of the Act. The said deducted amount was given credit to theassessee. On the premise the said amount representing the taxdeduction at source at 2%, the assessing officer brought to tax thecorresponding turnover representing the T.D.S amount. Onappreciation of the facts on record, in particular, the nature ofagreement entered into by the assessee with the subcontractor, inthe ultimate analysis the turnover relating to the contract executedby the subcontractor was held liable to be deleted. In giving effectto the orders of the Tribunal, while passing the consequentialorders, the assessing officer had deleted the amount relating tothe T.D.S which was treated as the income of the assessee underSection 198 of the Act. This is on account of the fact that whilemaking the original assessment, the assessing officer had alreadyincluded 2% and 2.15% representing the royalty, the commissionas part of the income besides treating the 2% T.D.S amount alsoas income by virtue of Section198 of the Act. In other words, thesame amount was included twice in computation. After deductingT.D.S amount he also deducted Rs.2,88,048/- from the tax creditgiven. It is not representing that the T.D.S on account of the factthat the turnover relating to the corresponding amount infact wasnot treated as income of the assessee. The amount deductedinitially as T.D.S either can be treated as part of the income of theassessee or as representing and relatable to the receipts whichare liable to be reckoned in the process of assessment. 10) In the present case, on account of the earlier proceedings,the amount received by the assessee on account of the T.D.Scame to be treated as part of the commission, which the assessee is entitled to receive under agreement entered into with thesubcontractor. The same is rightly treated as income for therespective assessment years. In that view of the matter, theassessee obviously is not entitled to the benefit of treating theamounts initially deducted as T.D.S, as part of the tax paid by theassessee. Therefore, the common substantial question of lawwhich has been raised in the appeals, is required to be answeredagainst the assessee and in favour of the revenue. 11) Accordingly, both the appeals are dismissed. There shall beno order as to costs. __________________________ L. NARASIMHA REDDY,J Date:23.07.2014.Note: L.R. copy to be marked.B/o.Gk ____________________________ CHALLA KODANDA RAM, J HON’BLE SRI JUSTICE L. NARASIMHA REDDYAND HON’BLE SRI JUSTICE CHALLA KODANDA RAM Gk I.T.T.A. Nos.24 OF 2002 & 52 OF 2003 Date:23.07.2014.