High Court Of Telangana And Andhra Pradesh
D.Rama Kotaiah & Co. Vs. ACIT
Section 198
L. Narasimha Reddy And Challa Kodanda Ram, JJ.
I.T.T.A. Nos.24 Of 2002 & 52 Of 2003
July 23, 2014
JUDGMENT
Challa Kodanda Ram, J. – These two appeals are filed under section 260A of the Income-tax Act, 1961 (for short, “the Act”), by the assessee raising the following common questions of law said to be arising from the orders dated March 29, 2001, of the Income-tax Appellate Tribunal (for short, “the Tribunal”), Visakhapatnam, in I. T. A. No. 1902/Hyd/1994 and I. T. A. No. 1903/Hyd/1994, for the assessment years 1988-89 and 1989-90, respectively.
“Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the appellant-assessee is not entitled to the credit of tax deducted at source on the amounts paid on sub-contract works ?”
2. Since the question of law is common to different assessment years, relating to the same assessee, it is being dealt with in a common judgment.
3. The brief facts leading to the filing the present appeals are that the assessee was a civil contractor and during the assessment years 1988-89 and 1989-90, he was assessed with respect to income arising from the works executed by himself as well as the works executed by the sub-contractor, on his behalf. A sum of Rs. 89,032 for the assessment year 1988-89 and Rs. 2,88,048 for the assessment year 1989-90 was credited to the account of the assessee in the form of tax deduction at source (for short, “the T. D. S.”) made by the principal. If the works were executed by the sub-contractor, the assessee was entitled only to 2 per cent. royalty on the gross receipts.
4. The Assessing Officer initially sought to bring to the tax the entire turnover relating to the contract to the extent it was executed by the sub-contractors and was also assessed in the hands of the sub-contractors, treating the same as the receipts of the assessee. In appeal and further appeals, the issues came to be settled finally by the order dated March 29, 2001, of the Tribunal, whereby the turnover relating to the sub-contracts corresponding to the T. D. S. amounts were deleted.
5. While passing the consequential orders to give effect to the order of the Tribunal, the Assessing Officer treated the T. D. S. amount as income of the assessee and brought the same to tax. The assessee filed appeals before the Commissioner of Income-tax (Appeals) and the same were allowed. The Revenue filed further appeal and the Tribunal found the order of the Commissioner of Income-tax (Appeals) is erroneous and thereby restored the order of the Assessing Officer. As against this order, the assessee is in appeal under section 260A of the Act raising the substantial question of law referred in paragraph No. 1.
6. Heard Sri A. V. Krishna Kaundinya, learned counsel for the assessee, and Sri J. V. Prasad, learned counsel for the Revenue.
7. The facts are not in dispute. The crucial aspect of the matter is as to whether the treatment accorded to the sum of Rs. 89,032 for the assessment year 1988-89 and Rs. 2,88,048 for the assessment year 1989-90 as T. D. S. in the assessment of the income of the assessee for the respective assessment years is sustainable in law. The contention of the assessee is that in the proceedings for the earlier assessment years, such amounts were not treated as income and the dispute has been settled through the orders of the Tribunal and thus the T. D. S. amounts are required to be given credit as such.
8. On the other hand, the contention of the learned counsel for the Revenue is to the effect that the disputed amounts are required to be treated as part of the income liable for assessment and the same cannot be treated as tax paid on behalf of the assessee but deserve to be treated as corresponding income.
9. We have considered the rival submissions and we do not find any error in the orders of the Tribunal. The crucial aspect of the matter is that at the time when the amounts were deducted by the principal while making payments to the sub-contractors, these amounts were deducted at 2 per cent. towards T. D. S. under section 194C of the Act. The said deducted amount was given credit to the assessee. On the premise the said amount representing the tax deduction at source at 2 per cent. the Assessing Officer brought to tax the corresponding turnover representing the T. D. S. amount. On appreciation of the facts on record, in particular, the nature of agreement entered into by the assessee with the sub-contractor, in the ultimate analysis the turnover relating to the contract executed by the sub-contractor was held liable to be deleted. In giving effect to the orders of the Tribunal, while passing the consequential orders, the Assessing Officer had deleted the amount relating to the T. D. S. which was treated as the income of the assessee under section 198 of the Act. This is on account of the fact that while making the original assessment, the Assessing Officer had already included 2 per cent. and 2.15 per cent. representing the royalty, the commission as part of the income besides treating the 2 per cent. T. D. S. amount also as income by virtue of section198 of the Act. In other words, the same amount was included twice in computation. After deducting the T. D. S. amount he also deducted Rs. 2,88,048 from the tax credit given. It is not representing that the T. D. S. on account of the fact that the turnover relating to the corresponding amount in fact was not treated as income of the assessee. The amount deducted initially as T. D. S. either can be treated as part of the income of the assessee or as representing and relatable to the receipts which are 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. S. came to be treated as part of the commission, which the assessee is entitled to receive under agreement entered into with the sub-contractor. The same is rightly treated as income for the respective assessment years. In that view of the matter, the assessee obviously is not entitled to the benefit of treating the amounts initially deducted as T. D. S. as part of the tax paid by the assessee. Therefore, the common substantial question of law which has been raised in the appeals is required to be answered against the assessee and in favour of the Revenue.
11. Accordingly, both the appeals are dismissed. There shall be no order as to costs.
[Citation : 368 ITR 441]
