The Commissioner Of Income Tax vs Vellapally Brothers … on 4 June, 2010

       

  

  

 
 
  IN THE HIGH COURT OF KERALA AT ERNAKULAM

ITA.No. 1155 of 2009()


1. THE COMMISSIONER OF INCOME TAX,
                      ...  Petitioner

                        Vs



1. VELLAPALLY BROTHERS (CONSTRUCTIONS) PVT.
                       ...       Respondent

                For Petitioner  :SRI.JOSE JOSEPH, SC, FOR INCOME TAX

                For Respondent  :SRI.JOSEPH KODIANTHARA

The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice P.S.GOPINATHAN

 Dated :04/06/2010

 O R D E R
        C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ.
                         ---------------------------
                    I.T.Appeal No. 1155 OF 2009
                          --------------------------
                  Dated this the 4th day of June, 2010

                           J U D G M E N T

Ramachandran Nair, J.

Heard Sri. Jose Joseph, the learned standing counsel

appearing for the appellant and Sri. Joseph Kodianthara, the

learned senior counsel appearing for the respondent.

2. The only question raised in the departmental appeal is

whether the Tribunal was justified in allowing deductions of total

payment of Rs.9,06,604/- made by the respondent to three sub

contractors of which two of them are unrelated to the respondent

and the other is a related firm. The Tribunal allowed the claim for

the reason that the contract provided for payment to sub contractors

on receipt from the awarder namely, the Cochin Port Trust. The

learned standing counsel appearing for the appellant raised the

contention that it was a voluntary payment without any legal liability

and so much so, it is not entitled to be allowed.

3. We feel the crucial question that should have been

considered was whether the respondent has in fact made payments

to sub contractors during the previous year relevant for the

assessment year 1994-96 and recovered TDS on payments to sub

I.T.A.No.1155/09
2

contractors and whether the sub-contractors have accounted the

transactions and paid tax in their assessments. Even though learned

senior counsel appearing for the respondent produced assessment

order of the related assesee namely Vellapally Brothers

(Constructions) Pvt. Ltd, in so far as payments to others are

concerned there is nothing to prove assessments of the same

amounts in the hands of the sub contractors. Since none of the

authorities have considered this and Tribunal has allowed the claim

merely based on the scheme of payment in the original contract, We

feel the matter requires reexamination on these issues with regard to

the admission of income and payment of tax by sub contractors.

Since there is no provision for the sub-contractors for sharing of

award amount in arbitration proceeding between the respondent and

awarder, we are not able to uphold the Tribunal’s order allowing the

claim based on a provision in the contract providing for payment after

receipt from the awarder.

We therefore allow the appeal by reversing the order of the

Tribunal but remitting the matter to the assessing officer to verify

whether the respondent have deducted TDS and the sub contractors

I.T.A.No.1155/09
3

have offered the amount and paid tax. If this has happened, that is,

recovery of TDS and assessments of the same amounts in the

hands of the sub contractors, then we do not think department can

apply another yard stick in the case of the respondent as above. The

assessing officer should verify the position as to whether the

respondent has collected TDS on the amounts and the very same

amount is in the hands of contractors and if so to allow the

deductions or otherwise to disallow the claim.

The appeal is allowed to the above extent and in the way

stated above.

C.N.RAMACHANDRAN NAIR
(JUDGE )

P.S.GOPINATHAN
(JUDGE )
vps

I.T.A.No.1155/09
4

I.T.A.No.1155/09
5