AO has disallowed the payment made by assessee to the labourers on the ground that TDS was not deducted u/s. 194C of the Act which was subsequently confirmed by the Ld. CIT(A).
Now the issue before us arises so as to whether the labourers are the employees of assessee or they are working in contractual capacity attracting the provisions of TDS. From the laborers register placed on pages 27 to 91 of the paper book, we find that the payment was made to individual labourers and not to the labour contractor. Therefore the individual labourers can be treated as employee of the assessee.
The employer is a person who controls and directs a servant or worker under an express or implied contract of employment. The employer accordingly is under obligation to pay him the salary or wages in compensation. Accordingly, an individual who works part-time or full-time under a contract of employment whether oral or written expressed or implied and he is liable to perform the duties as assigned. That person is called as employee.
In the instant case we find that the labourers are working under the direct supervision of the assessee. They have no other separate business organization. They are representing the organization of the assessee. Thus in our considered view there exists an employer and employee relationship between the assessee and labourers. The payment to the employees can be in the form of fixed salary plus incentive commission as mutually agreed.
