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2013 (10) TMI 775 - ITAT MUMBAIAddition made in respect of alleged inflated labour charges - Appellant had paid consolidated charges to the contractors towards Godown charges, inward transport, octroi, warpins, sizing, beam setter, dropin charges, weaving, jobber, clipping, folders, outward transport, Electricity, Mill stores spares, Lubricant and hamal charges which were claimed under the head labour charges – Held that:- The labour expenses in order to quality for allowance had to be incurred wholly and exclusively for the purpose of business. This is a typical case where the manufacturing was done by the concern using its own workforce but labour charges were paid to persons specified u/s 40A(2)(b) and or its employees who facilitated the assessee’s design. Thus, the expenditure was done to inflate the expenses and bring down the profit margin. The net profit percentage for various assessment years varies in a narrow range of 0.5% to 2%. Thus, it is inevitable to infer that there was indeed inflation of expenses. To ascertain the quantum of such inflation, it is pertinent to take into account that actual wage rate paid to the workers and the labour charges shown in the books of accounts. It is again an admitted position that the labour charges paid per meter of grey cloth were Rs.1.5 to 2 whereas the amount debited in the books was @ Rs.6.5 - Following the earlier orders of Tribunal restore the matter of inflated labour /job work charges to the file of the AO for his fresh consideration after giving due opportunity of hearing to the assessee.
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