TMI Blog2012 (9) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of non-deduction of TDS on payments made for ocean freight expenses. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of ₹ 1,49,882/- on account of under valuation of closing stock, in contravention of the provisions of section 145A of the Act. 2. The first ground of the Revenue s appeal is against the deletion of addition of ₹ 29,52,263/- out of repair expenses. The factual matrix of the case is that the assessee-company is engaged in the business of manufacturing of oil and Well chemicals. The Assessing Officer (AO) observed that the appellant claimed expenses under head store and spare and repair maintenance of ₹ 39,31,935/- as against the expenses of ₹ 8,58,385/- claimed in previous year. He had given reasonable opportunity of being heard for increase of expenses substantially compared to previous year. After verifying the details of repair and maintenance expenses, the AO allowed 25% i.e., ₹ 9,84,047/- out of ₹ 39,36,351/- and remaining expenses of ₹ 29,52,263/- was added in the income of the assessee. Being aggrieved by the order of Assessing Officer, the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppraisal of the particulars that the expenditure is for repairs and replacements of existing machinery. The incurrence of expenditure has neither increased the capacity nor has resulted in any enduring benefit. It is also a known fact that the chemical plants are subjected to larger wear and tear due to exposure to acids and hazardous gages. The assessee s plant was installed very long back in the yare 1985-86 and considering the gross block of plant machinery and buildings at ₹ 1.86 crores and ₹ 89.11 lakhs, the expenditure on repairs maintenance and spares cannot be considered as unreasonable as such expenditure has actually improved the yield and efficiency. Moreover, the contention of the assessee with regard to safety and environmental controls necessitating the expenditure on repairs maintenance also cannot be denied. I find that the Assessing Officer himself has allowed the expenditure to an extent of 25% of the total as revenue expenses without actually identifying the items wise expenses which are considered by him as capital in nature and that his observations and findings are only general. It appears that the Assessing Officer was swayed by the increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed before the AO that manufacturing plant remained closed for the period of 01-07-2005 to 22-11-2006 and thereafter trial production was taken. Regular production could not be started but this contention of the appellant could not find reasonable for declining in the GP rate. The assessee had changed the production of the company of pipe lax fab during the year. The assessee had not produced batch-wise production and batch-wise register for verification to the AO. There was no production but the closure of production had no bearing on GP as it is to be compared of percentage of sale there was addition in plant and machinery of ₹ 252.04 lakh; in building of ₹ 2.39 lakh. There was consumption of raw material during the year. Therefore the AO estimated the income by applying of 24% GP rate as against 50.70% and addition of ₹ 44,68,426/- was made in the income of assessee. Being aggrieved, the assessee carried the matter before ld. CIT(A). The ld. CIT(A) has been given detailed finding in his order at pages 8 to 13 and allowed the appeal. The observation of ld. CIT(A) in para-4.3 reproduced as under:- 4.3 I have considered the submissions of the ld. AR and fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P rate and GP rate is relatable term on gross sale when production stopped during the year, the GP rate is not affected by the closure of manufacturing process. Whatever produced by the assessee, the GP is rated on same production. The AO estimated GP rate at 24% which appears to be higher side. Therefore, we restrict the GP addition @ 10% in the interest of justice. The Assessing Officer is directed to recalculate the income on the basis of GP rate @ 10%. This ground of Revenue s appeal is partly allowed. 8. Coming to Revenue s ground No.3 is against the deleting the addition of ₹ 3,71,878/- u/s 40(a)(ia) of the Income-tax Act, 1961 ( the Act hereinafter). The AO observed that the assessee incurred expenditure Ocean freight of ₹ 3,71,878/- as was provisions of u/s. 194C of the Act. The assessee was required to deduct the TDS on the payment made to the Ocean freight of ₹ 3,71,878/- but the assessee had not deducted any TDS on these payments. After giving reasonable opportunity of being heard by the AO, addition of ₹ 3,71,878/- was made u/s. 40(a)(ia) of the Act. Being aggrieved by the order of Assessing Officer, assessee filed appeal before ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. It has nothing to do with the activity carried out by the assessee. The Board Circular No. 723 (supra) clarifies both the provisions of section 172 of the IT Act and section 194C of the IT Act and it is provided that in such case the provisions of section 172 of the It Act would apply and no deduction of tax is required as per section 194C of the IT Act. It is also clarified that that since the agent acts on behalf of the non-resident ship owners or charter, he steps into the shoes of the principal and accordingly, provisions of section 194C of the OT act would not apply in the case of the assessee. The AO has also not made out any case that the assessee has paid any amount to the residents. Therefore, provisions of section 194C of the IT Act have been wrongly applied in the case of the assessee. The learned CIT(A) was, therefore, not justified in remanding the matter to the file of the AO for verification of the details of expenses and deposit of the tax. The direction given by the learned CIT(A) is contrary to the above provisions of law. In view of the above discussions, we do not approve the findings of the authorities below. The orders of the authorities below are acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
