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2012 (4) TMI 340 - AT - Income TaxDisallowance made u/s. 40(a)(ia) – hire charges - TDS u/s 194I or 194C - held that:- before taking a decision on the applicability of TDS u/s. 194C of the Act on a contract, it is required to be examined whether the contract is a 'contract for work' or a 'contract for sale'. TDS shall be applicable only where it is a 'contract for work' as per the principles laid down in para 7(vi)(a) of Circular No. 681, dated 8-3-1994 and Circular No. 13/2006, dated 13-12-2006. - as per Circular No. 558, dated 28th March 1990, the applicability of the provisions of section 194C will have to be examined with reference to the terms and conditions of each contract. - transactions of the assessee will fall under the provisions of Sec. 194-I of the Act, which is effective from 13/7/2006. Since the assessment year involved in this appeal of the assessee is 2006-07, which is prior to the amendment made by the Taxation Laws (Amendment) Act, 2006 w.e.f. 13/7/2006. - Decided in favor of assessee. Unexplained expenditure - Addition of Rs. 33,13,143/- u/s. 69C - There is no dispute to the fact that the payments in question related to the liabilities brought forward from earlier year, i.e. payments were made against the opening balance of liabilities of the assessment year under consideration. In such circumstances, by no stretch of imagination, provisions of sec. 69C of the Act do apply to such transactions. It is also not disputed that the payments have not been entered in the P/L Account and claimed as expenditure. In that view of the matter, we find no infirmity in the order of ld. C.I.T.(A) in deleting the addition of Rs. 33,13,143/- made u/s. 69C of the Act, which is upheld Regarding estimation of gross profit - The ld. C.I.T.(A) has elaborately discussed the issue and came to a reasonable conclusion that net profit @ 3% instead of 4.5% estimated by the ld. A.O. would meet the ends of justice under the facts and circumstances of the case. After careful perusal of the said observation/finding, we are inclined to uphold the direction given by the ld. C.I.T.(A) to the ld. A.O. to compute contract profit @ 3% in place of 4.5% - Decided in favor of the assessee
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