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2010 (2) TMI 940 - AT - Income TaxDisallowance of labour charges - process carried out by outside manufacturers – Held that: - average cost per carat of diamonds processed at the premises of the assessee is Rs. 378.71 but if done from outside is only Rs. 351 per carat. considering the labour charges in percentage of turnover, the manufacturing labour charges for the assessment year 2003-04 were 2.22 per cent., whereas in the year under appeal the same is only 1.30 per cent. Thus, the labour charges paid for outside manufacturing are all within limits as compared to the earlier assessment years. Assesse has maintained a complete record for issue of rough diamonds for processing and receipt back of polished diamonds after processing. The fact has not been denied by any of the persons examined by the Assessing Officer. Expenses being within reasonable limits as compared to earlier year and also within the industry norms are allowable as such. Total deletion of the disallowance as made by the Assessing Officer. Deletion of disallowance out of various expenses – Held that:- Assessing Officer has merely observed that personal use expenses cannot be ruled out and, hence, 10 per cent. of the expenses are disallowable. The assessee has been exporting diamond. In connection with export, foreign travel was undertaken and complete details were filed in this regard. Out of the total expenses incurred on account of saving labour, postage and angadia, factory expenses and foreign travelling expenses, 10 per cent. expenses are disallowed on ad hoc basis. The vouchers in this regard have been produced. When the major expenses is in relation to factory expenses, it cannot be said that they have any personal element. postage and angadia expenses also, there cannot be any personal element. Foreign expenses are exclusively for the purpose of business. Disallowance was rightly deleted by the learned Commissioner of Income-tax (Appeals). appeal of the assessee is allowed and that of the Revenue is dismissed
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