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2012 (7) TMI 479 - AT - Income TaxDisallowance of 50% of packing charges and labour charges - CIT(A) deleted the additions - Held that:- The assessee’s claim is cogent one that persons engaged in the packing are not skilled labourers and are paid cash as they are not having any bank account. Thus, there is no necessity to maintain detailed records of temporary workers who finished the work assigned to them in a short span of time and that as assessee has paid piece rate charges in these circumstances, the quantum of expenditure can be compared to production done by the labour - This shows that the percentage of labour charges and packing charges to the turnover compares favorably with the percentages of expenses claimed in the earlier and subsequent years. AO has made adhoc disallowance of 50% of packing charges and labour charges without pointing out the specific expenditure under those heads - in favour of assessee. Deletion of addition made on account of shortage in production by CIT(A) - Held that:- CIT(A) has given a finding that assessee is maintaining the complete details / particulars of opening stock, purchases, consumption, production and sales which were verified by the AO and accepted without pointing out any deficiency or defect in them. Thus in these circumstances provision of section 145(3) have been incorrectly resorted to by the AO. Furthermore, AO has partly rejected the books of account, which is not tenable - in favour of assessee. Addition on account of disallowance u/s 40(a)(ia) - Held that:- The assessee has made payments to the three transporters mentioned in the assessment order for each order of transport executed by them. As the assessee has no contract for transport with any transporter, thus each GR Note becomes a separate contract and since the value of such contract does not exceed Rs. 20,000/- the assessee was not required to deduct tax at source from the said payments - the Board Circular No. 715 dated 8.8.1995 comes to the rescue of the assessee - the AO has not brought on record any document to show that the assessee had contract with any transporter and thus just because the payments exceeded Rs. 50,000/- there was no implicit reason to hold that the payments were made in pursuance to a contract - in favour of assessee. Disallowance of commission paid to foreign agents - Held that:- As assessee has made the payment of commission to non-resident agents for business procured abroad. Thus, the nonresident agents operated outside the country, no part of their income arises in India. Further, since the payment was remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India - Board Circular No. 786 dated 7.2.2000 & CBDT Circular No. 23 dated 23rd July, 1969 is relevant for this case - CIT(A) has given a finding that in earlier years such expenditure have been allowed in the scrutiny assessment u/s. 143(3) - in favour of assessee. Disallowance of vehicle expenses and telephone expenses - CIT restricted the diss allowance to to 1/ 10th instead of 1/5th & 1/3rd respectively by AO - Held that:- 1/10th disallowance against the impugned expenses is reasonable and has been also so held by the tribunal in assessee’s own case in earlier year assessment year 2001-02 no point of rejecting the order of the Ld. CIT(A) - in favour of assessee. Deletion of addition on account of household expenses by CIT(A) - Held that:- Addition in this case has been made by the AO, in a purely arbitrary manner and without any basis and documentary evidence, thus deletion is warranted - in favour of assessee.
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