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2012 (8) TMI 676 - AT - Income TaxDisallowance of expenditure towards labour and metal charges - CIT (A) reduced disallowance from 15% to 5% - Held that:- Considering the consistent stand of the assessee that contract work executed by it for AY under dispute involved laying new roads which require more expenditure towards labour charges and metal purchases unlike he earlier assessment year where the assessee under took repairs of existing roads, thus the CIT (A) has correctly observed that it is not possible to obtain vouchers for this type of expenditure and they have to be allowed on a reasonable basis - as the assessee had declared 11.5% which appears to be reasonable considering the nature of work executed by the assessee direction of CIT (A) to restrict the disallowance at 5% on total expenditure - in favour of assessee. Disallowance of departmental recoveries - CIT (A) deleted the addition - Held that:- The recoveries were made by the government departments towards quality control charges in case of every contractor and the assessee has also produced evidence before CIT (A) relating to the recoveries made by the department on consideration of which the CIT (A) has allowed deduction claimed by the assessee - No reason to interfere with the finding of the CIT (A) on this issue - in favour of assessee. Disallowed u/s 40A(3) - Held that:- It is an accepted practice in such nature of contract works that payments are made either daily or weekly to the labourer's through team leader (mestri) and such payment is recorded in single entry in cash book as it is simply not possible to make entries for payment made to each labourer as they are large in number. However, in reality, the payment made is an aggregate payment made to each labourer, if considered individually will be much less than Rs.20,000/-. In the aforesaid view of the matter, no disallowance u/s 40A (3)is called for considering peculiar facts of the case - in favour of assessee.
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