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2013 (8) TMI 177 - AT - Income TaxDisallowance of Wages - whether disallowance of 10% of the expenditure under wages is not excessive - survey in the premises of the assessee proposing to assess the assessee company at 4% of net work completed - Held that:- Rule 3(2)(m) of Karnataka Value Added Tax Rules permits allowance of 30% towards labour and like charges in case of Works Contract as permissible deduction even in a case where books of accounts are not maintained or not reliable in arriving the taxable turnover under the said Act. In the instant case, the total expenditure claimed towards labour/wages is Rs.4,27,42,817/- on a gross contract turnover of Rs.19,00,15,348/-, which is below 30% of the labour and like charges permitted as allowable in absence of books of accounts and supporting documents. The assessee's books of account were audited u/s 44AB. The estimation of 10% for the purposes of disallowance is not made on any materials or comparative cases or there is any evidence that expenditure is not genuine, on the other hand, disallowance is made on adhoc basis. Thus AO is not justified in disallowing on an adhoc basis 10% of the total wages and the CIT(A) in sustaining the same. Therefore reversing the orders of the Income Tax authorities and direct that disallowance of 10% of total wages is uncalled for. In favour of assessee.
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