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2014 (6) TMI 110 - AT - Income TaxDisallowance made u/s 40(a) - Non-deduction of Tax - scope of term payable as on 31st March TDS u/s 194C - taking looms and other machineries on rent from sister concerns - Confirmation of entire expenses outstanding expenses - Held that:- A.O has only proceeded on the basis of presumption that the entire expenses are liable for TDS deduction. We are of the view that the entire expenses cannot be considered for disallowance u/s. 40(a)(ia) on the basis of presumption only as there is no material brought on record by the Revenue to suggest that the change in the policy of the Assessee in taking machines and other facilities of sister concern on rent was fictitious and therefore the addition made u/s. 40(a)(ia) is deleted. Further as per the Assessee if the entire expenses are disallowed, the Gross Profit ratio would work out to more than 35% as against the Gross Profit of 2.91% shown by the Assessee which is unrealistic The accounts of Assessee do not reflect the correct state of affairs of the Assessee ends of justice shall be met if the addition is made at ₹ 20 lacs in the trading result of the Assessee Decided partly in favour of Assessee.
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