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2016 (3) TMI 542 - ITAT AHMEDABAD

2016 (3) TMI 542 - ITAT AHMEDABAD - TMI - Addition on account of cessation of liability u/s 41(l) - CIT(A) deleted the addition - Held that:- Assessee has himself agreed for the addition vide note sheet dated 22.12.2009 in the file of ld. Assessing Officer but the same has not been given any cognizance by the ld. CIT(A) in his appellate order. When the assessee himself is agreeing to the addition in the given circumstances, when the sundry creditors of ₹ 62,62,863/- were outstanding for so .....

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for statistical purposes.

Disallowance of labour charges - non deduction of tds u/s 194C - CIT(A) deleted the addition - Held that:- As during the course of assessment proceedings proper information and evidences were not supplied before the Assessing Officer for examining the applicability of provisions of section 194C of the Act on the labour contract charges of ₹ 17,79,855/- as to whether the complete amount of ₹ 17,79,855/- is liable for tax deduction at source u/s 19 .....

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5/- and also classify the respective heads i.e. TDS not required to be deducted/ TDS to be deducted @ 1%/TDS deducted @ 2%/value of goods sold wrongly mentioned under the head labour contract charges.- Decided in favour of revenue for statistical purposes. - ITA No. 470/Ahd/2011 - Dated:- 15-3-2016 - Shri Kul Bharat, JM And Shri Manish Borad, AM For the Petitioner : Mrs. Sonia Kumar, Sr.DR For the Respondent : None ORDER Per Manish Borad, Accountant Member This appeal of the Revenue is directed .....

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ssioner of Income tax (A) has erred in law and on facts in deleting the addition of ₹ 17,79,855/- made on account of disallowance of labour charges.. 3. On the facts and circumstances of the case , the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. 4. It is , therefore , prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored. 2. Briefly stated facts as culled out from the as .....

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ty u/s 41(1) of the Act at per para no.3 Rs.62,62,863/- 2. Labour charges u/s 40(a)(ia) of the Act as per para no.4 Rs.17,79,855/- Total Rs.80,42,718/- Aggrieved, assessee went in appeal before ld. CIT(A) who deleted the addition for cessation of liability u/s 41(1) of the Act ar ₹ 62,62,863/- and partly deleted the disallowance u/s 40(a)(ia) of the Act by sustaining it to ₹ 5,33,965/- at the place of ₹ 17,79,855/- Aggrieved, Revenue is now in appeal before the Tribunal. 3. Non .....

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y reason given by the assessee during the assessment proceedings for non-payment of such sundry creditors was due to the dispute with supplier on account of quality of goods supplied by them. The ld. Assessing Officer was not convinced with the reply of assessee because in the normal course of business supplier cannot wait so long for receiving money for sales made by him and as the assessee has claimed the amount of purchases made from such sundry creditors in previous years and nothing has bee .....

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gainst the addition of ₹ 62,62,863/- on account of Cessation of liability u/s. 41(1} of the Act. It was noticed by the assessing officer that in the Balance sheet, there were 31 creditors outstanding for more than three years as detailed at para-3 of the assessment order. It was observed by the A. O. that these liabilities are shown outstanding for abnormally prolong period. According to the assessing officer these liabilities are under the ambit of section 41(1) of the I. T. Act, 1961. Du .....

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para-3.9 of the assessment order, the A.O. observed as under :- "3.9 . .In view of the above discussion, it is held that though the assessee has not written off the above creditors in its books of account, however, the facts and the surrounding circumstances do suggest that these liabilities are no more required to be paid, therefore, the provisions of section 41(1) clearly ;/ apply on such transactions. Also the assessee vide note sheet dated 22-12- 2009 agreed for the proposed addition. .....

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were of out station, we had demanded the confirmation from our own side and further requested the Id. ITO to call for the direct confirmation from the creditors as provided under section 133 of the I. T. Act, 1961. But due to last week of month for completion of assessment, the Id. A.O. had made the addition without considering the concerned fact. So in this regard, if you think it fit and wish to consider the additional evidences, we are ready to provide the confirmation in respect of remaining .....

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ing for more than three years. The provisions of Sec. 41(1) come into play when the assessee obtains in cash or in kind any amount out of the expenditure allowed earlier. Alternatively the assessee must have obtained benefit by way of remission or cessation of trading liability. The third scenario in the provisions can be invoked is when the assessee unilaterally writes-off the liability. In the instant case none of the above-mentioned events took place. Therefore invocation of the provisions of .....

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more. In the normal course of business depending on the type of goods someone is dealing in there is always a payment cycle for recovering amount from debtors as well as paying amount to supplier of goods which normally by no canon can be more than a year except for some exceptional circumstances. This does not seem to be a case of assessee because out of total 31 sundry creditors of ₹ 62,62,863/- outstanding for more than three years means that this amount has been claimed as purchases in .....

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of account because there is every possibility that some of the sundry creditors are not genuine and happen to be a bogus purchase for which no amount was actually required to be paid and if this be a situation then there actually arise a cessation of liability. 7. We observe that in the assessment order ld. Assessing Officer recorded following at para 3.9 which reads as under :- 3.9 In view of the above discussion, it is held that though the assessee has not written off the above creditors in it .....

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nishing inaccurate particulars of income. 8. From the above para we understand that assessee has agreed to the proposed addition to be made because assessee was unable to provide the requisite information in order to prove the genuineness of the sundry creditors. Assessee has mentioned before the lower authorities that some of the confirmations were received by the assessee and some of the parties have not replied to the letters of assessee, but in our view such reply creates serious doubt that .....

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manner and only the relevant facts and circumstances are required to be taken into consideration to judge the real character of the issue under consideration and also Hon. Supreme Court in the case of Sumati Dayal vs. CIT 214 ITR 801 has held that in absence of any direct evidences, the surrounding circumstances and other relevant factors would be proper base to judge or decide any issue under taxation matter. 9. From going through the above referred decisions of Hon. Supreme Court we are of th .....

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and final treatment in the books of account in the year under appeal or in the following years. 10. We further observe that assessee has himself agreed for the addition vide note sheet dated 22.12.2009 in the file of ld. Assessing Officer but the same has not been given any cognizance by the ld. CIT(A) in his appellate order. When the assessee himself is agreeing to the addition in the given circumstances, when the sundry creditors of ₹ 62,62,863/- were outstanding for some three years or .....

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for statistical purposes. 11. Now we take up ground no.2 which relates to deletion of addition of ₹ 17,79,855/- made on account of disallowance of labour charges. Question was raised by ld. Assessing Officer that labour charges of ₹ 17,79,855/- has been deducted to the profit and loss account during the year without deducting tax u/s 194C of the Act and in reply to the same vide letter dated 18.12.2009 assessee submitted as under :- "You have requested to furnish explanation re .....

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ills on us for labor work done by them, the work and payment for labor is not contractual payment but it is labor purchase. These facts will be evident from the verification of statement of accounts of all parties filed herewith for your consideration. Since this not contractual payment but it is payment for labor purchase and hence no deduction of tax is required to be made at source." However, ld. Assessing Officer was not convinced with the reply of assessee as he could not put forth any .....

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ticles was made by the appellant, on which sales-tax was paid. It is further contended that the labour component of the work is around 30% of the total payment and therefore the disallowance may be restricted to 30% of the payments. Having considered the 'acts of the case, I am inclined to accept appellant's contentions. Disallowance of ₹ 5,33,965/- (being 30% of the total payment] is upheld. Balance disallowance is deleted. This ground of appeal is partly allowed. 13. Ld. DR suppo .....

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n the basis of actual figure i.e. the amount of work contract as well as individual bill of labour contract charges and also the parameter of total labour contract charges paid/payable to a single person during the year. In case if the bills of labour contract charges are separately depicting value of goods and the value of services then bifurcated details of these amounts needs to be ascertained. But in no case can it be estimated as the way ld. CIT(A) has done by observing that the labour paym .....

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