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2016 (11) TMI 800 - MADRAS HIGH COURT

2016 (11) TMI 800 - MADRAS HIGH COURT - [2016] 388 ITR 11 - Allowance of payment made towards sub-contractors - genuity of expenditure - Held that:- In the instant case, the work said to have been executed by the sub-contractors is not found as unconcerned or unconnected to the work undertaken by the assessee and hence the claim of payment made for such work by the sub-contractors deserves to be accepted as a genuine expenditure incurred by the assessee. - All payments made through banking c .....

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eal against the order of the Assessing Officer, relating to sub-contracting a part of his work. There is nothing to doubt, in such circumstances, regarding the genuineness of payments effected through banking channels in favour of the two sub-contracting agencies. - Decided in favour of assessee - Tax Case Appeal No. 350 of 2016 - Dated:- 7-9-2016 - Nooty Ramamohana Rao And Dr. P. Devadass, JJ. For the Appellant : J. Narayanasamy, Senior Standing Counsel For the Respondent : M. P. Senthilkumar J .....

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enditure of ₹ 2.38 crores claimed by the assessee as payment made towards sub-contractors can be allowed as deduction, even though the assessee had not filed any supporting bills or any other evidence for the expenses debited in the assessee's books of account ?" 2. The assessee is engaged in manufacturing/trading of "material handling equipment" like belt conveyors, screw conveyors, elevators, pipe conveyors and other similar products. The assessee has claimed certain e .....

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of account towards the end of the financial year as convenient/adjustment entries which are normally resorted to for reporting less quantum of profit arising out of business/trading activity undertaken by the assessee. On the above basis, the Assessing Officer has disallowed the amount of little more than ₹ 2.38 crores. 3. The assessee preferred an appeal to the Commissioner of Income-tax (Appeals). During the course of consideration of the appeal, the assessee has presented certain addit .....

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eon. It is thereafter, the appellate authority has held that the material additionally produced by the assessee is acceptable as the assessee has produced the proprietaries of both the sub-contracting agencies namely M/s. Erections India and M/s. Tekno Conveyor for examination, who have confirmed that they have carried on sub-contract work for the assessee in the project entrusted by the principal to the assessee. In the face of such material and also in view of the fact that the tax deducted at .....

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noticed at the very outset is that during the course of execution of the project, the two sub-contracting agencies have intimated, from time to time the running work progress details to the assessee which contained the details of quantity of structural steels of the executed work, for the verification and approval of the assessee. Any such arrangement pre-supposes the existence of a sub-contracting agency as otherwise there was no necessity for the so called sub-contractors to make available the .....

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n at all. In the instant case, the principal of the assessee namely M/s. Vedanta have issued mechanical completion and commissioning completion certificate to the assessee in respect of Bauxite Grinding and Modification Conveyors Work, a part of the said work is what turned out to have been sub-contracted by the assessee. Some of the payments made by the assessee are found through the banking channels and hence the Tribunal accepted the same as payments made to a sub-contractor. 5. Sri J. Naraya .....

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ocess of payments is not a substitute method for proving the same as genuine payment, which is required to be established. Though we see considerable force behind the submission of Sri J. Narayanasamy, the payments made through banking channel are not a substitute method for establishing the genuineness of the payment so made, but, however, the same is a strong indicating circumstance of the existence of an obligation to make payment at the first instance. In the instant case, the obligation tha .....

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the assessee from a third party would not have arisen. So long as the said running work details are not discredited as totally unconnected to the work which the assessee was required to execute towards its principal, the theory of sub-contracting that part of the work, set up by the assessee gains credibility. Though for all practical purposes and intent, it is safe to make payment through banking channel, for the sake of accounting convenience, but any such payment would pass muster as a genuin .....

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