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TMI Blog2015 (7) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... ision and packing supervision in view of the fact that these payments were made to technically educated persons and TDS thereon should have been u/s.194J as against TDS deduction made by the assessee u/s.194C. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in deleting the disallowance of Rs. 11 ,76,080/- on account of expenses for loading and unloading as the provisions of section 194C of the Act are applicable in respect of these payments, but the assessee did not deduct TDS on the payments made. 5. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored." Assessee is contract manufacturer of Parle Product Biscuits with Parle Products Pvt. Ltd(PPPL). It filed its return on 30.9.09 declaring income of 8.76 lacs.The AO completed the assessment , u/s.143(3) of the Act,on 19.12.11 determining the income of the assessee at Rs. 57,33.990/-. 2.First Ground of appeal is about deleting the disallowance of expenses,amounting to Rs. 6.87 lacs. During the assessment proceedings, the AO found that the assessee had entered into an agreement for manufacturing of biscuits wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reasonable or legal basis for disallowance of 6,87,530/- Finally he deleted the disallowance made by the AO. 2.2.Before us,the Departmental Representative(DR)supported the order of the AO. Authorised Representative(AR)argued that the assessee had incurred the expenditure for carrying out its business,that expenditure had direct nexus with completing the contract entered in to by the assessee with PPPL,that AO had ignored the terms of the agreement. 2.3.We have heard the rival submissions and perused the material before us.We find that as per the agreement dated 04.05.2007 the assessee had to perform certain functions and for that purpose it had incurred expenditure.The AO has not doubted the genuineness of the expenditure. The FAA has given a finding of fact that the AO had made the disallowance merely on presumption.The DR was not able to controvert the assertion made by the FAA.The assessee had furnished the details of the expenditure.In these circumstances,we are of the opinion that the order of the FAA does not require any interference from our side.So,confirming his order we decide ground no.1 against the AO. 3.Second ground is about deleting addition of Rs. 3,31,574/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystallised for the first time,that the said liability was enforceable on the assessee as per the terms of the agreement in the year under consideration,that same was correctly booked in the accounts of the company,that it was a legitimate business expenditure of the appellant company.The assessee placed reliance on the judicial pronouncements of Beekay Engg.Corpn(323ITR252),SRFLtd.(34SOT1),Yum Restauran -ts(India)(P.)Ltd.(224 CTR383).It also produced the copy of bill/voucher of PPPL for the month of June '08 showing such reduction of Rs. 3,31,574/- from processing charges payable to the assessee and stated that adjustment was as per Accounting standard-V. After considering the submissions of the assessee the FAA held that the expenditure related to the business of the assessee,that he had not appreciated the full facts in its entirety,that the expenditure was related to reduction of gross receipts on account of scrap empties recovery,that as per the policy and terms and conditions of the principal if such empties were not returned the principal was entitle to deduct the corresponding amount from the gross payment made to the assessee,that it was liable for such business respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the mixing supervising charges have been made to Deepak Ramesh Praiapati and Gaindlal,that packing supervision charge of Rs. 3,56,143/- were made ot Krishnakant Kodwani and others.The AO held that such payments were relating to the job which was technical in nature hence same was to be regarded fees for professional or technical services.Referring to the provisions of section 194 J and explanation 2 clause (vii) of subsection 1 of Section 9 of the Act,he disallowed the entire expenditure totaling to Rs. 8,37,979/-. 4.1.Before the FAA,the assessee submitted that it had divided its processes of manufacturing and the human interference under each process was hired upon to achieve the maximum precision, that supervision charges were paid towards the labor charges and TDS @ of 1% was deducted as there was no expertise or technical qualification required,that manufacturing processes was very standardized and documented,that PPPL personnel would come on sporadic visit,that charges were paid to contract labours who would load the material in the mixing machine or would pack the material,that it had deducted TDS u/s.194C of the Act,that the accounts of the assessee was subject to the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er,so,confirming the same ground no.3 is decided against the AO. 5.Last Ground is related to disallowance of loading and unloading expenses of Rs. 11,76,080/- made u/s.40(a)(ia) of the Act.According to the AO there were various parties to whom loading expenses more that Rs. 50,000/-were paid.He held that in such cases the provision of Section 194C were attracted.According to the AO the assessee had furnished the details of appearing in the ledger account vide its letter dated 24.10.2011 but thereafter it had neither attended nor had made any explanation regarding the applicability of Section 194C.The AO held that TDS had not been made in respect of loading expenses,that same had to be disallowed u/s.40(a)(ia) of the Act. 5.1.During the appellant proceedings before the FAA,it is argued that the loading expenses were incurred when the finished products were sent to various wholesalers and retailers for sale,that the unloading expenses were incurred when the various raw materials were received from PPPL for manufacturing process,that all the payments were made to persons who were daily wage earners and unskilled persons,that for them vouchers were made and signatures were obtained, ..... 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