TMI Blog2015 (7) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... under sub rule 4 of the Rules. We do find that the FAA has not followed any of the sub section of the Rule 46A and has decided the matter without calling for remand report from the AO. In the interest of justice,we are remitting back the matter to the file of the AO for limited purpose of verification of the bills/vouchers not produced before him and furnished to the FAA for the first time.- Decided partly in favour of revenue TDS u/s 194J OR 194C - Disallowance being expenses on account of mixing supervision and packing supervision - TDS liability - Held that:- We find that the AO had made the disallowance as he was of the opinion that mixing supervision and packing supervision fell in the category of fees for technical services.He invoked the provisions of section 9(1)(vii)r.w.s.194J and 40(a)(ia). We find that he has not elaborated as to how the mixing and packing supervision can be termed fees for technical services-a term having its definite meaning.In our opinion,the FAA has rightly held that it was a pure and simple labour contract and was covered by the provisions of section 194C. - Decided against AO TDS u/s 194C - Disallowance of loading and unloading expenses u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 57,33.990/-. 2.First Ground of appeal is about deleting the disallowance of expenses,amounting to ₹ 6.87 lacs. During the assessment proceedings, the AO found that the assessee had entered into an agreement for manufacturing of biscuits with PPPL on 4.5.07 for a period of 2 yrs.,that the agreement contained rights/responsibilities and obligations of both the parties, that as per agreement primary role of the assessee was to manufacture biscuits out of the raw material supplied by PPPL , that the agreement provided for preservation of various material supplied by , that the assessee had debited ₹ 6.87 lacs to the P L account under the head expenditure of Maida, sugar, broken C-box handling.The AO held that these materials were supplied by PPPL. He directed the assessee to explain as to why the claim made by it should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 ₹ 3,31,574/-.During the assessment proceedings, the AO found that an amount of ₹ 3,31,574/- had been deducted from gross receipt towards Scrap empties recovery,He asked the assessee to explain as to why ₹ 3,31,574/- should not be added as income for the reason that the disputed amount was payable for prior period.He observed that the expenditure pertained to earlier year whereas assessee was following mercantile system of accounting,that the assessee had not produced bill/voucher for verification. Finally,he disallowed the claim made by the assessee. 3.1.Against the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocessing 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 responsibility which could not be presumed to be other than business consideration.Considering the business activities, manufacturing, distant place of business,the FAA held that the expenditure was genuine.He further held that most of the gunny bags and empties were lost or became obsolete or utilised in the business premises for restoring the goods, keeping safe the inventory or utilization of the such empties by the employees or workers,that possibility of such happenings could not be denied.Finally,he held that the expenditure claimed by the assessee was allowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 audit u/s. 44AB,that no adverse comment was placed by the auditors in that regard,that AO,before reaching to the conclusion of the services being of professional/technical nature,did not bring anything on record to prove his allegation, that no opportunity was provided to the assessee to put forth its contention.After considering the submissions of the assessee and the assessment order,the FAA held that the supervision charges paid for a contractual obligation were labour charges,that the mixing supervision and packing supervision was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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, that during the course of assessment proceedings ledger copy of the said expenses was produced before the AO,that the AO based on an analysis of the ledgers and based on the names mentioned in the narrations worked out the payments made to various parties and made the disallowance u/s 40(a)(ia) r.w.s. 194C of the Act.The assessee relied upon the cases of Indian Road Lines,Kalindi Agro Biotech Ltd.(7 ITR-TribJ 249),Deewan Chand (178 Taxmann 173),Laxrni Protein Products P Ltd.(3 ITR-Trib 768),R.R. Carrying Corporation (126 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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