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TMI Blog2019 (4) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... business of steel rolling and had filed its return of income for the assessment year 2005-2006 on 31.10.2005 declaring total income of Rs. 4,91,12,940 under the normal provisions of the act and Rs. 4,98,26,022 u/s 115JB of the Act. The assessment was completed u/s 143(3) of the Act on 28.12.2007 accepting the returned income. Later, this assessment was sought to be revised by issuance of show cause notice u/s 263 of the Act by the learned Administrative Commissioner (in short `the ld.CIT'), holding that the order passed by the ld.AO is erroneous inasmuch as it is prejudicial to the interest of the revenue, in respect of the following issue:- "It is seen from the Annexure to submissions made dated 28.12.2007, that the assessee company during the financial year relevant to AY 2005-06 paid Rs. 4,84,15,406/- in respect of angle conversion charges to seven parties viz. M/s.Eagle Steel, Vinar Ispat Ltd, R.S.Industries Ltd., Bhuwalka Steel Industries Ltd., Shri Venkatesh Steel, Industrial Manufacturers and Maharashtra Power Transmission Structures Pvt. Ltd. It is seen from the details of expenses claimed during the year that angle conversion charges have been paid at higher rates to gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jority of the job work during the year had been done by M/s.Eagle Steel and M/s.Vinar Ispat Ltd. The assessee furnished complete rate chart showing total cost incurred with respect to each and every party, more particularly with regard to these two parties. The assessee pleaded that the total cost paid to M/s Eagle Steel (sister concern) is less when compared to that of the payment made to M/s Vinar Ispat Ltd. Accordingly it was pleaded that the provisions of section 40A(2)(b) of the Act cannot be made applicable in the facts of the instant case. The ld.CIT however observed that the assessee has chosen to show that the total cost in respect of M/s.Eagle Steel at a lower side by showing burning loss less than M/s.Vinar Ispat Ltd. He observed that the aspect of burning loss has been framed deliberately to avoid the disallowance and evade taxes. He concluded that although the conversion charges of each of the four firms engaged in the angle conversion charges are different but burning loss of M/s Vinar Ispat Ltd. has been shown at Rs. 210 per MT more than the burning loss sustained by other three firms as the burning loss in the case of M/s Vinar Ispat Ltd. has been shown at Rs. 2094 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decide from time to time as per MOU entered with them. The price are depends on type of raw materials supplied to them, transport cost factor (who will bear the cost of transport) and urgency of the material (demand and supply factor). As per the MOU terms and condition, we are allowed certain percentage of loss to the conversion agent, which directly effect the cost of conversion. These depends upon the past experience and current market trend. During the year under assessment the major job works was done by two parties namely M/s Eagle Steels (situated at Taloja) and M/s Vinar Ispat Ltd. (situated at Chandrapur). M/s Eagle Steels was doing the job works for the supplies to be made by us for our customers, in around, Mumbai & Gujarat. Whereas the Vinar Ispat was doing the job works for supply to be made at Butibori (Nagpur), Jabalpur and Raipur. This division of works was made mainly to save the transport cost on raw materials and finished goods. Therefore, some tiny rate difference was there between the major job worker on average cost. This again effect the cost factor on size of the section of finished products, random length and fixed length and quality of the raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Raw material purchase (MT) 60,145.192 Average Raw material cost 20,932.00 Maharashtra Steels Rolling Mills Private Limited A.Y. 2005-2006 Annexure - 3 Details of conversion charges received. Name Address Qty. MT Amount K.E.C. International B-190, MIDC Area Butibori, Nagpur, Maharashtra 1867.69 4,987,134.00 Prakash Ispat Udyog Nagpur, Maharashtra 1475.62 2,715,124.00 R.P.G.Transmission Ltd Deori, Jabalpur 487.24 1,246,675.00 Sanvijay Rolling & Engg. Works 9, Immambada Road, Nagpur 966.00 1,738,800.00 Kalpataru Power Transmkission 101, Part-111, GIDC Sector 28, Gandhinagar. 1328.21 3,004,730.00 13,692,463.00 9. The aforesaid details submitted by the learned AR goes to prove clearly that the aspect of payment of conversion charges and job charges by the assessee to various parties including the related parties as specified u/s 40A(2)(a) of the Act together with the respective rate per MT paid to each of those parties thereon were thoroughly examined by the ld.AO in the course of assessment proceedings itself. The ld.AO, after examination of those factual details submitted by the assessee with corresponding evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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