2015 (2) TMI 162 - AT - Income Tax

G.P. addition - CIT(A) directing to calculate G. P. @29% on estimated sale of ₹ 3,75 crores instead of 32% on sales of ₹ 5 crores - Held that - CIT(A) had thus estimated the sales to be at ₹ 3.75 Crores as against sales of ₹ 3.50 Crores disclosed by the assessee which considering the totality of the facts appears to be reasonable and we, therefore, feel no reason to interfere with the order of the learned CIT(A) in estimating the sales at ₹ 3.75 Crores. As far as estimation of gross profit is concerned, ITAT estimated the gross profit at 30% for all the assessment years from 2001-02 to 2004-05. The learned CIT(A) after considering the factual position of the closure of Food Court for two months and due to increase in wages and salaries had considered the gross profit rate at 29% as against 26.21% worked out by the AO. We, therefore, feel no reason to interfere with his order as the learned DR could not controvert the findings of the learned CIT(A). - Decided against revenue. Disallowance on depreciation on vehicle - CIT(A) allowed the claim - Held that - CIT(A) following the decisions of his predecessors in the assessee s own case for earlier years 2004-05 to 2005-06 deleted the addition. As the assessee company had made payment for the vehicles and it is also reflected in the books of the company. Further, the vehicles were used for the purpose of the business of the assessee company, no reason to interfere with the order of the learned CIT(A).- Decided against revenue. Disallowance made u/s 40(a)(ia) - Non deduction of tds before making the payment for packing materials - Held that - The purchases on account of plastic trays, cups, spoons and plastic dishes etc. which did not carry the logo of the assessee and were in the nature of purchases. The purchases were of standardized material available in market. These submissions of the assessee could not be controverted by the Revenue by bringing any material evidence on record. We are, therefore, of the view that the purchases made by the assessee from the aforesaid three parties cannot be considered as being a case of contract which would require deduction of TDS u/s 194C of the Act and, therefore, no disallowance u/s 40(a) (ia) of the Act is called for. We, therefore, direct the AO to delete the addition made on this count. - Decided in fvaour of assessee.

Summary

Issues Involved:
1. Addition of gross profit.
2. Deletion of disallowance of depreciation on vehicle.
3. Confirmation of addition on account of disallowance made u/s 40(a)(ia) of the Act.

Detailed Analysis:

1. Addition of Gross Profit:
The primary issue in the Revenue's appeal was the addition of gross profit. The Assessing Officer (AO) estimated the sales at Rs. 5 Crores and the gross profit at 32%, resulting in a gross profit of Rs. 1,60,00,000/-. The AO added the difference of Rs. 67,60,535/- to the income of the assessee. The learned Commissioner of Income Tax (Appeals) [CIT(A)] reduced the estimated sales to Rs. 3.75 Crores and the gross profit rate to 29%, considering the factual position of the closure of the Food Court for two months and increased wages and salaries. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere as the estimation appeared reasonable and the learned Departmental Representative (DR) could not controvert the findings. Consequently, this ground of appeal by the Revenue was dismissed.

2. Deletion of Disallowance of Depreciation on Vehicle:
The AO disallowed the claim of depreciation on vehicles amounting to Rs. 1,45,000/- on the grounds that the vehicles were purchased in the name of the directors and not the company. The CIT(A) deleted this addition, following the decisions of his predecessors in the assessee's own case for earlier years. The Tribunal found no reason to interfere with the CIT(A)'s order, as the Revenue did not bring any evidence to controvert the findings. Thus, this ground of Revenue's appeal was dismissed.

3. Confirmation of Addition on Account of Disallowance Made u/s 40(a)(ia) of the Act:
The AO disallowed expenses aggregating to Rs. 2,91,445/- u/s 40(a)(ia) of the Act, as the assessee did not deduct TDS on payments made for packing materials which were specifically printed for the assessee. The CIT(A) confirmed the disallowance of Rs. 1,90,661/- but deleted Rs. 1,00,784/- subject to verification by the AO, as TDS was deducted at a lower rate for this amount. The Tribunal found that the purchases were standardized materials available in the market and did not carry the logo of the company, thus not constituting a contract requiring TDS deduction. Therefore, the Tribunal directed the AO to delete the addition made on this count, allowing this ground of the assessee's Cross Objection.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's Cross Objection. The order was pronounced in the open Court on 19-04-2013.