2015 (12) TMI 1070 - HC - Income Tax

TDS u/s 194C - Addition on account of labour charges - Held that - As decided in Commissioner of Income Tax, Faridabad vs. M/s Ram Gopal & Sons 2015 (8) TMI 177 - PUNJAB & HARYANA HIGH COURT the assessee claimed deduction in respect of labour charges paid to about 50 labourers. The Assessing Officer reduced this amount having come to the conclusion that only a few labourers were traceable at the given addresses and some of the addresses were not even confirmed. The Tribunal kept in mind the ground realities in such cases.There were comparable results in expenses of labour charges in earlier years. The deductions were allowed to the assessee. The quantum of expenditure can be compared to the production done by the labour. The labour was engaged on piece rate bases. It was found that there was a co-relation between the production as well as the number of labour engaged. The issue really is a question of fact and appreciation of facts. We are unable to say that this analysis and the findings of the CIT(A) and of the Tribunal are perverse or absurd. - Decided in favour of the assessee. Addition on account of shortage in production - Held that - As decided in Commissioner of Income Tax, Faridabad vs. M/s Ram Gopal & Sons 2015 (8) TMI 177 - PUNJAB & HARYANA HIGH COURT the Assessing Officer made an addition to the assessee s income having rejected the assessee s case that there was a shortage in production. The CIT(A) found, as a matter of fact, that the assessee had been maintaining the complete details/particulars of opening stock, purchase, consumption, production and sales, which were in fact verified and accepted by the Assessing Officer. The finding is that the addition was made purely on imagination and assumptions without bringing any documentary material on record. The finding is neither absurd nor perverse. - Decided in favour of the assessee. TDS u/s 194C - Disallowance under section 40(a)(ia) - Held that - The assessee has made payments to the three transporters mentioned in the assessment order for each order of transport executed by them. The assessee has no contract for transport with any transporter. Thus each GR Note becomes a separate contract and since the value of such contract does not exceed ₹ 20,000/- the assessee was not required to deduct tax at source from the said payments. It was further submitted that this is also borne out by the Board Circular No.715 dated 8.8.1995 - Decided in favour of the assessee.

Summary

Issues Involved:
1. Deletion of addition on account of labour charges.
2. Deletion of addition on account of shortage in production.
3. Deletion of addition on account of disallowance under Section 40(a)(ia) of the Income Tax Act, 1961.

Detailed Analysis:

1. Deletion of Addition on Account of Labour Charges:
The revenue contested the deletion of Rs. 13,04,528/- added by the Assessing Officer (AO) for labour charges. The AO had based the disallowance on comparisons with two other manufacturers, concluding that the assessee inflated labour charges to reduce taxable income. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition, relying on a previous Tribunal decision in the assessee's favor for the assessment year 2001-02. The Tribunal upheld the CIT(A)'s decision, citing consistency with earlier judgments. The High Court referenced its own decision in a similar case, affirming that the issue was factual and the Tribunal's analysis was neither perverse nor absurd.

2. Deletion of Addition on Account of Shortage in Production:
The revenue challenged the deletion of Rs. 20,97,572/- added by the AO for alleged production shortages. The AO rejected the assessee's reported production shortage of 7.19%, deeming it abnormally high, and applied a 3.7% shortage rate instead. The CIT(A) deleted this addition, noting the assessee maintained detailed records that were verified by the AO. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's addition was based on assumptions without documentary evidence. The High Court reiterated its stance from a similar case, confirming that the matter was factual and the findings were neither absurd nor perverse.

3. Deletion of Addition on Account of Disallowance Under Section 40(a)(ia):
The revenue disputed the deletion of Rs. 8,59,481/- added by the AO under Section 40(a)(ia) for non-deduction of tax at source under Section 194C. The AO argued that payments to transporters exceeding Rs. 50,000/- required TDS. The assessee contended that each Goods Receipt (GR) note was a separate contract not exceeding Rs. 20,000/-, thus not requiring TDS, supported by Board Circular No.715 dated 8.8.1995. The CIT(A) agreed, finding no evidence of a transport contract exceeding Rs. 20,000/- per GR note. The Tribunal upheld this view, citing the Board Circular and lack of contrary evidence from the AO. The High Court found no illegality or perversity in the CIT(A) and Tribunal's findings, dismissing the revenue's appeal.

Conclusion:
The High Court dismissed the revenue's appeal, upholding the Tribunal's decisions on all three issues. The court found the Tribunal's reliance on previous cases and factual analyses to be appropriate and free from legal or factual errors.