2015 (12) TMI 1180 - HC - Income Tax

Addition on account of labour charges - ITAT deleted the addition - Held that - 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 against revenue

Summary

Issues:
- Appeal against ITAT order upholding CIT(A) order deleting additions on labour charges and production shortage for assessment year 2005-06.
- Substantial questions of law raised regarding deletion of additions.

Analysis:
1. The appellant challenged the ITAT decision upholding CIT(A) order deleting additions of Rs. 6,72,048 on labour charges and Rs. 4,25,602 on production shortage for the assessment year 2005-06. The appellant raised substantial questions of law regarding these deletions.

2. The first substantial question of law pertained to the deletion of Rs. 6,72,048 on account of labour charges. The Assessing Officer had reduced the claimed deduction after finding discrepancies in the addresses of labourers. However, the Tribunal considered the historical expenses, production correlation, and engagement basis for labour to allow the deductions. The Court found this to be a factual analysis and not perverse or absurd, thus dismissing the appeal on this issue.

3. The second substantial question of law related to the deletion of Rs. 4,25,602 due to production shortage. The Court referred to a previous judgment where this question was answered against the appellant. Therefore, this question was also dismissed against the appellant.

4. The Court emphasized the importance of factual analysis and appreciation in such cases involving deductions for labour charges and production shortages. The decision to allow deductions was based on a correlation between production and labour engagement, which was found reasonable and not arbitrary. Consequently, the appeal was dismissed based on the factual findings and analysis presented by the CIT(A) and the Tribunal.