2010 (7) TMI 1165 - AT - Income Tax

Summary

Issues involved: The first issue is the deletion of addition of labor charges made by the Assessing Officer under section 40A(2) of the Income Tax Act. The second issue is the deletion of the estimated addition of depreciation made by the Assessing Officer.

Issue 1 - Labor Charges:
The Revenue appealed against the deletion of an addition of Rs. 17,83,410 made by the Assessing Officer on account of labor charges. The CIT(A) deleted the addition, stating that the Assessing Officer did not prove the expenditure was excessive or unreasonable. The CIT(A) found that the assessee outsourced labor work to meet technical specifications and standards, avoiding delays in services. The CIT(A) held that the Assessing Officer was unjustified in disallowing the labor charges. The ITAT confirmed the CIT(A)'s decision, noting that the assessee provided complete details of labor payments and that the Assessing Officer failed to prove unreasonableness in the payments. The ITAT dismissed this issue of the Revenue's appeal.

Issue 2 - Depreciation:
The Revenue appealed against the deletion of an estimated addition of Rs. 2.50 lakh on depreciation made by the Assessing Officer. The CIT(A) admitted new evidence, a certificate from M/s. Santi Consulting Engineers, without confronting it to the Assessing Officer. The ITAT decided that the new evidence needed re-verification by the Assessing Officer. The assessee's counsel agreed to set aside the issue for the Assessing Officer to consider the new evidence. Therefore, this issue of the Revenue's appeal was set aside for reconsideration by the Assessing Officer.

In conclusion, the ITAT upheld the deletion of the labor charges addition but set aside the depreciation issue for further verification by the Assessing Officer.