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2024 (6) TMI 330 - AT - Income TaxDisallowance of expenses related to payments made to contractors for loading and unloading for packing - assessee mainly argued that the payments were made via banking channel and after deducting the TDS and the contractor to whom the payments made were income-tax assessees and hence the assessee has successfully discharged its burden and the AO failed to bring any adverse material in this regard - HELD THAT - We find that the issue of payments made to contractors is squarely covered in favour of the assessee by the order of ITAT 2024 (2) TMI 1388 - ITAT DELHI CIT (A) in his order has given a finding that during the remand proceedings, 5 out of 6 contractors were produced before the AO and statements of these contractors were recorded by the AO. All of them confirmed that they have provided labour to the assessee company for packing and loading of finished product - As before the Id. CIT (A), assessee produced the sixth contractor whose statement was also recorded. In his statement, he confirmed to have supplied labor for packing, loading and unloading. Another plank of AO is that the employee of the assessee company used to withdraw cash from the contractor's bank account. CIT (A) has noted that he has perused the banks accounts and the entries of withdrawal were self. Therefore, he held that cash withdrawn by the contractors and the contractors during the statement accepted that the employee of the assessee company used to accompany him at the time of withdrawal of cash from the bank and cash used to be carried in company's vehicle and this arrangement was used to ensure for the payment distributed to labourers hired for the work of the company. Another plank of the AO is that these contractors are ex-employees of the assessee company. It has been submitted that this fact has been accepted. For this explanation, the assessee submitted that for continuous supply of labour, only reliable and known person can be deployed. Another plank of AO is that in the computer of the assessee, bills of these contractors were found. It has been submitted that all the contractors have prepared the bills at the premise of the assessee as these contractors were only supplying labour and did not have separate infrastructure. CIT (A) has also found that the salary and wages per kg. production is in the range of 10% to 25% of other industries and there was no adverse findings in this regard in the assessment order. Furthermore, books have not rejected. This ground is decided against the Revenue. Unexplained investment u/s 69 - assessee failed to prove the source of payment made in cash for purchase of land - HELD THAT - Since no such land was ever purchased, the question of alleging cash payment does not arise at all. It is clear that the deal of purchase of the land in loose paper seized, has not taken place and therefore, there is no question of payment of cash for such alleged deal and it was only a proposal. As hold that alleged investment is not made, since, transaction has not materialized. Accordingly, agree with the argument of the appellant and therefore, findings of the A.O. are erroneous. Therefore, addition made u/s 69 of the Act, as unexplained investment, is deleted - we find no infirmity in the order of learned Commissioner (Appeals) and hence, the Revenue's appeal fails and dismissed on this ground also. Characterization of receipt - Sales-tax subsidy under Package Scheme of Incentives (Maharashtra), 1993 - HELD THAT - Incentive Scheme of the State of Maharashtra and the purpose of the Scheme and also considering the judgment of Indo Rama 2024 (1) TMI 1228 - DELHI HIGH COURT , we are of the firm view that subsidy received by the assessee was a capital receipt and hence the assessee's claim is allowed. Assessee has not provided the working of the quantum of the subsidy arrived in its books of account so we restore the matter back to the file of the AO for quantifying the exact amount of the subsidy after calling replies from the assessee and supportive documents in this regard. The issue of exemption of sales-tax subsidy has been principally accepted to be termed as capital receipts but for the limited purposes for the quantification of the figures, the matter is restored to the AO. Addition u/s 14A r.w.r. 8D - argument of the assessee is that Rule 8D and 14A provisions are only invokeable in respect of those investments from which the assessee has earned dividend - HELD THAT - We are of the view that the issue of 14A may be restored to the AO for examining afresh in the light of the settled position of law as discussed hereinabove. Needless to say that the AO will afford reasonable opportunity to the assessee accordingly.
Issues Involved:
1. Disallowance of expenses related to payments made to contractors for loading and unloading. 2. Deletion of addition alleged to have been made by the assessee in the purchase of land at Nasik. 3. Exemption of sales-tax subsidy. 4. Disallowance of expenses by invoking the provisions of section 14A read with Rule 8D of the Act. Summary: 1. Disallowance of Expenses Related to Payments Made to Contractors for Loading and Unloading: The assessee argued that payments were made via banking channels after deducting TDS, and the contractors were income-tax assessees. The Assessing Officer failed to provide cross-examination of the persons whose statements were relied upon. The ITAT upheld the Commissioner (Appeals) decision, which followed previous orders affirming that the payments were genuine. The ITAT found no infirmity in the Commissioner (Appeals) order, confirming that the contractors were produced and confirmed the services provided. 2. Deletion of Addition Alleged to Have Been Made by the Assessee in Purchase of Land at Nasik: The Assessing Officer added Rs. 48,00,000 u/s 69 of the Act, alleging investment out of books. The Commissioner (Appeals) found no incriminating material indicating any investment outside the books and noted that the document relied upon was a mere proposal. The ITAT upheld this view, finding no infirmity in the Commissioner (Appeals) order. 3. Exemption of Sales-Tax Subsidy: The assessee claimed sales-tax subsidy of Rs. 32.91 crores under the Maharashtra Incentive Scheme, 1993, as a capital receipt. The Commissioner (Appeals) dismissed the claim, stating the assessee had treated such receipts as revenue in earlier years and failed to provide working details. The ITAT, considering similar cases and the purpose of the scheme, held that the subsidy was a capital receipt. The matter was restored to the Assessing Officer for quantifying the exact amount of subsidy. 4. Disallowance of Expenses by Invoking the Provisions of Section 14A Read with Rule 8D of the Act: The assessee argued that its own funds were sufficient for making tax-free investments, and hence, no disallowance should be made. The ITAT restored the issue to the Assessing Officer to examine the position of own funds and decide as per the judgment of the Hon'ble Gujarat High Court in CIT vs. UTI Ltd. The ITAT also considered the restriction of disallowance to only those investments yielding dividends. Conclusion: The appeals of the assessee for assessment years 2007-08, 2008-09, and 2009-10 were allowed as indicated, and the Revenue's appeals for assessment years 2007-08 and 2008-09 were dismissed. The Revenue's appeal for assessment year 2009-10 was partly allowed for statistical purposes.
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