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TMI Blog2011 (2) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the favour of revenue. Addition - on account of wastage - in the business of manufacture of utensils - purchases of raw material and there was sale of scrap - The AO has allowed wastage only at 25%. As per him, the wastage was only in cutting of the square shape patta/ patti in which only the corners were lost which came to 21.5% - scrap not exceed in any case 25% and therefore allowed 25% and the balance scrap was treated as good produced and sold unaccounted - wastage generation was subject matter of verification by the Excise authorities who allow export only after verification of input output ratio - Assesse claimed that patta/patti is irregular in shape cutting them there is lot of wastage - wastage is supported by certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t during the assessment proceedings the assessee vide letter dated 13.12.2007 and 17.12.2007 had submitted confirmation, ledger copy of account and PAN etc before the AO which was ignored. CIT (A) was satisfied by the explanation given and observed that the assessee had explained the source of investment as withdrawal from the firm in which the directors were partners. The directors were assessed with the same AO. He therefore deleted the addition aggrieved by which the revenue is in appeal. 2.1 Before us the Learned AR for the assessee submitted that the assessee vide letter dated 17.9.09 addressed to the AO a copy of which was placed at page 10 of the paper book had given the name and address as well as PAN of the directors. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had made purchases of raw material weighing 2166889 kg and there was sale of scrap of 845115 kg. The AO noted that the scrap generation during the year was shown at 844008 kg which came to 41.67% of raw material consumed. It was observed by him that the assessee was purchasing patta/ patti which were rectangular in share from which circular sheets were cut of different si2es and at the time of taking out circular sheets from the rectangular patta/ patti, only wastage was the loss of corners which was mathematically shown at 21.5%. It was observed by him that in the remaining process of utensil making, scrap was at the most 1%. He also noted that scrap generation in such industry varied from 18 to 22% and even in worst situation th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of JCIT Vs VXL (India) Ltd. in ITA No.54/Asr/1999 in which the tribunal in identical situation based on the letter of Excise authorities accepted wastage of 42% and allowed the claim of the assessee. CIT (A) accordingly directed the AO to delete the addition aggrieved by which the revenue is in appeal. 3.1 Before us the Learned AR for the assessee reiterated the submissions made before the CIT(A) that the patta/ patti which was the raw material was not rectangular in shape but of irregular shape. He referred to the photographs placed at apge 76 to 79 of paper book in support of the claim. Therefore in the circular cutting the wastage was not only 21.5% which will be in case of square shape material. Further, in the process of manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production process as well as export. 3.2 We have perused the records and considered the rival contentions carefully. The assessee is in the business of manufacturing of utensils by using raw material such as stainless steel patta/ patti. The assessee had shown wastage of 41.61%. The AO has allowed wastage only at 25%. As per him, the wastage was only in cutting of the square shape patta/ patti in which only the corners were lost which came to 21.5%. He has observed that the wastage could not exceed in any case 25% and therefore allowed 25% and the balance wastage shown was treated as finished products sold unaccounted. In this process addition had been made of Rs.3,64,27,408/-. The claim of the assessee is that the patta/ patti are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that no tax had deducted at source. The AO noted that all the parties except one to whom freight had been paid were Indian residents. Since no tax had been deducted at source he disallowed the claim of freight in respect of resident Indians amounting to Rs.46,69,682/- under section 40(a)(ia). In appeal the assessee submitted before the CIT (A) that payment of freight had been made to the shipping agents of nonresident. Therefore in such cases the provisions of section 194C and 195 were not applicable and no tax was required to be deducted. Reliance was placed on the circular No.723 dated 19.9.95 of CBDT in which it was explained that in case of such agents of nonresidents no TDS are required. CIT (A) was satisfied by the explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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