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TMI Blog2012 (7) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of expenses - invoking provisions of Section 68 - Held that:- From the perusal of the record, it is seen that Rs. 3,33,000/- has been withdrawn from the cash book on 29-5-2004 and the same has been deposited in the bank account on 18-6-2004. Thus, there is a direct nexus between the withdrawals from the cash book and the deposits made in the bank account - thus addition made u/s.68 are deleted as no point of unexplained cash credit arise here - in favour of assessee. - IT Appeal No. 3487 (Mum.) of 2009 - - - Dated:- 8-6-2012 - P.M. Jagtap, Amit Shukla, JJ. Bhupendra Shah for the Appellant. D.S. Sunder Singh for the Respondent. ORDER Amit Shukla , Judicial Member The present appeal has been filed by the assessee against the order dated 13-2-2009, passed by the CIT(A)-XX, Mumbai for the quantum of assessment passed under Section 143(3) for the assessment year 2005-2006 on the following grounds of appeal :- "1. On the facts and in the circumstances of the appellant's case and in law, the learned Assessing Officer erred in disallowing expenses aggregating a sum of Rs. 64,52,061/-by invoking provisions of Section 40(a)(ia) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 736/- paid to Hiren Textiles Private Limited, no TDS was deducted as there was no contract. The Assessing Officer thus invoked the provisions of Section 40(a)(ia) and disallowed the following expenses :- ( i ) Processing Charges Rs. 1,19,282/- ( ii ) Packing Charges Rs. 1,35,494/- ( iii ) Weaving Charges Rs. 60,14,842/- ( iv ) Service Charges Rs. 1,82,443/- Total Rs. 64,52,061/- 3. Before the CIT(A), it was submitted that TDS was not deducted as there was no contract or agreement between the assessee and the parties specifically for payment made on weaving and processing charges. For the other items, it was submitted that the payment made was less than Rs. 20,000/- on each occasion and in any case it was less than Rs. 50,000/- per person for the entire year. Learned CIT(A) did not agree with the contention of the assessee and held that the payments made by the assessee on account of processing charges, packing charges, weaving charges and service charges debited to the profit loss account were contractual in nature as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not written, there is always an oral contract in such kind of service. Regarding no deduction of TDS due to heavy losses by the company, he submitted that in such a case, the recipient company could have obtained the certificate from the Department for non-deduction of tax which has not been done so in this case. 6. We have carefully considered the rival contentions and also perused the material placed on record. The assessee company was engaged in wholesale trading and manufacturing of cloths and has made huge payments on account of weaving and processing charges to various parties. Such an outsourcing of work amounts to work done in pursuance of a contract, even though it may not be written. There has to be some terms and conditions for processing and weaving of the cloths for doing it in a certain manner and also there has to be some kind of understanding for the quality and design. All these things can be oral also and comes within the purview of "work" done in pursuance of a contract. The basic postulate of a contract is that there should be some kind of risk and responsibility for carrying out any work. Once the assessee is making a payment for weaving and processing char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted back to the Assessing Officer as per the observations given above. 8. In ground No.2, the assessee has challenged the disallowance of Rs. 1,20,000/- under Section 40(a)(ia) with regard to payment made on car hiring charges. The Assessing Officer had observed that a sum of Rs. 1,88,152/- has been claimed towards motor car expenses, out of which Rs. 68,152/- relates to petrol expenses. Balance sum Rs. 1,20,000/-has been paid to Smt. Geetadevi Deora, one of the partners in lieu of hiring of car. The Assessing Officer had invoked the provision of Section 40A(2)(b) and disallowed the entire sum of Rs. 1,88,152/-including the petrol expenses. 9. Learned CIT(A) held that the provisions of Section 40A(2)(b) are though not applicable, however, the sum of Rs. 1,20,000/- is disallowable on the ground that TDS have not been deducted on hire of the car which is in the nature of contractual payment. He, therefore, invoked the provisions of Section 40(a)(ia) and sustained the addition of Rs. 1,20,000/-. Learned AR reiterated the same submission and submitted that there was no such kind of contract with the partner. 10. After carefully considering the finding of the CIT(A) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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