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TMI Blog2016 (12) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... ove findings and hence we dismiss this ground of appeal.- Decided against assessee TDS u/s 194C - non deduction of TDS on making charges to various persons - Held that:- . The appellant has not furnished any details regarding the basis of the making charges paid to each of the 23 persons but it appears from the AO's observations that making charges were paid to each person according to the work completed by him. It is also mentioned in the assessment order that the 23 persons who were paid making charges were actually paid as lead persons for the work completed by their team. This lead person in turn paid to the other workers. But as far as the appellant is concerned, the payment is made to the lead person for the work done by himself or his team. Thus there is an implied contract between the appellant and such persons who have been paid the making charges. The provisions of sec 194C are clearly attracted. Even if we assume that the 23 persons who were paid making charges were employees of the appellant, then also in most of the cases TDS provisions are attracted because payment to each individual person exceeded the minimum taxable income. The appellant should have deducted tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd valued the closing stock at ₹ 3,02,35,241/-. After reworking the trading account, he worked out the additional net prof it at ₹ 29,04,567/- and added to the returned income . (ii) The assessee debited ₹ 41,81,082/- towards making charges . On verif ication of vouchers produced by the assessee, the AO found that they were self vouched . The assessee firm prepared the receipts for converting standard gold to ornament gold at ₹ 15.81 lakhs. He also found that the Sl. nos. are also not reflected in the vouchers and the complete details of the person is not reflected in the vouchers so produced. Considering the volume of vouchers produced he proposed to disallow 10% of the making charges at ₹ 4,18,908/- which was accepted by the assessee and accordingly disallowed ₹ 4,18,908/- as unexplained expenditure u/s 69C. 03. Aggrieved, the assessee filed an appeal before the CIT (A), Mysuru. The CIT (A) confirmed the additions. The assessee is on appeal before us with the following grounds : 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant denies itself liable to be charged to interest u/s. 234-B of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled especially the appellant was not required to pay any advance-tax and consequently the levy of interest u/s.234B is illegal and liable to be deleted. 04. We heard the rival submissions and gone through relevant orders. This Tribunal, in its order in MA No 45(B)/2000 in ITA No 464(B)/2009 MA No 107(B)/2000 in ITA No 464(B)/2009 in the asssessee s case for a Y 2006- 07 dt 11.3.2005 has extracted the its order in ITA No 464(B)/2009 dt 24.9.2009 as under : 5. We have heard the rival contentions and perused he material on record. On our careful perusal of the facts and circumstances, we are inclined to hold that one the AO had computed the missing quantity of gold on the basis of purchase and sale from the impounded books of accounts and on the basis of survey conducted it was an exercise to be made for valuing the missing stock of 1442.01 grams. The learned counsel before us has indicated that the exercise was under taken by the AO who had recasted the trading account which figures have been incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 In the face of the above, we have to take a look at the findings of the Tribunal in its order dated 24-09-2009 reproduced by us, at para-8 above. What we find is that the Tribunal had indeed considered the argument of the assessee on gold content in the stock and held that only real gold content was to be considered. It also held that the valuation at rate of 538.599 per gram, as done by the assessee considering the actual gold content in 91.6 purity gold jewellery was correct. The result of this exercise is that variation was limited to difference in quantity in the closing stock alone and not in the pricing. Difference in quantity in closing the Tribunal as 1,442 01 grams is the same as mentioned by us at para-5 above and valuation has been directed to be taken at ₹ 538.599. If we are to say that the rate of 538.599 per gram considered for valuing the closing stock was incorrect or if we are to say that the difference in quantity in stock was only 1,306.335 grams and not 1,442.01 grams, this, in our opinion, would be nothing but equivalent to a review. To draw a conclusion that actual cost per gram was ₹ 60 1.98 will in fact be equal to re-writing the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant's books and found that it paid to 25 different persons at ₹ 31,10,253/-, out of this, ₹ 75,029/- was paid to 3 persons and in each case the payment was less than ₹ 50,000/- in the full year and hence he allowed such claim and in the balance 22 cases the amount paid was exceeding ₹ 50,000/- per person but the assessee did not deduct TDS on such payments. Since, the assessee failed to deduct tax as per provisions of sec 194C, the AO disallowed the claim at ₹ 30,35,224/- u/s 40(a)(ia) of the Act . 10. On an appeal, the assessee pleaded before the CIT(A), Mysuru that this Hon'ble ITAT in the appellant's case in a y 2006-07 had held that the closing stock of gold as on 3 1.3.2006 be valued @ ₹ 538.59 per gram. Adopting it, the CIT(A) arrived the average cost of gold for the purpose of valuation of the closing stock and reworked the net profit at ₹ 87,18,317/- as against the net profit determined by the AO at ₹ 78,90,381. Thus, it resulted in an enhancement to the extent of ₹ 8,27,936/-. The CIT(A) held that the enhancement is a result of the stand taken by the appellant and hence there is no need to provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1859 to 1864/Bang/1992) is set aside and the matters are remitted to the Tribunal for hearing and disposal of Cross- objections No.73- 78/Bang/2001 filed by the appellant in accordance with law. 13. We heard the rival submissions and gone through relevant orders. With regard to the Valuation of closing stock, the relevant portion of the CIT(A) order is extracted as under : 5.1 In the course of appeal proceedings, Sri Subramanian, AR argued that the opening stock of gold as on 1.4.2006 should be the same as the value of the closing stock as on 31.3.2006. Sri Subramanian pointed out that the Hon'ble ITAT in its order in the appellant's case for the A.Y.2006-07 had held that the closing stock of gold as on 3 1.3.2006 be valued @ ₹ 538.59 per gram. 5.2 I have gone through the order of the Hon'ble ITAT. I find that, in principle, the argument of the AR has to be accepted. I may mention here that as regards the quantity of the opening or closing stock of gold, there is no dispute. I direct the AO to value the opening stock of gold @ ₹ 538.59 per gram as decided by the Hon'ble Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat an amount of ₹ 31,10,253 is debited to the trading account under the head Making Charges . As the expenditure incurred on account of making charges falls under the purview of Section 194C of the Act, the assessee was asked to explain vide this office letter dated 21.12.2009 whether he has effected the TDS on the amount of ₹ 31,10,253/-. It was explained by the assessee vide its letter dated 23.12.2009 filed in this office on 24.12.2009 as under: we submit that manufacture of gold ornaments is a very skilled job.We do not have any person to develop any newDesign. Every gold smith has his own specialization Like some are good at making bangles, some in making Of necklaces etc. Customers also place order for making ornaments to a particular gold smith and its our practice not to give more jobs to a single gold smith as we would be carrying risk. We give gold of a particular weight for manufacture an ornament. We do not enter into any contract in terms of wages payable. The job being skilled takes different time for completion and based on the skill involved and the time taken, the gold smith demands wages for his job and after negotiation, we finally pay him. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount wherever it exceeds ₹ 20000/- one time and ₹ 50,000/- in a year as per the provision of Sec. 194C. Hence, the above payments attracts the provisions of section 194C thereby the assessee should have deducted TDS wherever the amount has exceeded ₹ 20000/- or ₹ 50,000/-. He cannot discharge the duties of the main labourers by disbursing the wages to all the persons. The assessee is utilizing the above tool to camouflage that section 194C is inapplicable in his case. Therefore, assessee's contention is rejected on the ground that, though there is no written contract entered into between assessee and labourers, there is oral contract exists between the persons and the assessee. This is evident from the list reproduced as in the earlier paragraphs of this order. A proposal was sent to the assessee on 24.12.2009, proposing to disallow the amount of expenditure debited to trading account amounting to ₹ 31,10,253/- towards making charges, posting the case for hearing on 29.12.2009. Assessee did not respond to the above letter. In turn, he filed a revised ledger account showing the making charges paid to the workers as on 31.12.2009 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the making charges paid to each of the 23 persons but it appears from the AO's observations that making charges were paid to each person according to the work completed by him. It is also mentioned in the assessment order that the 23 persons who were paid making charges were actually paid as lead persons for the work completed by their team. This lead person in turn paid to the other workers. But as far as the appellant is concerned, the payment is made to the lead person for the work done by himself or his team. Thus there is an implied contract between the appellant and such persons who have been paid the making charges. The provisions of sec 194C are clearly attracted. Even if we assume that the 23 persons who were paid making charges were employees of the appellant, then also in most of the cases TDS provisions are attracted because payment to each individual person exceeded the minimum taxable income. The appellant should have deducted tax u/s 192. The disallowance is therefore, confirmed. The ground of appeal is dismissed. 17. We have considered the above findings and decisions. The assessee has not let in any material to dislodge them. In view of that facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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