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TMI Blog2021 (4) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had not incurred the amount as expenditure towards making charges of jewellery for payment to the goldsmiths and also not debited this amount in the books, for the officer to conclude that the assessee has not effected TDS and hence the disallowance u/s.40(a)(ia) is unwarranted and unjustified on the facts of the case. 5. The CIT(A) further failed to appreciate that the assessee had made payments to the goldsmiths for making of jewellery as per the agreed trade norms and was not justified in assuming the wastage in the making at jewellery as making charge and disallowing the amount for not effecting TDS by the Assessee. 6. The CIT(A further failed to appreciate that the goIdsmith returns roughly 94% of the gold as jewellery out o the quantum of gold given for ornament making that the 6% is accepted as wastage in gold making and there was no basis to assume this as the making charge and hence the disallowance merely on surmises and conjectures is wholly unjustified and unsustainable on the facts of the case. 7. The CIT(A) further failed to appreciate that the mere reliance on the statement of two goldsmiths recorded at the back at the assessee cannot be the basis to valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med excessive wastage, while manufacturing gold ornaments over and above 1% and accordingly, opined that the assessee has retained gold with goldsmith in lieu of making charges, which is in the nature of labour charges comes under the purview of works contract as defined under section 194C of the Act. The Assessing Officer has taken support from statement of goldsmiths in support of his findings, where they have stated that they will deliver 94 gms of gold out of 100 gms received by them for making ornaments. Accordingly, rejected the arguments of the assessee and treated excessive wastage charges over and above 1% as making charges. Since the assessee has shown wastage of 6755.29 gms of gold, after allowing 1% of wastage, balance 5669.527 gms of gold, has been treated as making charges and after taking prevailing market rate of gold which was 2837.55 gms gold has esimated making charges of Rs. 1,64,65,887/- and disallowed the same u/s. 40(a)(ia) of the Act for non-deduction of TDS u/s.194C of the Act. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee has reiterated its submissions made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if a sum is payabe by any other name or accounted under any other head in the books of account. Accordingly, opined that there is no error in the reasons recorded by the Assessing Officer to arrive at the conclusion that excess wastage allowed by the assessee is nothing but making charges, which attracts provisions of section 194C and thus, for non-deduction of TDS, the same needs to be disallowed u/s.40(a)(ia) of the Act. 6. The learned AR for the assessee submitted that the learned CIT(A) has erred in confirming disallowance u/s.40(a)(ia) of the Act, without appreciating the fact that there can be no disallowance, where no payment is made and/or debited into books of account of the assessee. The learned AR for the assessee further submitted that additions made by the Assessing Officer and sustained by the learned CIT(A) is purely a guess work on assumption, without there being any evidence to prove that assessee has paid making charges in the form of gold. The assessee has filed all evidences to prove that making charges in this line of industry is between 5 to 6% and said percentage is depends upon type of ornaments manufactured by the assessee. The assessee has also obtained a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee has claimed 6.2% wastage. Therefore, he has computed excessive wastage of 5% and treated the same as making charges paid for manufacturing of gold ornaments. To arrive at such conclusion, he has relied upon statement recorded from goldsmiths, who had involved in manufacturing of gold ornaments. 9. We have given our thoughtful consideration to the arguments advanced by the learned AR for the assessee in light of facts brought out by the Assessing Officer and find that there is no merit in the reasons given by the Assessing Officer to treat excessive wastage as making charges. Further, there is no uniform yardstick to quantify making wastage in any process of manufacturing of goods, including manufacturing of gold ornaments. But, it all depends upon nature of goods manufactured or types of gold ornaments manufactured by the parties. The Assessing Officer has considered 1% wastage and to support his stand taken statement from goldsmiths, where they have stated that they have returned 94 gms of gold out of 100 gms gold received from the assessee. Except this, no other independent evidence was brought on record to support his findings. On the other hand, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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