N.Palanivelu, Chennai vs Assessee

अपीलाथ क ओर से / Appellant by : Shri. A.S. Sriraman, Advocate यथ क ओर से / Respondent by : Shri. A.V.Sreekanth, IRS, JCIT.

सन ु वाई क तार ख/Date of hearing : 29.04.2015 घोषणा क तार ख /Date of Pronouncement : 29.04.2015

आदे श / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER

This appeal by assessee are directed against the order of the

Commissioner of Income Tax (Appeals), Salem, dated 29.01.2015 for

the assessment year 2009-10.

:- 2 -: I.T.A.No.618/Mds/2015.

2. The first ground for consideration is with regard to addition

made u/s.40 (a)(ia) of the Act.

2.1 The brief facts of the case the assessee is a proprietor of M/s.

Nagamalai Textiles, which concern is indulged in manufacturing of

fabrics and had made a total turnover of E9,30,49,475/- during the

financial year 2008-09. During the course of production the unit has

incurred a sum of E23,18,855/- towards sizing which process is needed

for strengthening the wrap by adding starch to reduce breakage of the

yarns. In order to complete the above process the assessee has

engaged to various sizing mils who mills who execute the said process

for the assessee. The point to be noted in this case is that the whole

control of the work was in the hands of the assessee and alleged sub

contract work was executed i.e. sizing work under the full control of

the assessee itself. There are no such discretion with alleged sub-

contractors for executing the above works. They were executing the

work as per requirement of tender under full control and supervision of

assessee. The Assessing Officer has disallowed an amount of

E23,18,855/- on the ground that no TDS was made by the assessee as

required u/s.194C of the Act. On appeal, the Commissioner of Income :- 3 -: I.T.A.No.618/Mds/2015.

Tax (Appeals) confirmed the order of the Assessing Officer. Against

this, the assessee is in appeal before us.

3. We have heard both the sides and perused the material on

record. We find that the Special Bench of the Tribunal in the case of

Merilyn Shipping and Transports vs. ACIT (2012) 136 ITD 23

(Visakhapatnam) and judgment of Gujarat High Court in the case of

CIT vs. M/s. Vector Shipping Services (P) Ltd in ITA No.122 of 2013

dated 09.7.2013 held that sec 40(a)(ia) is not applicable when there is

no outstanding balance at the end of the close of the year relevant to

the assessment yea in respect of these payment. However, the

assessee has not brought on record, the details of outstanding

expenses or schedule of sundry creditors showing whether the

impugned amount is outstanding at the end of the close of the

previous year relevant to the assessment year either in the name of

the party or outstanding expenses. Hence, in the interest of justice,

we are remitting the issue back to the file of the Assessing Officer with

direction to verify the claim of the assessee and the assessee shall

place necessary evidence in support of his claim.

:- 4 -: I.T.A.No.618/Mds/2015.

4. Further, we make it clear that if the impugned amount is not

outstanding at the end of the close of the assessment year in respect

of the expenses either as outstanding expenses or as sundry creditors,

this amount cannot be disallowed. This ground is remitted back to the

Assessing Officer for fresh consideration.

5. The next ground is with regard to partially sustaining the

disallowance @ 20% on weaving charges. While completing the

assessment, the Assessing Officer disallowed 20% of the

weaving/cooly paid to the labour on the ground that vouchers are all

self-made. Aggrieved, the assessee preferred an appeal before the

Commissioner of Income Tax (Appeals). On appeal, the Commissioner

of Income Tax (Appeals) restricted the disallowance to 15%. Against

this, the assessee is in appeal before us.

6. We have heard both the sides and perused the material on

record. In our opinion, adhoc disallowance made by the Assessing

Officer @20% on the ground that supporting vouchers are self-made

vouchers is on higher side. In our opinion, it is appropriate to disallow

only 10% of weaving charges supported by self made vouchers. This

ground is partly allowed.

:- 5 -: I.T.A.No.618/Mds/2015.

7. In the result, the appeal of the assessee in ITA

No.618/Mds/2015 is partly allowed for statistical purposes.

Order pronounced in the open court at the time of hearing on Wednesday, the 29th of April, 2015 at Chennai.

Sd/- Sd/- (वी. दग ु ा! राव) (चं पज ू ार ) V. DURGA RAO (CHANDRA POOJARI) या"यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER

चे"नई/Chennai. #दनांक/Dated:29.04.2015. KV

आदे श क त&ल'प अ(े'षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आय* ु त (अपील)/CIT(A) 4. आयकर आय* ु त/CIT 5. 'वभागीय त न-ध/DR

6. गाड फाईल/GF.