Issues relating to Job worker of dyeing of fabric resolved in : A.P. PROCESSORS vs.ASSISTANT COMMISSIONER OF INCOME TAX Jul 17, 2015 (2015) 44 CCH 0384 DelTrib

1. Job Worker not maintaining the record of receipt and dispatch of the goods because of the fact that the ownership of the fabric received for processing is not of the assessee, nor the shortage due to shrinkage, etc. of the fabrics belong to the assessee. Rejection of books of accounts quashed

2. Following shrinkage in dyeing  accepted

Cambric – shrinkage – 5% and further – 2% to – 5%. If it is further required residual shrinkage as zero.

Crapes – 10% and further – 2% if it required line dry (dry in air).

Other than the above shrinkage, there is another loss of fabric by 2% on account of grey and dyed fabs.

3. Fire Insurance claim received by Job Worker can not be treated as income of the Job worker not mainstaining stock records, where he produced all the relevant documents relating to insurance claim before the AO during the assessment proceedings along with FIR lodged before the Police; and report of Verifier (Valuation and Loss Assessor).

4. Hon’ble Supreme Court decision in Empire Industries Ltd. Vs. Union of India (3 Judges Bench) reported as 162 ITR 846 held that textile dyeing and printing amounts to manufacturing. Hence Additional depreciation of 20% u/s 32(1)(iia) is available to Job Worker engaged in dyeing of fabric

No addition u/s 68 can be made in the hands of person engaged in business of accommodation entries. Addition should be made in the hands of beneficiaries. Person providing accomodation entries can only be assessed to commission income.

ZENITH ESTATE LTD Jul 20, 2015 ITA No. 3419/Del/2014 (2015) 44 CCH 0396 DelTrib

No addition can be made in current year for opening balance of liability not deposited/paid

KISAN SAHKARI CHINI MILL LTD. LUCKNOW TRIBUNAL ITA No. 130/LKW/2014 (2015) 44 CCH 0393 LucknowTrib

Payment of Subscription to federation not covered by 194J and hence not hit by 40(a)(ia).

KISAN SAHKARI CHINI MILL LTD. LUCKNOW TRIBUNAL ITA No. 130/LKW/2014 (2015) 44 CCH 0393 LucknowTrib

Followed  Tribunal decision in the case of ACIT, Sitapur vs. Kisan Sahkari Chini Mill Ltd. Sampurnanagar, Lakhimpur Kheri in I.T.A. No.406 to 409/Lkw/2013 dated 29/11/2013

Sale of Property- unsigned agreement seized- Decided in favour of assessee

SARAL TALWAR (2015) 44 CCH 0391 HydTrib Jul 22, 2015

 It needs to be mentioned, assessee from the very initial stage of the proceeding has denied of receiving any cash amount from Mr. Suresh Chand Agarwal towards the sale of property. It is also evident that apart from the receipts and the unsigned document, there is no other evidence in the possession of the department to conclusively prove that the assessee has actually received the amount of Rs.2.66 crores from Mr. Suresh Chand Agarwal.

Adhoc disallowance of 50% of expenditure incurred in earning commission income, for the reason that assessee has not been able to explain fully that the expenditure claimed was wholly and exclusively laid out for the purpose of business. Assesee furnished names, cheque numbers and amounts of commission paid. Adhoc disallowance held not sustainable.

SARAL TALWAR (2015) 44 CCH 0391 HydTrib Jul 22, 2015

Software License Fee claimed as revenue expenditure , however, treated as capital by the department and allowed depreciation @ 60% under computer during 143(3). Later department reopened to allow depreciation @ 25% under intangibles. Held that since there is no failure to disclose material facts , no reassessment can be made.

[HCL TECHNOLOGIES LIMITED 16.07.2015 W.P.(C) 7948/2013 & CM 16840/2013 HIGH COURT OF DELHI]

Followed Haryana Acrylic Manufacturing Co. v. CIT: 308 ITR 38 (Delhi)

Wel Intertrade Private Ltd.[2009] 308 ITR 22 (Delhi) 

 Punjab and Haryana High Court in the case of Duli Chand Singhania [2004] 269 ITR 192

Good will is eligible for Depreciation as Intangible

Supreme Court in the case of SMIFS Securities Ltd., 348 ITR 0302 followed in

St. Angelo’s Computers Ltd. ITA No.6874/Mum/2011 Date of Pronouncement 22/07/2015

Tyssenkrupp elevator (India) (P) Ltd., 167 TTJ 131(Del);  

Worldwide Media Pvt. Ltd., 30 ITR (Trib) 181;

M/s PPG Asian Paints Pvt. Ltd., ITA No.2919/Mum/2013, dated 15-4-15 

M/s Toyo Engineering India Limited, ITA No.3279/Mum/2008, dated 13-10-2014; Birla Global Asset Finance Co. Ltd., 221 Taxman 176(Bombay); 

 KEC International Ltd., Order dated 7-2-2013(Bombay High Court)

In case a transporter hires trucks from any other transporter or truck owner on day-to-day requirement basis, such an arrangement cannot be said to be a result of written or oral contract.This is so because the liability fastened on the transporter (contractor) under a contract with a party for transporting its goods is never fastened either on the transporter or the truck owner from whom the trucks are hired

CHANDRAKANT THACKAR (2009) 28 CCH 0702 CuttackTrib

Credit sales not reflected in books of account—Total unrecorded sales cannot be regarded as the profit of the assessee—Net profit rate has to be adopted—Once a net profit rate is adopted, it cannot be said that there is perversity of approach—Whether the rate is low or high would depend upon the facts of each case Held

 BALCHAND AJIT KUMAR (2003) 71 CCH 0380 MPHC. 

President Industries Gujrat High Court Concurred with

Tribunal held that entire sales could not be added as income of assessee but addition could be made only to the extent of estimated profits embedded in sales for which net profit rate was adopted—There is no finding or material about suppression of investment in acquiring the goods which are subject of undisclosed sales—No referable question of law arises

PRESIDENT INDUSTRIES (2002) 124 TAXMAN 0654 (1999) 67 CCH 0259 GujHC

Difference between income as per TDS certificate and that shown in books—As per TDS certificate, gross amount of assessee’s receipts is Rs. 4.51 crores whereas as per the accounts, it is Rs. 4.29 crores—Assessee was not able to reconcile the difference to the extent of Rs. 14,94,285 and hence AO made addition thereof under the head ‘Undisclosed transportation receipts’— Not justified—In case of difference between the gross receipts as shown in the assessee’s books and as per TDS certificate addition is to be made only in respect of profits embedded therein—Impugned order is set aside and the AO is directed to adopt the GP rate declared by the assessee for the assessment year under consideration and compute addition accordingly

R.R. CARYYING CORPORATION CUTTACK BENCH (2009) 126 TTJ 0240

Balasore Synthetic (P) Ltd. vs. Dy. CIT (ITA No. 141/Ctk/2008) followed

Assessee is a transporter engaged in executing various contracts by engaging its own vehicles as well as vehicles of other transporters—There is nothing on record to suggest that any contract existed between the assessee and the other transporters—There is neither any written nor real agreement in this regard—AO has not made out a case that there existed contractor and sub-contractor relationship between the assessee and the alleged sub-contractor and that the latter has been engaged on some definite terms and conditions for executing the work—Therefore, assessee was not liable to deduct tax under s. 194C from the payments made to other transporters and same could not be disallowed under the provisions of s. 40(a)(ia)

R.R. CARYYING CORPORATION ITAT, CUTTACK BENCH (2009) 126 TTJ 0240

Payments were received by the representatives of the labourers who in most cases were employee of the assessee—AO holding that such payments made to Mukadam was nothing but payment made to contractors and since tax was not deducted under s. 194C, orders under s. 201(1) and 201(1A) were passed—AO not justified—As assessee has made payment for labourers but to the representative of the labourers through their Mukadam who are the employees of the assessee, provisions of s. 194C requiring deduction of tax are not applicable

LAXMI PROTEIN PRODUCTS (P) LTD.

ITAT, AHMEDABAD 29 CCH 0122 AhdTrib

No TDS u/s 194C for payment of daily wages

DEWAN CHAND (Delhi High Court) 76 CCH 1260