ITO 9(2)(3), MUMBAI V. MAN FOODS P.LTD, MUMBAI

ITA 7150/MUM/2012

• Counselvise Citation: 715019914 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN V P
• Assessee Lawyers: SURESH N OTWANI
• Keywords: Business expenditure
• Section: 194C

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , , BEFORE S/SH. JOGINDER SINGH,JUDI CIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.7150/MUM/2012, / ASSESSMENT YEAR - 2009 - 10 INCOME TAX OFFICER - 9(2)(3) ROOM NO. - 225, 2 ND FLOOR, A A Y KAR BHAVAN, MK ROAD MUMBAI - 400 020. VS M/S. MAN FOODS PVT. LTD. 1 ST FLOOR, VRINDAVAN SOCIETY SARASWATI COLONY, MEERA BAUG, SANTACRUZ (W),MUMBAI. PAN: AA DCM 8861 H ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI SURESH N. OTWANI / REVENUE BY :SHRI ASGHAR ZAIN V.P. / DATE OF HEARING : 08 - 07 - 2015 / DATE OF PRONOUNCEMENT : 22 - 07 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 25.9.2012 OF THE CIT(A) - 20, MUMBAI,THE ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ( LD.CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF EXPENSES CLAIMED OF RS.6,87,3501 - EVEN THOUGH THE ASSESSEE CHOSE NOT TO SUBMIT ANY EXPLANATION IN RESPECT OF QUERY RAISED REGARDING THE GENUINENESS OF THE EXPENDITURE CLAIMED. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS CORRECT IN DELETING RS.3,31 ,574/ - BEING PRIOR PERIOD EXPEN DITURE EVEN THOUGH , ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW,THE LD.CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.8,37,979/ - BEING EXPENSES ON ACCOUNT OF MIXING SUPE RVISION AND PACKING SUPERVISION IN VIEW OF THE FACT THAT THESE PAYMENTS WERE MADE TO TECHNICALLY EDUCATED PERSONS AND TDS THEREON SHOULD HAVE BEEN U/S.194J AS AGAINST TDS DEDUCTION MADE BY THE ASSESSEE U/S.194C. 4. WHETHER ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.11 ,76,080/ - ON ACCOUNT OF EXPENSES FOR LOADING AND UNLOADING AS THE PROVISIONS OF SECTION 194C OF THE ACT ARE APPLICABLE IN RESPECT OF THESE PAYMENTS, BUT THE ASSE SSEE DID NOT DEDUCT TDS ON THE PAYMENTS MADE. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ASSESSEE IS CONTRACT MANUFACTURER OF PARLE PRODUCT BISCUITS WITH PARLE P RODUCTS P VT. LTD (PPPL) . IT FILED ITS RETURN ON 30.9.09 DEC LARING INCOME OF 8.76 LACS .T HE AO COMPLETED THE ASSESSMEN T , U/S.143(3) OF THE ACT, ON 19.12.11 DETERMIN ING TH E INCOME OF THE ASSESSEE AT RS.57,33.990/ - . ITA/7150/MUM/2012 - AY.2009 - 10,MFPL 2 2. F IRST G ROUND OF APPEAL IS ABOUT DELETING THE DISALL OWANCE OF EXPENSES, A M OUN T IN G TO RS.6.87 LACS. DU RING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR MANUFACTURING OF BISCUITS WITH P PPL ON 4.5.07 FOR A PERIOD OF 2 YRS., THAT THE AGREEMENT CONTAINED RIGHTS/RESPO NSIBILITIES AND OBLIGATIONS OF BOTH THE PARTIES, THAT AS PER AGREEMENT PRIMARY ROLE OF THE ASSESSEE WAS TO MANUFACTURE BISCUITS OUT OF THE RAW MATERIAL SUPPLIED BY PPPL , THAT THE AGREEM ENT PROVIDED FOR PRESERVATION OF VARIOUS MATERIAL SUPPLIED BY , THAT T HE ASSESSEE HAD DEBITED RS.6.87 LACS TO THE P&L ACCOUNT UNDER THE HEAD EXPENDITURE OF MAIDA, SUGAR, BROKEN C - BOX HANDLING. T HE AO HELD THAT THESE MATERIALS WERE SUPPLIED BY P PPL. HE DIRECTED THE ASSESSEE TO EX P LAIN AS TO WHY THE CLAIM MADE BY IT SHOULD NOT BE DISALLOWED IN THE LIGHT OF THE AGREEMENT DT. 0 4. 0 5. 20 07. A S PER THE AO THE ASSESSEE DID NOT FURNISH ANY EXPLANATION IN THIS REGARD.HE HELD THAT THE EXPENDITURE IN QUESTION WAS NOT INCURRED FOR THE BUSINESS OF THE ASSESSEE AND HENCE WAS TO BE DISALLOWED. 2.1 . AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (F AA ).BEFORE HIM IT WAS CONTENTED THAT THE DISPUTED EXPENDITURE HAD BEEN INCURRED TOWARDS THE LABOUR PAYMENT MADE, THAT THE MATERIAL WAS PROVIDED BY PPL , THAT THE OBLIGATION OF ITS USES TO THE PRECISION AND WITHOUT ANY LOSS WAS ON THE ASSESSEE , THAT IT HAD HIRED LABOURERS FOR HANDLING THE MATERIAL DURING MANUFACTURING PROCESS, THAT THE AMOUNT WAS PAID AS SERVICE CHARGES TO THE CONTRACTOR WHO WAS RESPON SIBLE FOR HANDLING OF MATERIAL, THAT THE SAID EXPENDITURE WAS DEBITED UNDER THE HEAD MAIDA , SUGAR, C - BOX HANDLING EXPENSES, THAT THE EXPENDITURE HAD DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE , THAT THE NATURE OF EXPENDITURE WAS MISUNDERSTOOD BY THE AO .THE ASSESSEE FURNISHED THE COPY OF THE LEDGER ACCOUNT OF THE DISPUTED EXPENSES ALONGWITH THE DEBIT NOTES OF THE CONTRACTOR. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE F AA HELD THAT THE MATERIAL WAS TO BE UN LOADED/INSPECT ED/TESTED/ STORED BY THE ASSESSEE , THAT THE EXPENDITURE RELATING TO UNLOA D ING AND SUPERVISION OF RAW MATERIAL TOWARDS LABOUR PAYMENT WAS TO BE BORNE BY THE ASSESSEE , THAT THE AO HAD DISALLOWED THE EXPENDITURE MERELY ON THE PRESUMPTION THAT AS PER THE AGREE MENT WITH P PPL NO EXPENDITURE WAS TO BE INCURRED BY THE ASSESSEE , THAT THE PRESUMPTION OF THE AO WAS UNFOUNDED, T HAT THE AO HAD DISALLOWED THE EXPENDITURE WITHOU T ANALYZING ITS NATURE, THA T THE EXPENDITURE HAD DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE , T HAT THERE WAS NO REASONABLE OR LEGAL BASIS FOR DISALLOWANCE OF 6,87 ,530/ - FINALLY HE DELE TED THE DISALLOWANCE MADE BY THE AO. 2. 2 . BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE AO. AUTHORISED REPRESENTATIVE(AR)ARGUED THAT THE ASSES SEE HAD INCURRED THE EXPENDITURE FOR CARRYING OUT ITS BUSINESS,THAT EXPENDITURE HAD DIRECT NEXUS WITH COMPLETING THE CONTRACT ENTERED IN TO BY THE ASSESSEE WITH PPPL,THAT AO HAD IGNORED THE TERMS OF THE AGREEMENT. 2. 3 . WE HAVE HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE MATERIAL BEFORE US.WE FIND THAT AS PER THE AGREEMENT DATED 04.05.2007 THE ASSESSEE HAD TO PERFORM CERTAIN FUNCTIONS AND FOR THAT PURPOSE IT HAD INCURRED EXPENDITURE.THE AO HAS NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE. THE FAA HAS GIVEN A FINDING OF FACT THAT THE AO HAD MADE THE DISALLOWANCE MERELY ON PRESUMPTION.THE DR WAS NOT ABLE TO CONTROVERT THE ASSERTION MADE BY THE FAA.THE ASSESSEE HAD FURNISHED THE DETAILS OF THE EXPENDITURE.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT THE OR DER OF THE FAA DOES NOT REQUIRE ANY INTERFERENCE FROM OUR SIDE.SO,CONFIRMING HIS ORDER WE DECIDE GROUND NO.1 AGAINST THE AO. ITA/7150/MUM/2012 - AY.2009 - 10,MFPL 3 3 .SECOND GROUND IS ABOUT DELETING ADDITION OF RS.3,31,574/ - .DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT AN AMOUNT OF RS. 3,31,574/ - HAD BEEN DEDUCTED FROM GROSS RECEIPT TOWARDS SCRAP EMPTIES RECOVERY,HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY RS.3,31,574/ - SHOULD NOT BE ADDED AS INCOME FOR THE REASON THAT THE DISPUTED AMOUNT WAS PAYABLE FOR PRIOR PERIOD.HE OBSERVED THAT THE EXPENDITURE PERTAINED TO EARLIER YEAR WHEREAS ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING,THAT THE ASSESSEE HAD NOT PRODUCED BILL/ VOUCHER FOR VERIFICATION. FINALLY,HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE . 3.1 . AGAINST THE DISALLOWANCE OF THE EXPENDITURE THE ASSESSEE CONTENDED BEFORE THE FAA THAT THE MATERIALS FOR THE PURPOSE OF PRODUCTION WAS SUPPLIED BY THE PARLE, THAT THERE WA S AN ACCUMULATION OF BAGS, DRUMS AND OTHER CONTAINER DURING THE COURSE OF THE YEAR ,THAT A S PER CLAUSE XX OF THE AG RE EMENT, THE PROCEDURE FOR REALIS ATION OF SUCH EMPTIES/SCRAP WA S STIPULATED ,THAT A S PER THE SAID CLAUSE EMPTIES/SCRAP HAD TO BE BE DISPOSED BY ASSESSEE UNDER THE SCRAP INVOICE OF PARLE , THAT SINCE THE DATE OF AGREEMENT IT DID NOT DISPOSE ANY SUCH EMPTI ES/GUNNY BAGS ETC ,THAT INSTEAD IT USED THE SAME FOR DISPATCHES OR SAME WAS LOST/PILFERED,THAT IT WAS OF THE OPINION THAT SINCE NO RECOVERY WAS MADE OUT OF SUCH EMPTIES/GUNNY BAGS DRUMS ETC. THERE WOULD NOT BE ANY CLAIM BY PPPL,THAT IT DID NOT MAKE ANY PR OVISIONS FOR THE YEAR UNDER APPEAL,THAT PPPL APPROACHED THE ASSESSEE AFTER THE END OF ALMOST A YEAR OR SO AND FORWARDED IT CLAIM FOR RECOVERY OUT OF SUCH EMPTIES/GUNNY BAGS ,THAT IT EXPLAINED TO PPPL THAT THAT THE BAGS/CONTAINERS WERE USED BY THEM OR WAS L OST/DAMAGED,THAT PPPL HOWEVER, CALCULATED THE TOTAL RECOVERY BASED ON THE SUPPLIES MADE TO THE ASSESSEE DEDUCTED SAID AMOUNT UP F RONT AS RECOVERY FOR EMPTIES/GUNNY BAGS FROM THE PROCESSING CHARGES PAYABLE BY IT, IN THE MONTH OF JUNE 2008,THAT AT THAT TIME FOR THE FIRST TIME ASSESSEE - COMPANY CAME TO KNO W ABOUT LOSS THAT IT HA D TO BEAR,THAT C ONSIDERING THE BUSINESS EXIGENCIES IT EVENTUALLY BOOKED THE SAID EXPENDITURE IN ITS ACCOUNTS FOR THE YEAR 2008 - 09, THAT DURING THE YEAR UNDER REFERENCE, THE SCRAP EMPTIES CHARGES OF RS.3,31,574/ - WE RE RECOVERED BY PPPL FROM THE ASSESSEE IN PURSUANCE OF THE AGREEMENT,THAT THE CHARGES WE RE SETTLED AND RECOVERED BY THE PARLE IN TH E YEAR UNDER APPEAL, THAT IN THE ABSENCE OF ANY ACTUAL RECOVERY BY THE ASSESSEE THE LIABILITY O N THE IT BY WAY OF CLAIM BY PPPL WAS CRYSTALLISED FOR THE FIRST TIME,THAT THE SAID LIABILITY WAS ENFORCEABLE ON THE ASSESSEE AS PER THE TERMS OF THE AGREEMENT IN THE YEAR UNDER CONSIDERATION, THAT SAME WAS CORRECTLY BOOKED IN THE ACCOUNTS OF THE COMPANY , THAT IT WAS A LEGITIMATE BUSINESS EXPENDITURE OF THE APPELLANT COMPANY. THE ASSESSEE PLACED R ELIANCE ON THE JUDICIAL PRONOUNCEMENTS OF BEEKAY ENGG.CORPN( 323ITR252 ) ,SRF LTD. ( 34SOT1), Y UM RESTAURAN - TS(INDIA)(P.)LTD. ( 224 CTR 383 ).IT ALSO PRODUCED THE COPY OF B ILL/VOUCHER OF PPPL FOR THE MONTH OF JUNE '08 SHOWING SUCH REDUCTION OF RS.3,31,574/ - FROM PROCESSING CHARGES PAYABLE TO THE ASSESSEE AND STATED THAT ADJUSTMENT WAS AS PER ACCOUNTING STANDARD - V . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE FAA HE LD THAT THE EXPENDITURE REL ATED TO THE BUSINESS OF THE ASSESSEE ,THAT HE HAD NOT APPRECIATED THE FULL FACTS IN ITS ENTIRETY ,THAT THE EXPENDITURE WAS RELATED TO RE D UCTION OF GROSS RECEIPTS ON ACCOUNT OF SCRAP EMPTIES RECOVERY ,THAT A S PER THE POLICY AND TERM S A ND CONDITIONS OF THE PRINCIPAL IF SUCH EMPTIES WE RE NOT RETURNED THE PRINCIPAL WAS ENTITLE TO DEDUCT THE CORRESPONDING AMOUNT FROM THE GROSS PAYMENT MADE TO THE ASSESSEE ,THAT IT WAS LIABLE FOR SUCH BUSINESS RESPONSIBILITY WHICH C OULD NOT BE PRESUMED T O BE OTHER THAN BUSINESS CONSIDERATION.CONSID ERING THE BUSINESS ACTIVITIES, MANUFACTURING, DISTANT PLACE OF BUSINESS, THE FAA HELD THAT THE EXPENDITURE WAS GENUINE. HE FURTHER HELD THAT MOST OF THE GUNNY BAGS AND EM PTIES WE RE LOST OR BEC AME OBSOLETE OR UTIL IS ED IN THE BUSINESS PREMISES FOR RESTORING THE GOODS, KEEPING SAFE THE INVENTORY OR UTILIZATION OF THE SUCH EMPT IES BY THE EMPLOYEES OR WORKERS,THAT POSSIBILITY OF SUCH HAPPENINGS C OULD NOT BE DENIED. FINALLY,HE HELD ITA/7150/MUM/2012 - AY.2009 - 10,MFPL 4 THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE WAS ALLOWABLE EXPENDITURE ,THAT DURING THE YEAR UNDER APPEAL THE LIABILITY GOT CRYSTALLISED,THAT PPPL HAD DEDUCTED THE DISPUTED AMOUNT. 3.3. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO AND STATED THAT NECESSARY DETAILS WERE NOT FILED BEFORE THE AO.THE AR RELIED UPON THE ORDER OF THE FAA. WE HAVE HEARD THE RIVAL SUBMISSION AND HAVE PERUSED THE MATERIAL BEFORE US. IT IS FOUND THAT THE ASSESSEE HAD NOT PRODUCED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM,THAT DURING THE APPELLATE PROCEEDINGS IT FURNISHED BILL/VOUCHERS AND THE FAA CONSIDERING THOSE DOCUMENTS GRANTED RELIEF TO THE ASSESSEE .BUT,AS PER THE PROVISIONS OF RULE 46A OF THE INCOME - TAX RULES,1962 THE FAA IS REQUIRED TO FORWARD THE NEW EVIDENCES TO THE AO OR HAS TO ADMIT THE SAME UNDER SUB RULE 4 OF THE RULES. WE DO FIND THAT THE FAA HAS NOT FOLLOWED ANY OF THE SUB SECTION OF THE RULE 46A AND HAS DECIDED THE MATTER WITHOUT CALLING FOR REMAND REPORT FROM THE AO.THEREFORE,IN THE INTEREST OF JUSTICE,WE ARE REMITTING BACK THE MATTER TO THE FILE OF THE AO FOR LIMITED PURPOSE OF VERIFICATION OF THE BILLS/VOUCHERS NOT PRODUCED BEFORE HIM AND FURNISHED TO THE FAA FOR THE FIRST TIME.GROUND NO.2 IS DECIDED IN FAVOUR OF THE AO,IN PART. 4. NEXT GROUND IS DEALS WITH THE DISAL LOWANCE OF RS.8,37,979/ - , BEING EXPENSES ON ACCOUNT OF MIXING SUPERVISION AND PACKING SUPERVISION . DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HA D MADE PAYMENT OF RS. 5,49, 200/ - UNDER THE HEAD 'MIXING SUPERVISION EXPENSES'. HE ASKED IT TO EXPLAIN THE NATURE OF THE EXP ENSE ALONG WITH SUPPORTING BILLS / VOUCHERS. THE ASSESSEE SUBMITTED SALARY STATEMENT FOR THE MONTH OF A PRIL, 2008. ON VERIFICATION OF THE SAME ,THE AO FOUDNT THAT THE PERSONS WHOM PAYMENT WAS MADE WERE NOT THE EMPLOYEES OF THE ASSESSEE ,THAT THEY WERE RENDER ING TECHNICAL SERVICES AND SUPERVIS ING THE M IXING P ROCESS ,THAT T HE MIXING SUPERVISING CHARGES HA VE BEEN MADE TO DEEPAK RAMESH PRAIAPATI AND GAINDLAL, THAT PACKING SUPERVISION CHARGE OF RS.3,56,143/ - WERE MADE OT KRISHNAKANT KODWANI AND OTHERS. THE AO HELD THAT SUCH PAYMENTS WERE RELATING TO THE JOB WHICH WA S T ECHNICAL IN NATURE HENCE SAME WA S TO BE REGARDED FEES FOR PROFESSIONAL OR TECHNICAL SERVICES. REFERRING TO THE PROVISIONS OF SECTION 194 J AND EXPLANATION 2 CLAUSE ( VII ) OF SUBSECTION 1 OF SECTION 9 OF THE ACT,HE DISALLOWED THE ENTIRE EXPENDITURE TOTALING TO RS.8,37,979/ - . 4.1. BEFORE THE FAA,THE ASSESSEE SUBMITTED THAT IT HAD DIVIDED ITS PROCESSES OF MANUFACTURING AND THE HUMAN INTERFER ENCE UNDER EACH PROCESS WAS HIRED UPON TO ACHIEVE THE MAXIMUM PREC ISION , THAT SUPERVISION CHARGES WE RE PAID TOWARDS THE LABOR CHARGES AND TDS @ OF 1% WAS DEDUCTED AS THERE WAS NO EXPERTISE OR TECHNICAL QUA LI FICATION REQUIRED ,THAT MANUFACTURING PROCESSES WAS VERY STANDARDIZED AND DOCUMENTED ,THAT PPPL PERSONNEL WOULD CO ME ON SPORADIC VISIT ,THAT CHARGES WE RE PAID TO CONTRACT LABOURS WHO WOULD LOAD THE MATERIAL IN THE MIXING MACHINE O R WOULD PACK THE MATERIAL,THAT IT HAD DEDUCTED TDS U/S.194C OF THE ACT,THAT THE ACCOUNTS OF THE ASSESSEE WAS SUBJECT TO THE TAX AUDIT U/S. 44AB ,THAT NO ADVERSE COMMENT WAS PLACED BY THE AUDITOR S IN THAT REGARD,THAT AO, BEFORE REACHING TO THE CONCLUSION OF THE SERVICES BEING OF PROFESSIONAL/TECHNICAL NATURE, DID NOT BR ING ANYTHING ON RECORD TO PROVE HIS ALLEGATION, THAT NO OP PORTUNITY WAS PRO V IDED TO THE ASSESSEE TO PUT FORTH ITS CONTENTION. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER,THE FAA HELD THAT T HE SUPERVISION CHARGES PAID FOR A CONTRACTUAL OBLIGATION WERE LABOUR CHARGE S,THAT T HE MIXING SUPERVISION AND P ACKING SUPERVISION WAS NOT RELATE D TO ANY TECHNICAL INPUTS NOR WA S FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES, THAT IT WAS RELATED TO A SUPERVISORY WORK ENSURING THE PRODUCTION AS PER THE SPECIFICATION OR REQUIREMENT GIVEN BY PPPL,THAT THE AO HAD WRONGLY PRESUMED THAT THE ASSESSEE HAD INCURRED SUCH EXPENSES AS A FEES FOR PROFESSIONAL SERVICE OR FEES FOR TECHNICAL SERVICES ,THAT THE PAYMENT S ITA/7150/MUM/2012 - AY.2009 - 10,MFPL 5 WERE IN THE NATURE OF LABOUR CHARGES AND IT HAD RIGHTLY MADE TDS @1 % AS DEDUCTIBLE U/S .194C OF THE ACT ,THAT UNLESS CONTRARY EVIDENCE WA S BROUGHT ON RECORD NO DISALLOWANCE OF EXPENDITURE U/S.40(A) (IA) COULD BE MADE. HE REFERRED TO THE CASES OF M /S. S. K. TEKRIWAL( ITA NO.1135/ KOL/2010 ),M/S CHANDABOY & JASSOBHOY( ITA NO.20/MUM/2010 ), RATNAKAR S AWAN T, DINESH N. SHAH & COMPANY(IT A NO. 2941/MUM/2011 )AND HELD THAT THE AO HAD WRONGLY PRESUMED THAT SUCH CONTRACTUAL PAYMENT WAS FEES FOR TECHNICAL OR PROFESSIONAL SERVICES. FINALLY,HE DELETED THE DISALLOWANCE MADE BY THE AO. 4.2. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO.THE AR STATED THAT S ERVICES RECEIVED BY THE ASSESSEE WERE NOT IN THE NATURE OF TECHNICAL OR CONSULTANCY,THAT IT WAS A LABOUR CONTRACT PAYMENT AND THE ASSESSEE HAD DEDUCTED TAX AS PER THE PROVISIONS OF THE ACT. 4.3. WE HAVE HEARD THE RIV AL SUBMISSIONS.WE FIND THAT THE AO HAD MADE THE DISALLOWANCE AS HE WAS OF THE OPINION THAT MIXING SUPERVISION AND PACKING SUPERVISION FELL IN THE CATEGORY OF FEES FOR TECHNICAL SERVICES.HE INVOKED THE PROVISIONS OF SECTION 9(1)(VII)R.W.S.194J AND 40(A)(IA) OF THE ACT.WE FIND THAT HE HAS NOT ELABORATED AS TO HOW THE MIXING AND PACKING SUPERVISION CAN BE TERMED FEES FOR TECHNICAL SERVICES - A TERM HAVING ITS DEFINITE MEANING.IN OUR OPINION,THE FAA HAS RIGHTLY HELD THAT IT WAS A PURE AND SIMPLE LABOUR CONTRACT AN D WAS COVERED BY THE PROVISIONS OF SECTION 194C OF THE ACT. WE DO NOT WANT TO DISTURB HIS ORDER,SO,CONFIRMING THE SAME GROUND NO.3 IS DECIDED AGAINST THE AO. 5. LAST GROUND IS RELATED TO DISALLOWANCE OF LOADING AND UNLOADING EXPENSES OF RS. 11,76,080/ - MADE U/S.40(A)(IA) OF THE ACT. ACCORDING TO THE A O THERE WE RE VARIOUS PARTIES TO WHOM LOADING EXPENSES MORE THAT RS.50, 000 / - WERE PAID.HE HELD THAT IN SUCH CASES THE PROVISION OF SECTION 194C WERE ATTRACTED. ACCORDING TO THE A O THE ASSESSEE HAD FURNISHED THE DETA ILS OF APPEARING IN THE LEDGER ACCOUNT VIDE ITS LE TTER DATED 24.10.2011 BUT THERE AFTER IT HAD NEITHER ATTENDED NOR HAD MADE ANY EXPLANATION REGARDING THE APPLICABILITY OF SECTION 194C. THE AO HELD THAT TDS HA D NOT BEEN MADE IN RESPECT OF LOADING EXPENSES , THAT SAME HAD TO BE DISALLOWED U/S.40(A)(IA) OF THE ACT. 5.1. DU RING THE APPELLANT PROCEEDINGS BEFORE THE FAA, IT IS ARG UED THAT THE LOADING EXPENSES WE RE INCUR RED WHEN THE FINISHED PRODUCTS WE RE SENT TO VARIOUS WHOLESALERS AND RETAILERS FOR SALE ,THAT THE UNLOADING EXPENSES WERE INCURRED WHEN THE VARIOUS RAW MATERIALS WE RE RECEIVED FROM PPPL FOR MANUFACTURING PROCESS ,THAT A LL THE PAYMENTS WERE MADE TO PERSONS WHO WE RE DAILY WAGE EARNERS AND UNSKILLED PERSONS ,THAT FOR THEM VOUCHERS WE RE MADE AND SIGNATURE S WERE OBTAINED, THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS LEDGE R COPY OF THE SAID EXPENSES WAS PRODUCED BEFORE THE AO,THAT T HE AO BASED ON AN ANALYSIS OF THE LEDGERS AND BASED ON THE NAM ES MENTIONED IN THE NARRATIONS WORKED OUT THE PAYMENTS MADE TO VARIOUS PARTIES AND MADE THE DISALLOWANCE U/S 40(A)(IA) R.W.S. 194C OF THE ACT.THE ASSESSEE RELIED UPON THE CASES OF INDIAN ROAD LINES , KALINDI AGRO BIOTECH LTD.( 7 ITR - TRIBJ 249 ), DEEWAN CHAND (178 TAX M ANN 173 ),LAXRNI PROTEIN PRODUCTS P LTD. ( 3 ITR - TRIB 768 ), R.R. CARRYING CORPORATION ( 126 TT J 240 ), CHANDRAKANT THAKKAR( 129 TTJ 1 ). THE FAA HELD THAT RECURRING PAYMENTS HAD BEEN MADE TO A DAILY LABOURERS WHO WE RE UNSKILLED PERSONS ,THAT SUCH PAYMENTS WERE MADE TH R O UGH VOUCHERS ,THAT THE AO HAD NOT DOUBTED THE GENUINE NESS OF SUCH EXPENDITURES ,THT HE DISALLOWED THE SAME MERELY ON THE PRESUMPTION THAT THERE WAS A CONTRACT OF SUCH LOADING AN D UNLOADING ,THAT THERE WAS NO SUCH VISIBLE CONTRACT,THAT IT WAS A RECURRING EXPENDITURE BORNE AT THE TIME OF ITS INCURRENCE ON DAY TO DAY BASIS ,THAT SUCH EXPENDITURE WAS NOT HIT BY THE PROVISIONS OF LAW U/S.194C R.W.S.40(A)(IA) OF THE ACT,THAT NO SUCH ITA/7150/MUM/2012 - AY.2009 - 10,MFPL 6 CONTRACTS WOULD BE ENTERED IN TO IN RESPECT OF DAY TO DAY RECURRING EXPENDITURE. HIGHLIGHTING THE BASIC INGREDIENTS OF A CONTRACT ,HE H ELD THAT IN ASSESSEES CASE NONE OF THE CONDITIONS WERE SATISFIED ,THAT THERE WA S NO AGREEMENT BETWEEN THE ASSESSEE AND THE LOADERS ,THAT PROVISIONS OF SECTION 194 C WERE NOT APPLICABLE.FINALLY,HE HELD THAT THE AO HAD WRONGLY DISALLOWED THE LOADING EXPENDITU RE FOR WANT OF TDS. 5.2. BEFORE US,THE DR AND THE AR RELIED UPON THE ORDERS OF THE AO AND THE FAA RESPECTIVELY. WE FIND THAT THE AO HAD MADE THE DISALLOWANCE AS HE WAS OF THE OPINION THAT THE LOADING AND UNLOADING CHARGES WERE COVERED BY THE PROVISIONS OF S ECTION 194 C OF THE ACT AND THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX FOR SUCH PAYMENTS.THE ASSESSEE HAD MADE PAYMENTS FOR LOADING AND UNLOADING TO THE UNSKILLED DAILY LABOURERS AND THERE WAS NO CONTRACT BETWEEN THE TWO PARTIES.IT HAD PRODUCED THE NECESSA RY DOCUMENTS ALONG WITH THE VOUCHERS BEFORE THE AO. THEREFORE,THERE WAS NO JUSTIFICATION IN HOLDING THAT THE PAYMENTS WERE COVERED BY SECTION 194C OF THE ACT AND THE ASSESSEE HAD TO DEDUCT TAX AT SOURCE.THEREFORE, IN OUR OPINION,THE ORDER OF THE FAA DOES N OT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.CONFIRMING HIS ORDER,WE DECIDE GROUND NO.4 AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS PARTLY ALLOWED . . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY,2015. 22 ND , 2015 SD/ - SD/ - ( /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 22 . 07 . 2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCE RNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.