TaxTMI 
TaxTMI 
2016 (3) TMI 721
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....ion. During the course of assessment proceedings, the A.O. noticed that the assessee has debited an amount of Rs. 16,86,052/- towards hamali charges. On perusal of the details filed by the assessee, it was noticed that the hamali charges were paid to daily labourers employed by the assessee. Therefore, the A.O. asked to produce the bills & vouchers and TDS particulars for the hamali charges claimed in the P&L account. In response to notice, the assessee stated that it has employed daily labourers for handling the materials in the factory premises for which it has paid wages to the labourers on weekly/fortnightly basis. The assessee further submitted that for the sake of convenience, it has paid the wages through a person called mestri. However, no payments to any individual labourers exceed Rs. 20,000/- in each case and aggregate of such payments also does not exceed Rs. 50,000/-. Similarly, the A.O. noticed that the assessee has claimed production charges amounting to Rs. 20,82,288/-. When asked to produce the bills & vouchers and TDS particulars for the same, the assessee has submitted that it has employed daily labourers for working in the factory premises and paid the wages on ....
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....nts as per the custom were made to mestri on behalf of the labour, in turn the mestri distributes the payments to the labourers. The assessee further submitted that it is not a contract of work or contract for supply of labour, but only payment of labour charges to the daily labourers employed in the factory premises for handling the materials. The A.O. without considering the above submissions applied the provisions of section 40(a)(ia) of the Act and disallowed the amount which is not correct. 5. Similarly, the assessee has paid production charges of Rs. 20,82,228/- towards labour working in the factory in the production process. The assessee further submitted that these labourers were engaged in the factory premises to assist the production process and wages was paid on weekly/fortnightly basis. As per the custom, the payments were made to mestri, in turn the mestri has distributed the payment to the workers on weekly basis. The assessee further submitted that it is not a contract of work or contact for supply of labour, but only a payment of labour charges for daily workers. Therefore, the provisions of section 40(a)(ia) of the Act cannot be invoked. 6. The assessee furth....
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....n for supply of labour from time to time which is evident from the vouchers produced before the A.O. The Ld. D.R. further submitted that the CIT(A) was erred in deleting the addition by stating that there is no written contract between the mestri and the assessee, since there exist an oral contract between the mestri and assessee. The mestri is bound to supply the labour/work force as per the terms till the work is completed which amounts to contact as stipulated u/s 194C of the Act. Since, the assessee failed to deduct the tax u/s 194C of the Act on such payments, the A.O. has rightly disallowed the amount by invoking the provisions of section 40(a)(ia) of the Act and his order should be upheld. Similarly, as regards the additions towards capital is concerned, the Ld. D.R. submitted that the assessee has failed to furnish sources for the cash credits in capital account therefore, the A.O. has rightly made the additions. The Ld. D.R. further submitted that the CIT(A) erred in holding that the A.O. should have discharged his onus in rejecting the same by bringing cogent material on record which was not done as the assessee did not discharged initial burden cast upon it. Therefore, t....
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....d his case was subjected to assessment u/s 143(3) of the Act, wherein the A.O. has accepted the source for investment in capital account of Best Feeds. The A.R. further submitted that if at all the A.O. is not satisfied with the sources for credits in capital account, then, the additions can be made only in the hands of the partners, but not in the hands of the firm. Therefore, the order of CIT(A) should be upheld. 11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. disallowed hamali charges and production charges by invoking the provisions of section 40(a)(ia) of the Act. The A.O. was of the opinion that the assessee has made the payment to the mestri for supply of labourers, therefore, it attracts the provisions of section 194C of the Act, therefore, disallowed the amount u/s 40(a)(ia) of the Act. It was the contention of the assessee that the amounts paid towards hamali charges and production charges are not covered u/s 194C of the Act. The assessee further submitted that these payments were made to daily workers employed in the factory for handling the materials and the payments were mad....