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TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 743
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....e expenditure on consumables claimed in two comparable cases from the same locality was to the tune of 40% and 21% of the job charges received. He, therefore, required the assessee to explain the abnormally higher expenditure claimed by it on consumables. In reply, the following explanation was offered by the assessee: "As per our accounts, the consumption of consumables for the A.Y. 2012- 13 is near about 71% of the labour charges earned. For your information, it is not for a particular year. Our practical and general consumption of consumables of every year remains between 65% to 72%, so it is not abrupt of sudden case. It may kindly be noted here that the consumption of consumables has got no relation of locality of the manufacturer. It depends upon the size of production, method of production, number of employees engaged, work load and the size of vat, whether it is oil fired or coal fired. So, giving the instance of other manufacturer of the same locality has got no meaning of consumption of consumables and no comparison stands at all. In the matter of assessment case for the A.Y. 2010-11, the Ld. ITO had given two examples or instances. In one case, the Ld. A.O. ha....
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....sessee itself, says that the volume of work was extremely huge on that particular year. In extreme work pressure, no one can depend only on manual process, it has to use some technical, mechanical or chemical process which usually save the time. For example, if your assessee has to galvanize or process some sub-graded black iron which huge rust or oil on it, your assessee can remove those rust or oil by manually using labour and spending several valued hours or it can be cleared in acid house within only half an hour using some strong acid and chemicals or consumables. Now, it can be clearly understood, in enormous work load one will only choose the second way. The assessee had also obtained the certificate from one technical consultant, Mr. Bibhuti Nath Misra who shows that the consumption of consumables of the assessee is correct as the standard consumption should be 75% to 80% as the norms of the vat used by the assessee. That your assessee is maintaining the ISO Standard. So the production and utilization of consumables are guided by ISO norms. This sort of norms are not followed by those two units, which has been mentioned by the ld. AO. That your assessee pointed out at th....
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....ut that does not mean that huge percentage of expenses by way of consumables is justified and reasonable and has actually been used for that extent as claimed." 5. For the above reasons, the Assessing Officer held that the expenditure claimed by the assessee on consumables was excessive and unreasonable. He accordingly allowed the claim of the assessee for consumables only to the extent of 52% of the job charges and disallowed the balance portion of 19% which resulted in a disallowance of Rs. 35,40,360/-. 6. The disallowance made by the A.O. on account of consumables was challenged by the assessee in the appeal filed before the Ld. CIT(A) and since the submission made by the assessee in support of its case on this issue was not found acceptable by the Ld. CIT(A), the later proceeded to confirm the disallowance made by the A.O. out of expenditure claimed by the assessee on consumables for the following reasons given in his impugned order: "As regards the appellant's contention that this was an oil based furnace whereas in other cases it was coal based. There is nothing on record to suggest that this is true. Even if this was true, which has not been established, it has also not....
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....s not even tried to discharge this onus. As regards the fact that appellant is an ISO company, he has not established that the others are not. In addition, he has not produced even a single case of a company which is an ISO company that is showing the level of consumption shown by the appellant. In any case, he has not shown how an ISO certified company would end up showing a higher level of consumption and therefore be less efficient that a company that has not passed the rigorous tests of efficiency and business processes that an ISO certified company has to pass through. The contentions of the appellant, without any supporting evidence or reasoning, on the face of it, sound unreasonable and contrary to common sense. The appellant's contention that there is no standard practice in is particular trade, does not cut much ice in this context since an ISO certification necessarily involves the standardization of processes and practices." 7. I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that a similar issue relating to the disallowance made by the A.O. on account of consumable expenses to the extent of ....
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....f 2% and upholding the same, we dismiss the appeal filed by the revenue." 8. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Y. 2010-11, I respectfully follow the order of the Division Bench of this Tribunal for A.Y. 2010-11 and restrict the disallowance made by the A.O. out of consumable expenditure at 19% of the total job charges earned to the extent of 2%. The impugned order of the Ld. CIT(A) on this issue is accordingly modified and ground no 1 of the assessee's appeal is partly allowed. 9. The issue involved in ground no 2 relates to the addition of Rs. 1,24,850/- made by the A.O. and confirmed by the Ld. CIT(A) by way of disallowance of weigh-bridge charges under section 40(a)(ia) for non-deduction of tax at source. 10. During the year under consideration, the assessee had paid a total amount of Rs. 1,24,850/- to M/s. Murshed Weigh Bridge on account of weigh-bridge charges. According to the A.O., the assessee was required to deduct tax at source from the said payment as per section 194C of the Act and since no such tax was deducted at source by the assessee, he disallowed the weigh-bridge expenses c....