TaxTMI 
TaxTMI 
2024 (4) TMI 644
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....e Income Tax Act, 1961 (hereinafter referred to as 'the Act') relating to the Assessment Year (A.Y) 2015-16. 2. The brief facts of the case is that the assessee is Private Limited Company engaged in the manufacture of Bulk Drugs and Pharma ceuticals products. For the Asst. Year 2015-16, the assessee filed its Return of Income on 22.10.2015 declaring total income of Rs. 64,38,250/-. The return was taken up for scrutiny assessment and made various disallowances. We are concerned only with three disallowances confirmed by the Ld. CIT(A) which are as follows: (i) Disallowance of Rs. 44,89,985/- on job work charges paid to Chevron Pharma Pvt. Ltd. (ii) Disallowance of Rs. 33,420/- on adhoc basis on the job work charges. ....
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....ut just compared the rates of the sister concern alone at different period only. The assessee explained the bills raised against the sister concern for job work to produce three products are detailed as under: Sr. No. Date Bill No Quantity Rate Gross Amount TDS Net Amount Amino 5 methyl Thaizol 1 01-07-2014 JW-01/14-15 474 150 71100 1422 69678 5 01-09-2014 JW-05/14-15. 1652 150 247800 4956 242844 11 24-01-2015 JW-12/14-15 2700 450 1215000 24300 1190700 13 31-01-2015 JW-13/14-15 900 450 405000 8100 396900 15 10-02-2015 JW- 16/14-15 300 450 135000 2700 132300 Bisphenol 7 02-12-2014 JW- ....
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....s. 44,89,950/- by invoking provision of section 40A(2)(b) of the Act. 2.4. Further the AO found that the evidence related to the expenses on job work payments to M/s.Microtech are by way of handmade bills without GST, CST, VAT, which are not verifiable in nature and so the AO made an adhoc disallowance at an estimated amount of Rs. 2/per kg and made disallowance of Rs. 33,420/-. 2.5. On further verification of the profit & loss account, the assessee shown export incentives of Duty Drawback of Rs. 1,64,890/= whereas as per the information available from export import summary data from CBEC, the assessee was sanctioned Duty Drawback of Rs. 2,63,448/- thereby the difference of Rs. 98,558/= was not shown as export incentive. Therefore the....
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.... 6. Ld. CIT (A) erred in law and on facts in not deleting but setting aside to AO the addition made of Rs. 98,558/- duty draw back incentive though the same amount has been offered on cash receipt basis in the subsequent year. 7. Levy of interest u/s 234B, 234C & 234D of the Act is unjustified 8. Initiation of penalty proceedings u/s 271(1)(c) of the Act is unjustified. 4.1. Heard rival submissions and perused the materials available on record including Paper Book and Case Laws compilation filed by the assessee. 5. Regarding Ground Nos. 1 to 4 disallowance of Rs. 44,89,985/- out of total job work charges of Rs. 92,67,600/- paid to sister concern. The Ld. CIT(A) confirmed the above addition on the ground that the ....
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.... on Assessing Officer and Assessing Officer had failed to discharge said onus, disallowance was unsustainable in law. 5.1. Similarly, the Co-ordinate Bench of the Delhi Tribunal in the case of IKEA Trading (India) Pvt. Ltd. Vs. DCIT reported in [2021] 123 taxmann.com 129 (Delhi-Trib.) held that where Assessing Officer had not brought any comparable case to demonstrate that payments made by assessee to directors were excessive or unreasonable, following CBDT Circular No. 6-P, dated 06.07.1968 which states that no disallowance is to be made under section 40A(2) of the Act in respect of payments made to relatives and sister concerns where there is no attempt to evade tax. 5.2. Similarly the Jurisdictional High Court in the case of PCIT V....
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.... of the Act. Thus the disallowance of Rs. 44,89,995/- made by the Lower Authorities are hereby deleted. Thus Ground Nos. 1 to 4 raised by the assessee are hereby allowed. 7. Regarding Ground No. 5 disallowance of Rs. 33,420 at Rs. 2 per Kg for 16710 Kgs. on estimated basis on the job work carried out by M/s. Mictrotech. The Ld. Counsel submitted that M/s. Microtech had charged different rate for different job works done by it. The Assessing Officer has not understood the nature of job work and why different rates were charged by M/s. Microtech, but on adhoc basis simply noticed different arithmetical figures and made an adhoc disallowance at Rs. 2 per Kg. Further the A.O. failed to note that the Goods and Service Tax (GST) came into effe....