TaxTMI 
TaxTMI 
TaxTMI 
2009 (3) TMI 215
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....ing", are performed in the factory premises by company's own employees on the payroll. But Biri binding is the major operation in the process of manufacturing "pacca hiri". As per Biri binding register the company has recorded production of as many as 1,70,51,03,300 number of Biris during the financial year 2004-05. Such huge task are performed by outside labourers who are known as "home workers" scattered over different localities and whom the company is not at all familiar with and who are not on the payroll as it is verified from the Biri binding charges, wages and bonus register. Such home workers are few thousands in number. Hence the company had to recruit or engage or appoint as many as 364 contractors who recruit the labourers from different and even distant localities and get the assigned binding works done by the numerous number of Biri binders. It would also be evident from details produced that for getting the work contract, the company accepted huge amount of security deposits from such contractors, which as per accounts stood at Rs. 30,97,364 as on 31st March, 2005. Hence, on verification of books of accounts and audit report and enclosures and the Biri binding charge....
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.... 42,000 1,48,509 --------------------------------------------------------------- Rs. 10,90,000 2,10,000 5,94,036 --------------------------------------------------------------- The assessee company has deducted tax at source against payment/credit of remuneration and bonus but commission amount of Rs. 5,94,036 has been paid/credited without deducting any tax at source knowing very well that the commission has been earned by the directors as honour to their professional and technical expertise in the line of Biri manufacturing and the income has been shown under the head "Income from other sources" in the (sic) Hence, the commission amounting to Rs. 5,94,036 payable/paid to the directors during the relevant accounting period without deducting tax at source has been disallowed. (iii) On account of sales promotion (prize coupons): The assessee debited expenditure amounting to Rs. 46,03,324 in the P&L a/c on account of "prize coupon and scheme" which as stated by the assessee is done with a vi....
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.... resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B, s. 40(a)(ia) can have no application. As discussed in details above, that the payments made by the assessee to the home workers through the Munshis do not fall in the category of 'interest', 'commission or brokerage', or payment to any resident contractor or sub-contractor. The inclusive definition of 'commission or brokerage' given in cl. (i) of Explanation to s. 194H, does not encompass payment made by an employer to his employee. These payments cannot also be categorized as payments to contractors. In fact, the payments made to the home workers can be categorized as 'wages' within the meaning of s. 17(1)(i) of the Act. Taxes are not deductible at source under s. 194C from this type of payments and for purported failure of which disallowance cannot be made under s. 40(a)(ia) of the Act. Therefore, I am of the opinion that the disallowance of this payments, which otherwise constitute allowable business expenditure, cannot be made for non-deduction of tax at sourc....
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....us. 5. At the time of hearing before us, the learned Departmental Representative, appearing on behalf of the Revenue, has heavily relied on the orders of the AO. 6. On the other hand, the learned counsel, appearing on behalf of the assessee, has supported the orders of the learned CIT(A) in respect of wages payment made to Biri workers. Further, he contended that the action of the learned CIT(A) is not justified, while confirming the wages paid to the Munshis by observing the same as contract payment and by applying s. 194H, he further contended that the Munshis also come under the workers but the payments are made at Rs. 240 per one lakh Biris got bounded from the labourers. The Munshis are also subjected to the provident fund regulations and are bound by the agreement entered with the various labour unions involved in the Biri manufacturing. Therefore, he contended that the learned CIT(A)'s contention that the payment made to the Munshis are covered under s. 194H is not justifiable. Therefore, he requested to delete the same. To substantiate this claim, he filed copies of the provident fund accounts maintained by the assessee company in respect of Munshis in the paper book. ....
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....l services, considered in s. 194J of the Act. Therefore, he supported the orders of the AO. 11. On the other hand, the learned counsel, appearing on behalf of the assessee, has supported the orders of the learned CIT(A) and stated that the directors have been paid commission, in addition to the salaries and other perquisites. Hence, the direction of the learned CIT(A) on this issue is in accordance with law. Therefore, he requested that the same may be upheld. 12. After hearing the rival submissions and on careful perusal of the materials available on record and taking into consideration that the assessee company has paid this commission to the directors as per their terms of employment for the work done in their capacity as whole-time directors, this commission should have been treated as an incentive in addition to salary, bonus and other perquisites. Therefore, in our considered opinion, the learned CIT(A) is justified in recording the same as not coming within the purview of commission or brokerage as defined in s. 194H nor a fee for professional or technical services as defined in s. 194J of the IT Act. Therefore, we find no infirmity in the orders of the learned CIT(A) on....
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....that there being no infringement of law, the expense under consideration does not fall within the mischief of the Explanation to s. 37(1) of the Act, and hence, is otherwise allowable. So far as the submission of evidence in support of claiming the expenditure, the learned Authorised Representative remained silent and no such evidence was produced. No unreasonable or impossible evidence was requisitioned by the learned AO in course of assessment proceedings. The names of the recipients of the prize money may be huge and payments were made by their retailers, the assessee may not have maintained the details of those recipients. However, the assessee itself submitted that for reimbursing the prize money from the assessee, the retailers had returned the prize coupons. Therefore, the assessee must have maintained those prize coupons. But no such coupon was produced before the AO or produced in course of hearing of the appeal. Thus, in absence of any such evidence, claiming excess expenditure in the name of inserting prize coupons in the bundles of Biris cannot be ruled out. In view of this fact and considering the volume of business of the assessee and in absence any supporting evidenc....