RY Midas Metacast Private Limited Vs ITO (ITAT Ahmedabad)
Assessee, a manufacturer engaged in casting & fabrication, filed appeal against the order of the NFAC dated 02.12.2024. The AO had made two disallowances- ₹ 25,41,797 being part of commission expenses treated as non-genuine, & ₹ 8,60,923 u/s 40(a)(ia) on alleged non-deduction of TDS on job-work charges.
During assessment, AO observed that Assessee had paid commission of ₹ 37.49 lakh to four parties. Since one party (Varun Radiators Pvt Ltd) allegedly did not respond to notice u/s 133(6) & because such commission was newly introduced in the year & paid on a lump-sum annual basis, AO held it unverifiable & disallowed part of the claim. CIT(A) confirmed the view. He further held that TDS was not deducted on job-work expenses of ₹ 28.64 lakh out of total ₹ 75.96 lakh & therefore disallowed 10% thereof u/s 40(a)(ia).
Tribunal noted that all commission payments were through banking channels with TDS deduction, supported by invoices, ledgers, & confirmations. The Bench also found AO’s factual assertion wrong-the party Varun Radiators Pvt Ltd had indeed replied to notice u/s 133(6) confirming receipt of commission. It observed that sales turnover had increased from ₹ 30.09 crore to ₹ 71.91 crore, & profits from ₹ 18.95 crore to ₹ 45.47 crore, establishing a direct nexus between the commission outlay & increased business. Hence, merely because commission was computed yearly instead of per transaction did not make it bogus. Regarding TDS on job-work, the Bench found AO had ignored quarterly TDS returns & Form 26AS, which clearly showed deduction of ₹ 1.14 lakh on entire job-work payment of ₹ 75.96 lakh. Thus, there was no default & the disallowance was factually unsustainable.
