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PER R.P. GARG, Sr.VP These cross appeals are against the order of the Commissioner of Income-tax (Appeals) for assessment year 2003-04.

2. In the revenue's appeal, the issues raised are - first with regard to the disallowance of wages of Rs.9 lakh and the other two with regard to the depreciation on building of Unit-II and the electrical installation installed therein. The Assessing Officer noticing the facts that wages have increased to Rs.21.82 lakh in the year under consideration as against Rs.12.55 lakh in the earlier year, disallowed a sum of Rs.9 lakh out of the wages to cover the discrepancies. He observed that the turnover of the assessee had decreased from 20.19 crores to Rs.6.95 crores and the assessee had purchased ITA Nos.447 & 524/Del./2009 (Assessment year : 2003-04) finished material of Rs.35.36 lakh whereas it was 27.55 lakh in the last year. The assessee submitted that the increase in expenses under the above head was due to the fact that the firm has started its own manufacturing unit, namely, Unit-II whereas in the earlier year all the manufacturing activities were got done on job work basis from various parties and the firm used to purchase manufactured material and finished goods, and the packing activities were got in its own premises. The Assessing Officer was not satisfied with the explanation and made the disallowance. The Commissioner of Income-tax (Appeals), however, allowed the claim of the assessee by observing in para.6 of his order as under: