NEW DRUG & CHEMICAL CO, MUMBAI V. DCIT 14(2), MUMBAI

ITA 153/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3850 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-01-2013
• Court: TRIBUNAL
• Department Lawyers: PIYUSH SONKAR
• Keywords: Fair market value

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ./ ITA NO. 153 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 09 - 1 0 ) M/S NEW DRUG & CHEMICAL CO., 20/48, LOHAR CHAWL, 2 ND FLOOR, JAY MAHAL ESTATE, ROOM NO.4, MUMBAI - 400002 VS. DCIT - 14(2), MUMBAI ./ ./ PAN/GIR NO. : A A AFN 1029 L ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NISHIT GANDHI /REVENUE BY : SHRI PIYUSH SONKAR / DATE OF HEARING : 05 / 04 /201 6 / DATE OF PRONOUNCEMENT 27 / 04 /201 6 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED B Y THE ASSESSEE AGAINST THE ORDER OF CIT(A) - MUMBAI, DATED FOR THE ASSESSMENT YEAR 20 09 - 2010 , IN THE MATTER OF ORDER PASSED U/S. 143 ( 3 ) OF THE I.T.ACT. 2 . FIRST GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION OF RS.2,51,810/ - ON ACCOUNT OF MVAT REFUND. 3. WE HA VE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE WAS CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING PRESCRIBED BY ICAI FOR ACCOUNTING OF VAT AND CST. THE ASSESSEE HAD SHOWN LESS PURCHASES IN TRADING ACCOUNT TO THE EXTENT OF MVAT. SIMILARLY SALES W ERE ALSO SHOWN WITHOUT INCLUDING THE AMOUNT OF MVAT SO COLLECTED. SINCE MVAT WAS NEITHER INCLUDED IN ITA NO. 153 /1 3 2 PURCHASES NOR INCLUDED IN SALES, THERE WAS NO JUSTIFICATION FOR TAXING THE MVAT REFUND. AS DEFIN E D UNDER SUB - SECTION 25 OF SECTION 2 OF THE MVAT ACT SALES PRICES DOES NOT INCLUDE TAX PAID OR PAYABLE TO THE SELLER. SIMILARLY SUB - SECTION 20 OF SECTION 2 OF THE MVAT ACT PURCHASE PRICES DOES NOT INCLUDE TAX PAID OR PAYABLE BY A PURCHASER TO A SELLER. ALSO AS PER THE PROVISIONS OF MVAT ACT IF THE CREDIT EXCEEDS THE TAX PAYABLE ON SALE IN PERIOD OF RETURN, THE EXCESS CREDIT WILL BE AVAILABLE FOR CARRIED FORWARD TO THE END OF THE FINANCIAL YEAR. IF THERE IS EXCESS INPUT TAX CREDIT AT THE END OF THE FINANCIAL YEAR THEN THE SAME WILL BE ELIGIBLE FOR REFUND. IT IS SIM ILAR TO INCOME TAX REFUND DUE ON ACCOUNT OF EXCESS OF TAX PAID OVER THE LIABILITY . 4. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR TAXING THE MVAT REFUND. IN THE INTEREST OF JUSTICE, WE RESTORE THIS ISSUE BACK TO THE FILE O F AO WITH A DIRECTION TO VERIFY THE PURCHASES AND SALES SO AS TO ASCERTAIN THAT MVAT PAID ON PURCHASES HAS NEITHER BEEN INCLUDED IN PURCHASES NOR MVAT RECEIVED FROM CUSTOMERS ON SALES IS INCLUDED IN THE AMOUNT OF SALES. THE AO IS DIRECTED TO DELETE THE AD DITION OF REFUND OF MVAT AMOUNT IF HE FINDS THAT PURCHASE AND SALES ARE SHOWN NET WITHOUT INCLUSION OF MVAT PAID AND RECEIVED. WE DIRECT ACCORDINGLY. 4. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION MADE ON ACCOUNT OF INTEREST PAID BY ASSESSEE T O THE UNSECURED CREDITORS ON THE PLEA THAT ASSESSEE HAS PAID INTEREST @18% TO THE SOME OF THE CREDITORS WHO ARE RELATIVES AS DEFINED U/S.40(A)(2) ( B ) . 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER SECTION 40(A)(2) ADDITION CAN BE MAD E IF THE AO RECORDS A FINDING TO THE EFFECT THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ARE EXCESSIVE OR UNREASONABLE AS COMPARED TO THE FAIR MARKET VALUE OF SERVICES OF GOODS FOR WHICH SUCH PAYMENT ITA NO. 153 /1 3 3 IS MADE. IN THE INSTANT CASE BEFORE US, REVENUE AUTHORI TIES HAVE NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST THAT FUNDS WERE AVAILABLE IN THE OPEN MARKET AT THE RATE OF INTEREST LOWER THAN 18% . L OOKING TO THE RATE OF INTEREST PREVAILING IN THE MARKET DURING THE YEAR UNDER CONSIDERATION FROM THE BANK AND PRI VATE PARTIES, WE ARE OF THE VIEW THAT INTEREST RATE OF 18% WAS REASONABLE. ACCORDINGLY, DISALLOWANCE MADE BY THE AO U/S.40A(2) IS NOT SUSTAINABLE. ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF INTEREST SO MADE. 6 . IN THE RESULT, APPEAL OF A SSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 04 / 201 6 . SD/ - ( PAWAN SINGH ) S D/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 27 / 04 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//