Davey Pharma & Surgicals, CHENNAI V. ACIT, CHENNAI

ITA 2020/CHNY/2015

• Counselvise Citation: 202021714 RSA 2015
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 25-09-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: M KARUNAKARAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.2020/MDS/2015 / ASSESSMENT YEAR : 2011-12 M/S DAVEY PHARMA & SURGICALS 14, KESAVA IYER STREET,I FLOOR CHENNAI 600 003 VS. THE ASSTT. COMMISSIONER O F INCOME-TAX NON-CORPORATE CIRCLE 4 CHENNAI [PAN AAAFD 0505 D ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI M KARUNAKARAN, ADVOCATE /RESPONDENT BY : SHRI P RADHAKRISHNAN, JCIT / DATE OF HEARING : 23 - 1 1 - 2015 ! / DATE OF PRONOUNCEMENT : 09 - 12 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-5, CHENNAI , DATED 31.7.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISALLO WANCE U/S 40A(2) OF THE ACT. ITA NO. 2020/15 :- 2 -: 3. SHRI M KARUNAKARAN, LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSING OFFICER DISALLOWED THE INTEREST PAID TO THE RELATIVES TO THE EXTENT OF ` 17,16,373/- U/S 40A(2) OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER RESTRICTED THE P AYMENT OF INTEREST AT 12%. HOWEVER, THE ASSESSEE CLAIMED THE INTEREST A T 21%. THE LD. COUNSEL FURTHER CLARIFIED THAT DURING THE RELEVANT PERIOD THE INTEREST CHARGED BY THE SCHEDULED BANK IS ONLY 18%, THEREFOR E, HE MAY NOT HAVE ANY OBJECTION TO RESTRICT THE PAYMENT OF INTER EST TO 18%. 4. ON THE CONTRARY, SHRI P RADHAKRISHNAN, LD. DEPARTME NTAL REPRESENTATIVE SUBMITTED THAT THE INTEREST WAS PAID TO THE CLOSE RELATIVES OF THE PARTNER IN VIOLATION OF SEC. 40A(2 ) OF THE ACT. REFERRING TO THE ASSESSMENT ORDER, THE LD. DR POINTED OUT THA T THE ASSESSEE HAS PAID INTEREST AT VARIOUS RATES RANGING FROM 15% T O 21%, THEREFORE, THE ASSESSING OFFICER RESTRICTED THE INTEREST PAYME NT TO 12% AND DISALLOWED A SUM OF ` 17,16,373/-. THEREFORE, ACCORDING TO THE LD. DR NO INTERFERENCE IN THE ORDER OF THE CIT(A) IS CALLE D FOR. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSING OFFICER APPEARS TO HAVE RESTRICTED THE INTEREST TO 12% AS A GAINST THE INTEREST PAID BY THE ASSESSMENT AT 21%. NOW THE LD. COUNSEL CLAIMS THAT THE PAYMENT OF INTEREST CAN BE RESTRICTED TO 18%. THIS TRIBUNAL IS OF THE ITA NO. 2020/15 :- 3 -: CONSIDERED OPINION THAT THE BANK RATE FOR COMMERCIA L LOAN DURING THE YEAR UNDER CONSIDERATION WAS RANGING FROM 13 TO 15% . THEREFORE, RESTRICTING THE PAYMENT OF INTEREST AT 15% WOULD ME ET THE ENDS OF JUSTICE. ACCORDINGLY, THE ORDERS OF THE LOWER AUTH ORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO RESTRICT T HE INTEREST PAYMENT TO 15% ON THE LOAN BORROWED FROM THE CLOSE RELATIVES O F THE PARTNERS AND THE PAYMENT MADE BY THE ASSESSEE OVER AND ABOVE 15 % HAS TO BE DISALLOWED. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISALLO WANCE OF ` 5,11,166/-. 7. SHRI M KARUNAKARAN, LD. COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED PROMOTION AL EXPENSES TO THE EXTENT OF ` 5,11,166/-. THE LD. COUNSEL CLARIFIED THAT IN FAC T, THE ASSESSEE HAS DEBITED A SUM OF ` 22,22,461/- UNDER THE HEAD SALES PROMOTION EXPENSES. HOWEVER, THE ASSESSING OFFICE R DISALLOWED 23% OF THE EXPENDITURE I.E ` 5,11,166/- ON THE GROUND THAT THE PAYMENT MADE BY THE ASSESSEE WAS CONTRARY TO THE REGULATIO NS FRAMED BY MEDICAL COUNCIL OF INDIA. THE LD. COUNSEL FURTHER SUBMITTED THAT HE WAS INSTRUCTED BY THE ASSESSEE NOT TO PRESS THIS G ROUND BEFORE THIS TRIBUNAL. HE HAS MADE AN ENDORSEMENT TO THIS EFFEC T IN THE APPEAL FOLDER. IN VIEW OF THIS, THE DISALLOWANCE OF ` 5,11,166/- IS CONFIRMED. ITA NO. 2020/15 :- 4 -: 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DECEMBER,2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 9 TH DECEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF