Minrocks International (P) Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2111/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61221 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 28-06-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VI KRAMADITYA
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Business expenditure
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.2111/MDS/2011 (ASSESSMENT YEAR: 2008-09) MINROCKS INTERNATIONAL (P) LTD. OLD NO.10, NEW NO.122, APPARSWAMY KOIL STREET, MYLAPORE, CHENNAI-600 004. PAN:AAACM6298F VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-IV (3), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. K.BALASUBRAMANIAN, ADVOCATE RESPONDENT BY : MR. VI KRAMADITYA, JCIT DATE OF HEARING : 28 TH JUNE, 2012 DATE OF PRONOUNCEMENT : 28 TH JUNE, 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF THE CIT(A)-V, CHENNAI DATED 30.09.2011. 2. THE ASSESSEE HAD FILED ITS RETURN OF INCOME REL EVANT TO THE ASSESSMENT YEAR 2008-09 ON 30.03.2009 ADMITTING TOTAL INCOME OF ` 9,58,210/-. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT ` 90,60,920/- . THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 28.12.2010 MAD E ITA NO.2111/MDS/2011 2 CERTAIN ADDITIONS/DISALLOWANCES IN THE INCOME RETUR NED BY THE ASSESSEE. THE ASSESSING OFFICER HAD MADE DISALLOWA NCE INTER-ALIA UNDER SECTION 40(A)(IA) FOR A SUM OF ` 41,21,355/- ON ACCOUNT OF NON-DEDUCTION OF TDS AND ALSO HAD DISALL OWED THE INTEREST ON FUNDS DRAWN BY THE DIRECTORS OF THE COM PANY. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) V IDE ORDER DATED 30.09.2011 PARTLY ALLOWED THE APPEAL OF THE A SSESSEE. STILL AGGRIEVED AGAINST THE ORDER OF THE CIT(A), TH E ASSESSEE HAS IMPUGNED THE ORDER OF THE CIT(A) BEFORE THE TRI BUNAL ON THE FOLLOWING TWO GROUNDS:- I) THE CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE MADE UNDER SECTION 40(A)(IA) FOR A SUM OF ` 41,21,355/- II) THE CIT(A) HAS ERRED IN CONFIRMING INTEREST DISALLOWANCE ON FUNDS ALLEGEDLY OVER DRAWN BY THE DIRECTORS OF THE COMPANY. 3. SHRI K.BALASUBRAMANIAN, COUNSEL APPEARING ON BEH ALF OF THE ASSESSEE SUBMITTED THAT AS REGARDS GROUND NO .1 IS CONCERNED, THE CASE OF THE ASSESSEE IS SQUARELY COV ERED BY THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF ITA NO.2111/MDS/2011 3 MERILYN SHIPPING & TRANSPORTS VS. ACIT., REPORTED A S 16 ITR (TRIB) (1)(SB). IN ORDER TO SUPPORT HIS CONTENTIONS , HE FURTHER RELIED ON THE ORDERS OF THE CO-ORDINATE BENCH OF TH E TRIBUNAL PASSED IN ITA NOS.1091 & 1092/MDS/2011 DATED 5.6.20 12 AND ITA NO.1197/MDS/2011 DATED 13.6.2005. AS REGAR DS ISSUE NO.2, THE COUNSEL SUBMITTED THAT CIT(A) FAILE D TO APPRECIATE THE FACTS PLACED BEFORE HIM THAT DIRECTO RS FUNDS WERE LYING WITH THE ASSESSEE COMPANY AND THAT DIRE CTORS HAD WITHDRAWN THE MONEY OUT OF NON-INTEREST BEARING FUN DS OF THE COMPANY LYING TO THE CREDIT OF THE DIRECTORS. THERE FORE, THE INTEREST PAID ON THE BORROWED FUNDS SHOULD BE ALLOW ED. 4. SHRI VIKRAMADITYA, APPEARING ON BEHALF OF THE RE VENUE CONCEDED THAT THE ISSUE NO.1 IS COVERED BY THE DECI SION FO THE SPECIAL BENCH OF THE TRIBUNAL. HOWEVER, HE STRONGLY OPPOSED THE SECOND ISSUE AND SUBMITTED THAT THE ORDER OF T HE CIT(A) ON THIS ISSUE IS A WELL-REASONED AND SPEAKING ORDER . 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE PARTI ES AND HAVE GONE THROUGH THE DECISIONS RELIED ON BY TH E COUNSEL FOR THE ASSESSEE. THE ASSESSEE HAD DEBITED A SUM O F ` ITA NO.2111/MDS/2011 4 41,21,355/- AS COST OF LEASE. THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON THE PAYMENT SO MADE. THE ASSESSEE FURTHER ADMITTED THIS FACT BEFORE THE ASSESSING OFFICER. TH E ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT OF PAYMENT AND ALSO INITIATED SEPARATE PENALTY PROCEEDINGS UNDER SECTIO N 271(1) (C) OF THE ACT. THE ASSESSEE OUGHT TO HAVE DEDUCTE D TAX WHILE MAKING PAYMENT TO CONTRACTORS UNDER THE PROVI SIONS OF SECTION 194C . BE THAT AS IT MAY, THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) FOR A SUM OF ` 41,21,355/- IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECI AL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & T RANSPORTS (SUPRA). THE D.R. HAS ALSO CONCEDED THE FACT THAT THE ISSUE IS COVERED BY THE SPECIAL BENCH DECISION OF THE TRIBUN AL. RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH, WE, REVERSE THE FINDINGS OF THE CIT(A) ON THIS ISSUE A ND ALLOW THIS GROUND RAISED BY THE ASSESSEE. 6. AS REGARDS ISSUE NO.2 WITH RESPECT TO DISALLOWA NCE OF INTEREST IS CONCERNED, THE CIT(A) IN THE IMPUGNED O RDER HAS HELD THAT THE ASSESSEE HAS ADVANCED AMOUNT TO THE T UNE OF ITA NO.2111/MDS/2011 5 ` 60,66,126/- WHICH IS INTEREST BEARING AS INTEREST FREE LOAN/ADVANCE. THE SAID AMOUNT IS NOT BEING USED FOR BUSINESS PURPOSE OF THE ASSESSEE/APPELLANT. THEREFORE, THE I NTEREST PAYMENT THEREON CANNOT BE ALLOWED AS BUSINESS EXPEN DITURE. WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY HELD THAT THE INTEREST ON AMOUNT ADVANCED AS INTEREST FREE LOAN T O THE DIRECTORS IS NOT ALLOWABLE AS BUSINESS EXPENDITURE OF THE ASSESSEE. THERE IS NO FORCE IN THE CONTENTION OF TH E ASSESSEE THAT THE CIT(A) HAS NOT TAKEN INTO CONSIDERATION T HE DIRECTORS FUNDS LYING IN THE COMPANY. THE CIT(A) IN HIS ORDE R HAS CATEGORICALLY STATED THAT THE COMPANY HAS INTEREST REFUNDS FROM BOTH THE DIRECTORS OF THE COMPANY AMOUNTING TO ` 1,01,30,368/- WHEREAS THE AMOUNTS DUE FROM THE DIRE CTORS INCLUDING THE AMOUNT DUE FROM THE PROPRIETARY CONCE RN OF ONE OF THE AFORESAID DIRECTORS AND THE ADVANCES GIVEN BY THE COMPANY FOR CONSTRUCTION FOR THE DIRECTORS IS ` 1,61,96.494/-. IN VIEW OF THE ABOVE OBSERVATIONS OF THE CIT(A), WE DO NOT DEEM IT APPROPRIATE TO INTERFERE IN THE FINDINGS OF THE CIT(A). NO NEW DOCUMENT HAS BEEN PLACED ON RECORD BEFORE THE TRIBU NAL BY THE ASSESSEE TO SUBSTANTIATE ITS CONTENTIONS. WE CO NFIRM THE ITA NO.2111/MDS/2011 6 FINDINGS OF THE CIT(A) BEING WELL REASONED AND DISM ISS THIS GROUND OF APPEAL OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED IN THE ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY, THE 28 TH OF JUNE, 2012 AT CHENNAI. SD/- SD/- ( ABRAHAM P.GEORGE ) ( VIKAS AWASTHY ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 28 TH JUNE, 2012. SOMU COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F .