ACIT Cir -08 Pune, Pune V. Alpha Foam Ltd, Pune

ITA 272/PUN/2012

• Counselvise Citation: 27224514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 272/PN/2012 (ASSTT.YEAR : 2007-08) ACIT CIRCLE-8, PUNE .. APPELLANT VS. ALPHA FOAM LTD., J-172, MIDC, BHOSARI, PUNE - 411026 .. RESPONDENT PAN NO. AACCA 4196J APPELLANT BY : MS. ANN KAPTHUAMA RESPONDENT BY : SRI NIKHIL PATHAK DATE OF HEARING : 14-05-2013 DATE OF PRONOUNCEMENT : 16-05-2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-V, PUNE ON FOLLOWING GROUND : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETIN G THE GUARANTEE COMMISSION OF RS.30,68,000/- PAYABLE TO T HE DIRECTORS FOR GIVING GUARANTEE TO THE BANKS FOR THE LOANS OBTAINED BY THE ASSESSEE COMPANY? 2. AT THE OUTSET OF HEARING IT WAS POINTED OUT THAT ISSUE IN THE APPEAL IS COVERED IN FAVOUR OF ASSESSEE BY THE ORDE R OF ITAT VIDE ITA NO.1617/PN/2008 FOR A.Y. 2004-05 WHEREIN THE TR IBUNAL HAS DISCUSSED THE SIMILAR ISSUE AND DECIDED IN FAVO UR OF ASSESSEE BY OBSERVING AS UNDER : 2 3.1. BEFORE US, THE STAND OF THE ASSESSEE WAS THAT AT THE ASSESSMENT STAGE ON ACCOUNT OF INADVERTENT MISTAKE ON THE PART OF THE NEW ACCOUNTANT, THE RATE OF COMMISS ION WAS SHOWN AS 3.50% IN PLACE OF CORRECT RATE OF 1.77 % AT WHICH THE GUARANTEE COMMISSION HAS ACTUALLY BEEN PAID. THE ASSESSEE ALSO DISPUTED THE OBSERVATION OF THE ASSESSING OFFICER WITH REGARDS TO FACT THAT THE BAN K CHARGES GUARANTEE COMMISSION @ 1%. IN THIS REGARD, THE ASSESSEE FURNISHED A CERTIFICATE FROM SBI TO THE EF FECT THAT THE COMMISSION ON BANK GUARANTEE IS CHARGED MAXIMUM TO THE EXTENT OF 2.5% PER ANNUM. THE LEARNED A.R DREW OUR ATTENTION TO PAGE 6 PARA 5 OF THE CIT(A) WHEREIN IT WAS POINTED OUT THAT THE COMPANY HAS DEBITED A SUM OF RS.10,52,000/- AS GUARANTEE COMMISSION UNDER THE HEAD 'INTEREST AND FINANCIAL CHARGES' PAID TO MR. RAJIV RANKA AND MRS. SUREKHA RANKA RS. 5,26,000/- EACH. THE LEARNED A.R FURTH ER DREW OUR ATTENTION TO THE FACT THAT THE CERTIFICATE ISSUED BY THE BANK WAS SUFFICIENT TO SHOW THAT THERE WAS N O NEED OF ADDITIONAL SECURITY. CONSEQUENTLY, THE ASSE SSEE COMPANY HAS TAKEN CREDIT FACILITIES AND LOAN OF RS. 2.98 CRORES FROM BANK AND THE ASSESSEE HAD PAID COMMISSION OF IN QUESTION. THE STAND OF THE ASSESSE E THAT BOTH MR. RAJIV RANKA AND MRS. SUREKHA RANKA HAVE BEEN PAID COMMISSION AT RS.5,26,000/- EACH AGAINST THE TOTAL AMOUNT OF RS. 3 CRORES. ACCORDIN G TO THE ASSESSEE, GUARANTEE COMMISSION IS PAID @ 1.77% AND INADVERTENTLY RECORDED AT 3.5% BY THE ACCOUNTAN T. IT WAS THUS POINTED OUT THAT THE RATE OF COMMISSION PA ID BY THE ASSESSEE WAS REASONABLE AS COMPARED TO MARKE T RATE AND THEREFORE, THE DISALLOWANCE IS NOT JUSTIFI ED. THE ASSESSEE HAS PAID COMMISSION @ 1.77% WHICH WAS MUCH LESSER THAN THE CHARGES PAID TO THE BANK AND T HIS AMOUNT WAS NOT JUSTIFIED. WE FIND THAT ON THE ISSUE IS OF PERCENTAGE OF GUARANTEE COMMISSION, VIS-A-VIS TH E 3 WHOLE AMOUNT OF LOAN OF RS.3.00 CRORES WHICH COMES TO @ 1.77% WHICH IS REASONABLE. REVENUE IS NOT JUSTIFIED TO CLUB BOTH GUARANTEE TOGETHER AND CALCULATE PERCENTA GE AGAINST WHOLE AMOUNT. EVEN BANK CHARGES ON THIS ACCOUNT ARE @ 2.5%. SO, ASSESSEE'S CLAIM OF GUARANT EE COMMISSION @ 1.77% AS DISCUSSED ABOVE IS REASONABLE . ACCORDINGLY DISALLOWANCE MADE BY INVOKING PROVISION OF SEC. 40A(2)(B) OF THE ACT IS NOT JUSTIFIED. SAME IS DIRE CTED TO BE DELETED. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONIN G WE ARE NOT INCLINED TO INTERFERE IN THE FINDING OF CIT(A) WHO HAS DELETED THE ADDITION ON ACCOUNT OF GUARANTEE COMMISSION OF RS. 30,68,000/- PAYABLE TO DIRECTORS FOR GIVING GUARANTEE TO THE BA NK FOR LOAN OBTAINED BY THE ASSESSEE COMPANY. 3. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 16 TH DAY OF MAY, 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL ME MBER PUNE, DATED THE 16 TH MAY 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CCIT, PUNE 5. D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // PRIVAT E SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE 4