M/s. Jamna Pharmaceuticals, Bhopal V. The I.T.O., Bhopal

ITA 596/IND/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6078 (ITAT-INDORE)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-02-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 29-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: H P VERMA; A GOYAL
• Keywords: Commercial expediency

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO.596/IND/2009 A.Y. 2005-06 M/S JAMNA PHARMACEUTICALS BHOPAL (PAN AACFJ-3950E) .APPELLANT VS INCOME TAX OFFICER WARD-1(2) BHOPAL .RESPONDENT APPELLANT BY : SHRI H.P. VERMA AND SHRI A. GOYAL RESPONDENT BY : SMT. APARNA KARAN, SR. DR O R D E R THIS APPEAL IS BY THE ASSESSEE CHALLENGING THE ORDE R OF THE LEARNED CIT(A) DATED 16.9.2009. DURING HEARING OF THIS APP EAL,I HAVE HEARED THE LEARNED RESPECTIVE COUNSELS AND CONSIDERED THE ARGU MENTS ADVANCED BY THEM. THE FIRST GROUND, BEING GENERAL IN NATURE, WA S NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, IT IS DISMISSED AS NOT PRESSED. 2. THE NEXT GROUND 2(I) PERTAINS TO SUSTAINING THE ADDITION OF RS.5,648/- ON ACCOUNT OF INTEREST PAID TO PERSONS S PECIFIED U/S 40A(2)(B). BOTH THE LEARNED COUNSELS AGREED THAT TH IS GROUND IS IDENTICAL TO GROUND NO. 2(III) IN THE CASE OF M/S ANJANI PHAR MACEUTICALS (ITA NO. 2 594/IND/09). IN VIEW OF THIS AGREEMENT, I AM REPRO DUCING HEREUNDER THE RELEVANT PORTION OF THE ORDER AS CONTAINED IN PARA 4 (PAGE 3) OF THE SAID ORDER :- 4. THE LAST GROUND (III) PERTAINS TO THE AMOUNT OF RS.10,368/- ON ACCOUNT OF INTEREST PAID TO PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT. THE LEARNED COU NSEL FOR THE ASSESSEE THAT THE ASSESSEE PAID INTEREST OF RS.10,368/- BY CONTENDING THAT IT IS VERY EASY TO T AKE INTERST FROM THE MARKET IN COMPARISON TO THE BANK B Y FURTHER CLAIMING THAT THE INTEREST WAS PAID FOR COM MERCIAL EXPENDIENCY. HOWEVER, THE LEARNED COUNSEL WAS FAIR ENOUGH TO EXPLAIN THAT THE LOAN WAS FROM THE SISTER CONCERN. ON THE OTHER THE LEARNED SR. DR STRONGLY DEFENDED THE ADDITION ON THE GROUND THAT IT WAS NOT HING BUT A METHOD DEVISED BY THE ASSESSEE TO DEFRAUD THE REVENUE ESPECIALLY WHEN IT WAS FROM THE SISTER CONC ERN. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND THAT THE ASSESSEE PAID INTEREST AT THE RATE OF 18% AGAINST THE PREVAILING RATE OF 14% CHARGED BY THE BANK/FINANCIAL INSTITUTION. THE ASSESSEE PAID INTE REST OF RS.62,208/- TO THE PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT. THE LEARNED FIRST APPELLATE AUTHORITY HAS CON SIDERED THE DECISION OF SA BUILDERS LIMITED (288 ITR 1 ) ( SC) AND CONFIRMED THE AMOUNT OF RS.5,648/- AS INTEREST PAID TO INTERESTED PARTIES. IN THE PRESENT APPEAL, THE INTEREST WAS ADMITTEDLY PAID TO INTERESTED PARTIES SPECIFIED U/S 40A(2)(B) OF THE ACT BY PAYING RATE OF INTEREST AT 18% AGAINST THE PREVAILING MARKET RATE OF 14% TO 15% AT THE RELEVANT TIME. EVEN OTHERWISE, NO COMMERCIAL EXPEDIENCY WAS EXPLAINED BY THE ASSESSEE, THEREFORE , I AM OF THE CONSIDERED OPINION THAT THE DECISION FROM THE HONBLE APEX COURT IN SA BUILDERS LIMITED(SUPRA) M AY NOT HELP THE ASSESSEE. EVEN OTHERWISE, THE REVENUE HAS ONLY DISALLOWED THE INTEREST WHICH WAS FOUND TO BE UNREASONABLE. IT IS NOT THE CASE THAT THE DISALLOW ANCE HAS BEEN MADE MECHANICALLY. IN VIEW OF THESE FACTS, I HAVE NOT FOUND ANY INFIRMITY IN THE STAND OF THE CI T(A), THEREFORE, IT IS UPHELD. THIS GROUND OF THE ASSESSE E IS DISMISSED. 3 IN THE LIGHT OF THE ASSERTION OF THE LEARNED RESPEC TIVE COUNSELS THAT THE FACTS ARE IDENTICAL, THEREFORE, WITHOUT GO ING INTO MUCH DELIBERATION, THIS GROUND OF THE ASSESSEE IS DISMIS SED. 4 THE NEXT DISALLOWANCE (GROUND 2(II) PERTAINS TO R S.20,000/- ON ACCOUNT OF CONVEYANCE EXPENSES. THE STAND OF THE ASSESSEE IS THAT THE DISALLOWANCE IS HIGHLY EXCESSIVE. ON TH E OTHER HAND, THE LEARNED SR. DR DEFENDED THE IMPUGNED DISALLOWAN CE. ON PERUSAL OR RECORD AND AFTER HEARING THE RIVAL SUBMISSIONS, IT IS SEEN THAT THE ASSESSEE CLAIMED C ONVEYANCE EXPENSES TO THE TUNE OF RS.2,41,266/- WHICH ARE MOS TLY PAYMENTS MADE FOR PETROL, ETC. IN COMPARISON TO RS. 1,61,673/- IN THE PRECEDING YEAR. WITHOUT GOING INTO MUCH DELIBE RATION, POSSIBILITY OF PERSONAL USE AND ALSO TO PUT AN END TO THE LITIGATION, THE IMPUGNED DISALLOWANCE IS REDUCED TO RS.10,000/- , AS AGREED BY THE LEARNED RESPECTIVE COUNSELS, THEREFORE, THIS PART OF THE GROUND NO. 2 IS PARTLY ALLOWED. 5. THE NEXT DISALLOWANCE PERTAINS TO THE DISALLOWAN CE OF RS.10,000/- ON ACCOUNT OF MISCELLANEOUS AND OTHER O FFICE EXPENSES. THE ASSESSEE ARGUED THAT THE DISALLOWANCE IS HIGHLY EXCESSIVE. ON THE OTHER HAND, THE LEARNED SR. DR DE FENDED THE DISALLOWANCE. 4 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED RESPECTIVE COUNSELS AND PERUSED THE MATERIAL AVAILA BLE ON THE FILE. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE CLAI MED OFFICE EXPENSES OF RS.26,003/- AND MISC. EXPENSES OF RS.75 ,517/-. THE STAND OF THE AO WAS THAT THE MAJOR PORTION OF THESE EXPENSES WAS NOT SUPPORTED BY ANY BILLS, THEREFORE, HE DISAL LOWED RS.10,000/- OUT OF THESE EXPENSES. HOWEVER, THE SUB MISSIONS OF THE ASSESSEE BEFORE THE LD. CIT(A) ARE THAT COMPLET E DETAILS FOR THESE EXPENSE WERE PRODUCED ALONG WITH BILLS AND VO UCHERS AS HAS BEEN NOTED IN PARA 7.3 (PAGE 8) OF HIS ORDER BY FURTHER MENTIONING THAT THE AO HAS NOT POINTED OUT ANY DEFE CT OR ANY EXPENSES NOT SUPPORTED BY ANY BILL. ON QUESTIONING FROM THE BENCH, THE LEARNED REPRESENTATIVES FROM BOTH THE SI DES AGREED THAT IT CAN BE REDUCED TO RS.5000/-. IN VIEW OF TH IS AGREEMENT, THE IMPUGNED DISALLOWANCE IS REDUCED TO RS. 5,000/- IN PLACE OF RS.10,000/- SUSTAINED BY THE LD. CIT(A), CONSEQUENT LY, THIS PART OF THE GROUND IS PARTLY ALLOWED. 6. THE NEXT PART (IV) AND (V) OF GROUND NO. 2 PERTA INS TO DISALLOWANCE OF RS.25,000/- ON ACCOUNT OF TELEPHONE EXPENSES AND RS. 30,000/- ON ACCOUNT OF TRAVELLING EXPENSES WHICH HAS BEEN CHALL ENGED BY THE ASSESSEE. THE STAND OF THE ASSESSEE IS THAT THE DI SALLOWANCE IS QUITE UNJUSTIFIED AND ALTERNATIVELY IT IS EXCESSIVE. ON T HE OTHER HAND, THE LD. 5 SR. DR STRONGLY DEFENDED THE ADDITIONS BY CONTENDIN G THAT PERSONAL USE CANNOT BE RULED OUT AND THE ASSESSEE DID NOT FURNIS H THE NECESSARY DETAILS. ON CONSIDERATION OF RIVAL SUBMISSIONS AND ALSO FRO M THE RECORD I HAVE FOUND THAT THE ASSESSEE CLAIMED RS.2,62,478/- ON ACCOUNT OF TELEPHONE EXPENSES AS AGAINST RS. 1,61,673/- IN THE PRECEDING YEAR AND RS. 7,06,7089/- AGAINST RS.6,65,166/- (IN THE PRECE DING YEAR)FOR TRAVELLING EXPENSES. THE STAND OF THE REVENUE IS TH AT THE INCREASE IN THE EXPENDITURE UNDER THESE HEADS IS DISPROPORTIONATE T O THE TURNOVER AND ALSO THE EXPENSES WERE NOT SUPPORTED BY PROPER BILL S. AT THE SAME TIME, THE ELEMENT OF PERSONAL USE CANNOT BE RULED OUT. K EEPING IN VIEW THE MATERIAL ON RECORD, THAT THE DISALLOWED AMOUNT WAS NOT SUPPORTED BY ANY BILLS OR VOUCHERS AND ALSO THE PERSONAL USE OF TELEPHONE AND VEHICLES (TRAVELLING EXPENSES) CERTAINLY NOT RULED OUT, THER EFORE, I HAVE NOT FOUND ANY INFIRMITY IN THE STAND OF THE REVENUE, THEREFOR E, ON THIS ASPECT THE VIEW OF THE LEARNED FIRST APPELLATE AUTHORITY IS AF FIRMED. 7. THE LAST DISALLOWANCE ((VI) OF GROUND NO. 2 PERT AINS TO RS.14,000/- ON ACCOUNT OF VEHICLE MAINTENANCE EXPENSES. THE LEA RNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE DISALLOWANCE IS UNJ USTIFIED AND WITHOUT ANY BASIS. ALTERNATIVELY, IT WAS CONTENDED THAT IT IS EXCESSIVE. ON THE OTHER HAND, THE LEARNED SR. DR STRONGLY DEFENDED TH E DISALLOWANCE BY CONTENDING THAT NECESSARY DETAILS WERE NOT FURNISHE D BY THE ASSESSEE. 6 ON CONSIDERATION OF RIVAL SUBMISSIONS AND ALSO FRO M THE RECORD, IT IS SEEN THAT THE ASSESSEE CLAIMED RS.1,40,979/- AS AGA INST RS.1,07,937/- (PRECEDING YEAR) AS VEHICLE MAINTENANCE EXPENSES. THE STAND OF THE REVENUE IS THAT IT WAS NOT SUPPORTED BY ANY DOCUMEN TARY EVIDENCE. THE AO DISALLOWED RS. 14,000/- OUT OF THE CLAIMED EXPEN DITURE. SINCE THERE WAS NO DOCUMENTARY EVIDENCE/BILL/VOUCHER TO SUBSTAN TIATE THE CLAIM, THEREFORE, THERE IS NO INFIRMITY IN THE STAND OF TH E LEARNED CIT(A), THEREFORE, THIS PART OF THE GROUND IS ALSO DISMISSE D. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSI ON OF THE HEARING ON 15.2.2010. (JOGINDER SINGH) JUDICIAL MEMBER FEBRUARY 15 TH , 2010 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE