Creative Printers Pvt.Ltd., Ahmedabad V. The Dy.CIT(OSD)Range-1, Ahmedabad

ITA 601/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9348 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MAURYA
• Assessee Lawyers: C N SHAH
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 601/AHD/2012 (ASSESSMENT YEAR: 2008-09) CREATIVE PRINTERS PRIVATE LIMITED INDUSTRIAL MILL ESTATE, GOMTIPUR, AHMEDABAD-380021 V/S DY. CIT (OSD) RANGE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACC4965B APPELLANT BY : SHRI C. N. SHAH, AR RESPONDENT BY : SHRI R.P. MAURYA, SR. D.R. ( )/ ORDER DATE OF HEARING : 25 -02-201 6 DATE OF PRONOUNCEMENT : 29 -02-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-6, AHMEDABAD DATED 09.01.2012 PERTAINING TO A.Y. 2008-09. ITA NO. 601/ AHD/2012 . A.Y. 2008-0 9 2 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF RS. 221676/- MADE U/S. 14A OF THE ACT. 3. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O FO UND THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 7,51,354 /- AND LTCG OF RS. 1,73,622/- WHICH WAS CLAIMED AS EXEMPT FROM TAX ABLE INCOME. THE A.O WAS OF THE FIRM BELIEF THAT DISALLOWANCE U/S. 1 4A READ WITH RULE 8D OF THE ACT IS PERTINENT ON THE FACTS OF THE CASE. T HE A.O WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS PARKED ITS BORROWED FU NDS IN THE INVESTMENT AND, THEREFORE, PROCEEDED BY COMPUTING T HE DISALLOWANCE U/S. 14A READ WITH RULE 8D, THE DISALLOWANCE WAS CO MPUTED AT RS. 2,92,023/-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E DREW OUT ATTENTION TO THE SUMMARIZED BALANCE SHEET OF 5 YEARS AND POIN TED OUT THAT ASSESSEES OWN FUNDS WERE FAR MORE THAN THE INVESTM ENT AND, THEREFORE, THERE CANNOT BE ANY DISALLOWANCE OF INTE REST IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF BO MBAY IN THE CASE OF RELIANCE UTILITIES AND POWER 313 ITR 340 AND IN SO FAR AS THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES ARE CONCERN ED. THE LD. COUNSEL STATED THAT THE DISALLOWANCE IS ON HIGHER S IDE CONSIDERING THE FACTS OF THE CASE. PER CONTRA, THE LD. D.R. SUPPORT ED THE FINDINGS OF THE REVENUE AUTHORITIES. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW. WE HAVE ALSO GIVEN A THOUGHTFUL CONSIDERATION TO THE S UMMARIZED BALANCE SHEET OF 5 YEARS EXHIBITED AT PAGE 32A OF THE PAPER BOOK. WE FIND THAT DURING THE YEAR UNDER CONSIDERATION, THE TOTAL OWN FUNDS OF THE ITA NO. 601/ AHD/2012 . A.Y. 2008-0 9 3 ASSESSEE IS AT RS. 352.25 LACS WHEREAS THE INVESTME NTS ARE AT RS. 162.64 LACS. THUS IT CAN BE SEEN THAT ASSESSEES OW N FUNDS ARE FAR MORE IN EXCESS OF THE INVESTMENTS. THEREFORE IN OUR CONSIDERED OPINION, THIS IS NOT A FIT CASE FOR DISALLOWANCE OF INTEREST U/S. 14A READ WITH RULE 8D IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF RELIANCE UTILITIES A ND POWER 313 ITR 340. WE ACCORDINGLY DIRECT THE A.O TO DELETE THE AD DITION OF RS. 2,36,758/- ON ACCOUNT OF INTEREST, IN SO FAR AS THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES ARE CONCERNED, W E FIND THAT THE A.O HAS DISALLOWED RS. 55,265/- WHICH APPEARS TO BE REASONABLE AND CALLS FOR NO INTERFERENCE. THE DISALLOWANCE OF RS. 55,265/- IS CONFIRMED. ASSESSEE GETS PARTIAL RELIEF. 6. THE SECOND GRIEVANCE RELATES TO THE ADDITION MADE O N ACCOUNT OF DISALLOWANCE OF EXCESS INTEREST PAID TO RELATIVES. 7. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O NOTICED THAT THE ASSESSEE HAS PAID INTEREST ON BORR OWED FUNDS FROM DIRECTORS AND SHAREHOLDERS OF THE COMPANY AND THE R ELATIVES INVOKING THE PROVISION OF SECTION 40A(2)(B) OF THE ACT. THE A.O WAS OF THE FIRM BELIEF THAT PAYMENT OF INTEREST @ 15% WAS EXCESSIVE AND ACCORDINGLY PROCEEDED BY COMPUTING THE DISALLOWANCE OF RS. 1,51 ,244. 8. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT THE A.O HAS COMPARED THE INTEREST PAYMENT TO THE RELATIVES AND HAVE TREATED THE SAME AS EXCESSIVE WHICH IS NOT CORRECT. IT IS T HE SAY OF THE LD. COUNSEL THAT INTEREST PAYMENT @ 15% CAN NEVER BE ON THE HIGHER SIDE ITA NO. 601/ AHD/2012 . A.Y. 2008-0 9 4 CONSIDERING THE MARKET CONDITIONS. PER CONTRA, THE LD. D.R. RELIED UPON THE FINDINGS OF THE A.O. 9. AFTER CONSIDERING THE FACTS AND THE SUBMISS IONS, IN OUR CONSIDERED OPINION INTEREST PAYMENT @ 15%, BY ANY S TRETCH OF IMAGINATION CAN NEVER BE CONSIDERED TO BE EXCESSIVE . WE, THEREFORE, SET-ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 1,51,244/-, GROUND NO. 2 IS ACCORDI NGLY ALLOWED. 10. GROUND NO. 3 IS AGAINST THE LEVY OF INTEREST. THE L EVY OF INTEREST IS THE MANDATORY THOUGH WOULD BE CONSEQUENTIAL IN T HIS CASE, WE ACCORDINGLY DIRECT THE A.O TO LEVY INTEREST AS PER THE PROVISIONS OF THE LAW. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29 - 02 - 2016 . SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD