ITO (OSD), CHENNAI V. M/s. Shanmuga Arts Science Technology and Research Academy (SASTRA), CHENNAI

ITA 612/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6502 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 30-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: R SITTARAMAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI U.B. BEDI, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NO. 612/MDS/2010 ASSESSMENT YEARS 2004-05 THE INCOME-TAX OFFICER [OSD] EXEMPTIONS III CHENNAI - 34 VS. M/S SHANMUGA ARTS SCIENCE TECHNOLOGY AND RESEARCH ACADEMY [SASTRA] 5, MAIN ROAD, DR. CHENNAI 600 004. (PAN NO. AAAAB 0187 C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R. SITTARAMAN DEPARTMENT BY : SHRI ANIRUDH RAI, CIT O R D E R PER N.S. SAINI, A.M :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER PASSED BY THE LD. CIT(A)-XII, CHENNAI DATED 29.01.20 10 FOR ASSESSMENT YEAR 2004-05. PAGE 2 OF 8 I.T.A. NO. 612/MDS/2010 2. GROUND NO. 1 IS GENERAL IN NATURE AND REQUIRES N O ADJUDICATION FROM OUR SIDE. 3. IN GROUND NO. 2, THE GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,68 ,75,000/- BEING GUARANTEE COMMISSION PAID TO THE TRUSTEES. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D PAID GUARANTEE COMMISSION TO FOUR TRUSTEES @ 1.5% EACH A ND CLAIMED DEDUCTION OF RS. 2.25 CRORES. THE ASSESSING OFFIC ER CONSIDERING THE SAME TO BE EXCESSIVE, ALLOWED 50% OF THE CLAIM OF T HE ASSESSEE AND DISALLOWED THE BALANCE 50% OF THE GUARANTEE COMMISS ION AMOUNTING TO RS. 1,68,75,000/-. 5. IN APPEAL, THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL DATED 13.11.2009 IN ASSESSEES OWN CASE IN THE ASSE SSMENT YEARS 2003-04 AND 2005-06 IN ITA NOS. 1740 & 1741/2008, D ELETED THE ADDITION. PAGE 3 OF 8 I.T.A. NO. 612/MDS/2010 6. THE LD. D.R. SUPPORTED THE ORDER OF THE AO WHERE AS THE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT IN ASSESSMENT YEARS 2003-04 AND 2005-06 IN ITA NOS. 17 40 & 1741/2008 SIMILAR DISALLOWANCE OF COMMISSION WAS MA DE BY THE ASSESSING OFFICER WHICH WAS DELETED BY THE LD. CIT( A) AND IN FURTHER APPEAL BY THE REVENUE, THE TRIBUNAL CONFIRMED THE O RDER OF THE LD. CIT(A) BY OBSERVING AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE ENTIRE EVIDENCES AVAILABLE ON RECORD. UNDENIABLY, IN PRINCIPLE, THE PAYMENT OF COMMISSION TO TRUSTEES STANDING AS GUARANTORS FOR THE ASSESSEE-TRUST TO THE BANKS FROM WHOM LOANS HAVE BEEN TAKEN, HAS BEEN ACC EPTED BY THE ASSESSING OFFICER HIMSELF. THEREFORE, THE R EASONS FOR NOT ADMITTING ANY COMMISSIONS NO LONGER SURVIVE. TH E ONLY DISPUTE NOW IS REDUCED TO THE PERCENTAGE OR AMOUNT OF THE COMMISSION TO BE PAID TO THEM. ADMITTEDLY, AFTER L OOKING INTO VARIOUS ASPECTS, REGARDING THE MARKET RATE OF G UARANTEE COMMISSION, THE LD. CIT(A) HAS CAME TO A FIGURE OF 1 .5% TO EACH GUARANTOR, WHICH IS FOUND TO BE MOST REASONABLE. THE LD. CIT(A) HAS EXAMINED THE PREVAILING RATES OF GUAR ANTEE PAGE 4 OF 8 I.T.A. NO. 612/MDS/2010 COMMISSION WHICH GOES UPTO 10% (REFER PARA 4.6.3.1) . THE REVENUE COULD NOT MAKE OUT A GOOD CASE FOR INTERFERENC E IN THE IMPUGNED APPELLATE FINDINGS IN SO FAR AS THIS I SSUE, FOR BOTH YEARS, IS CONCERNED. ACCORDINGLY, WE DISMISS THE GROUNDS RAISED BY THE REVENUE CHALLENGING THE DECISI ON OF GUARANTEE COMMISSION BEING ALLOWED AT THE RATE OF 1. 5% EACH GUARANTOR. 8. THE LD. D.R. COULD NOT PRODUCE ANY EVIDENCE TO S HOW THAT THE ABOVE QUOTED DECISION OF THE TRIBUNAL WAS REVERSED IN APPEAL BY A HIGHER AUTHORITY. NO SPECIFIC DEFECT IN THE ORDER OF THE LD. CIT(A) COULD BE POINTED OUT BY THE LD. D.R. THEREFORE, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE AND H ENCE DISMISS THE SAME. 9. IN GROUND NO. 3, THE GRIEVANCE OF THE REVENUE I S THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2 4 LAKHS BEING PROFESSIONAL CHARGES PAID TO M/S RAJALAKSHMI ENTERP RISES. PAGE 5 OF 8 I.T.A. NO. 612/MDS/2010 10. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD CLAIMED RS. 75 LAKHS AS PROFESSIONAL CHARGES PAYABLE TO M/S RAJ ALAKSHMI ENTERPRISES. THE ASSESSING OFFICER OBSERVED THAT D URING THE YEAR, THE TRUST HAS AVAILED A LOAN OF RS. 6 CRORES FROM M/S CITY UNION BANK AND RS. 11 CRORES FROM INDIAN OVERSEAS BANK. HENCE PROFESSIONAL CHARGES FOR AVAILING OF LOAN OF RS. 1 7 CRORES @ 3% WORKS OUT TO RS. 51 LAKHS. ACCORDINGLY HE DISALLOWED PR OFESSIONAL CHARGES OF RS. 24 LAKHS AND ALLOWED PROFESSIONAL CHARGES O F RS. 51 LAKHS. 11. IN APPEAL, THE LD. CIT(A) DELETED THE DISALLOWA NCE FOLLOWING THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 20 03-04. 12. THE LD. D.R. ARGUED THAT THE ASSESSEE HAD CLAIM ED PROFESSIONAL CHARGES ON LOAN SANCTIONED AND DISBURS ED OF RS. 25 LAKHS @ 3% WHEREAS THE ASSESSING OFFICER FOUND THAT ACTUAL LOAN SANCTIONED AND DISBURSED DURING THE YEAR WAS RS. 17 LAKHS AND THEREFORE, RESTRICTED THE ALLOWANCE OF PROFESSIONAL CHARGES OF RS. 51 LAKHS. PAGE 6 OF 8 I.T.A. NO. 612/MDS/2010 13. THE LD. A.R., ON THE OTHER HAND, ARGUED THAT TH E ASSESSING OFFICER IN HIS ORDER HAS STATED THAT DURING THE YEA R ASSESSEE HAS AVAILED LOAN OF RS. 6 CRORES FROM CITY UNION BANK AND RS. 11 CRORES FROM INDIAN OVERSEAS BANK WHICH IS NOT CORRECT. HE FILED TWO LETTERS FROM CITY UNION BANK SANCTIONING LOAN OF RS . 6 CRORES AND RS. 9 CRORES VIDE LETTERS DATED 7.10.2003 AND 9.2. 2004. THUS HE SUBMITTED THAT THE ASSESSEE AVAILED LOAN OF RS. 15 CRORES FROM CITY UNION BANK AND RS. 11 CRORES FROM INDIAN OVERSEAS B ANK. THUS TOTAL LOAN AVAILED BY THE ASSESSEE DURING THE YEAR WAS RS . 26 CRORES. ASSESSEE BY MISTAKE HAS CLAIMED PROFESSIONAL CHARGE S ON RS. 25 CRORES @ 3% AMOUNTING TO RS. 75 LAKHS. THEREFORE, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 24 LAKH S, DISALLOWING PROFESSIONAL CHARGES ON RS. 24 LAKHS. HOWEVER, HE SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO TH E FILE OF THE ASSESSING OFFICER FOR VERIFYING THE LETTERS OF THE CITY UNION BANK NOW FILED BEFORE TRIBUNAL AND REDECIDING THE ISSUE. 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFI CER DISALLOWED PROFESSIONAL CHARGES OF RS. 24 LAKHS OUT OF TOTAL PROFESSIONAL PAGE 7 OF 8 I.T.A. NO. 612/MDS/2010 CHARGES OF RS. 75 LAKHS CLAIMED BY THE ASSESSEE AT 3% ON THE LOANS AVAILED DURING THE YEAR FOR THE REASON THAT THE ACT UAL LOAN AVAILED BY THE ASSESSEE DURING THE YEAR WAS RS. 17 CRORES AND NOT RS. 25 CRORES. ON APPEAL THE LD. CIT(A) DELETED THE ADDIT ION BY FOLLOWING THE ORDER OF HIS PREDECESSOR FOR ASSESSMENT YEAR 20 03-04. THE LD. A.R. HAS SUBMITTED THAT THE ASSESSEE HAD RECEIVED L OAN OF RS. 15 CRORES FROM CITY UNION BANK AND RS. 11 CRORES FROM INDIAN OVERSEAS BANK, THUS TOTALING RS. 26 CRORES. THE ASSESSING OFFICER HAS WRONGLY STATED THAT THE ASSESSEE HAD TAKEN LOAN OF RS. 6 CRORES ONLY DURING THE YEAR FROM CITY BANK. HE PRODUCED TWO LE TTERS FROM CITY UNION BANK DATED 7.10.2003 AND 9.2.2004 SANCTIONING RS. 15 CRORES TO THE ASSESSEE. THE LD. A.R. HAS ALSO SUBMITTED T HAT HE HAS NO OBJECTION TO THE MATTER BEING RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION OF THE ISSUE A FTER VERIFICATION OF THE SANCTION LETTERS FROM CITY UNION BANK FILED BEF ORE THE TRIBUNAL. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AU THORITIES AND REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION OF THE ISSUE AFRESH AFTER PROPER VER IFICATION. HE SHALL ALLOW REASONABLE AND PROPER OPPORTUNITY OF HE ARING TO THE ASSESSEE BEFORE ADJUDICATING THE ISSUE AFRESH. TH E ASSESSEE IS ALSO PAGE 8 OF 8 I.T.A. NO. 612/MDS/2010 DIRECTED TO FILE ALL EVIDENCES IN RESPECT OF LOAN A VAILED DURING THE YEAR BEFORE THE ASSESSING OFFICER ON WHICH IT WISHE S TO RELY AS AND WHEN CALLED UPON TO DO SO BY THE ASSESSING OFFICER. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 30 TH JUNE 2011. SD/- SD/- (U.B.S BEDI ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH JUNE, 2011. VL/- COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE