K.S. Agricultural Industries (Regd.), Malerkotla V. ACIT, Ludhiana

ITA 825/CHANDI/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9793 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 16-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 824/CHD/2015 ASSESSMENT YEAR: 2011-12 M/S K.S.AGROTECH (REGD.) VS. THE ACIT, C-IV, MALERKOTLA LUDHIANA PAN NO. AAFFK3700Q & ITA NO. 825/CHD/2015 ASSESSMENT YEAR: 2011-12 SH. K.S. AGRICULTURAL INDUSTRIES, VS. THE ACIT, CEN TRAL CIRCLE II, MALERKOTLA LUDHIANA PAN NO. AABFK5707H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ATUL GOYAL RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 12.07.2016 DATE OF PRONOUNCEMENT : 13.07.2016 ORDER BOTH THE APPEALS BY THE DIFFERENT ASSESSEES ARE DI RECTED AGAINST THE DIFFERENT ORDERS OF LD. CIT(A)-2, LUDHIANA DATED 21 .8.2015 FOR ASSESSMENT YEAR 2011-12. 2 2. IT IS STATED THAT ISSUES ARE COMMON IN BOTH THE APPEALS, THEREFORE, BOTH THE APPEALS WERE HEARD TOGETHER. BOTH THE PAR TIES MAINLY ARGUED IN ITA NO. 825/CHD/2015 AND STATED THAT THE ORDER IN T HIS CASE MAY BE FOLLOWED IN ITA NO. 824/CHD/2015, WHICH IS ON IDENT ICAL FACTS AND THE ISSUE BEING RELATED TO THE ASSESSEES. ITA NO. 825/CHD/2015 [M/S K.S. AGRICULTURAL INDUSTR IES (REGD), MALTERKOTLA] 3. ON GROUND NO.1, THE ASSESSEE CHALLENGED THE ADDITION O F RS. 2,29,693/- U/S 40A(2)(B) OF THE INCOME-TAX ACT, 196 1 (IN SHORT 'THE ACT'). THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MAN UFACTURING OF AGRICULTURAL IMPLEMENTS. THE ASSESSING OFFICER NOTE D THAT ASSESSEE HAD PAID INTEREST OF RS. 6,89,079/- ON UNSECURED LOANS. THE ASSESSING OFFICER FURTHER NOTED THAT ON THE UNSECURED LOANS THE ASSESSEE HAD PAID INTEREST @ 18% PER ANNUM. AFTER CONSIDERING THE FACTS OF THE CASE, TH E ASSESSING OFFICER RESTRICTED THE CLAIM OF INTEREST ON UNSECURED LOANS PAID TO THE FAMILY MEMBERS I.E COVERED U/S 40A(2)(B) TO THE RATE OF 12 % AND ACCORDINGLY DISALLOWED AN AMOUNT OF RS. 2,29,693/-. 4. THE ADDITION WAS CHALLENGED BEFORE LD. CIT(A) A ND VARIOUS CASE LAWS HAVE BEEN CITED. THE LD. CIT(A) FURTHER FOUND THAT THERE IS NO DISPUTE THAT LOANS FROM THE PERSONS TAKEN ARE COVER ED U/S 40A(2)(B) OF THE I.T. ACT. THE LD. CIT(A) ALSO NOTED THAT THE ASSESS ING OFFICER MADE THE ADDITION ACCORDINGLY, WHICH IS NOT EXCESSIVE. THE A SSESSING OFFICER HAS 3 RECORDED SATISFACTION WITH REGARD TO THE EXCESS OF INTEREST PAID TO THE RELATED PERSONS AND ACCORDINGLY DISMISSED THE APPEA L OF THE ASSESSEE. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT ADDITION IS TOTALLY UNJUSTIFIED. THE ASSESSEE PLEAD ED BEFORE THE AUTHORITIES BELOW THAT INTERST @ 18% WERE NOT EXCESSIVE OR UNRE ASONABLE HAVING REGARD TO THE FAIR MARKET VALUE. THE ASSESSEE ALSO SUBMITT ED THAT FINANCIAL INSTITUTE CHARGE INTEREST @ 12% TO 15 % AFTER OBTAINING COLLA TERAL SECURITIES AND CHARGING COMPOUNDING INTEREST WHICH MAY VARY UP TO 24%. IN THE CASE OF ASSESSEE, NO SECURITY HAVE BEEN GIVEN FOR OBTAINING UNSECURED LOANS. THEREFORE, ASSESSING OFFICER SHOULD HAVE CONSIDERED THESE ASPECTS BEFORE MAKING DISALLOWANCE IN THE MATTER. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PB- 43 WHICH IS ASSESSMENT ORDER U/S 14 3(3) DATED 23.12.2011 FOR ASSESSMENT YEAR 2009-10 IN THE CASE OF ASSESSEE IN WHICH THE ASSESSING OFFICER DID NOT MAKE ANY DISALLOWANCE OF INTEREST O N THE SAME ISSUE. HE ALSO REFERRED TO PB-46 WHICH IS ALSO ASSESSMENT ORD ER OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 DATED 18.12.2012 U/S 143 OF THE I.T. ACT IN WHICH ALSO NO DISALLOWANCE HAVE BEEN MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF EXCESSIVE INTEREST PAID. PB-50 TO PB-52 ARE THE LEDGER ACCOUNTS OF INTEREST ON UNSECURED LOANS FOR THOSE PERIODS WHIC H SHOWED THAT THE ASSESSEE PAID THE INTEREST TO RELATED PERSONS @ 18% . THESE FACTS, THEREFORE, WOULD CLEARLY PROVE THAT IN PRECEDING ASSESSMENT YE ARS I.E. IN 2009-10 AND 2010-11, THE ASSESSEE WAS PAYING INTEREST @ 18% ON UNSECURED LOANS. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER U/S 143(3 ) DID NOT CONSIDER THE PAYMENT OF INTEREST @ 18% TO BE EXCESSIVE OR UNREAS ONABLE. THEREFORE, CONSIDERING THE HISTORY OF THE ASSESSEE, I FIND THA T PAYMENT OF INTEREST @ 4 18% IS NOT EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE. I ACCORDINGLY, SET ASIDE THE OF THE ASSESSIN G OFFICER AND DELETE THE ADDITION OF RS. 2,29,693/-. GROUND NO.1 OF THE ASSE SSEES APPEAL IS ALLOWED. 6. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF EXPENSES @ 20% OUT OF TELEPHONIC AND MOBILE EXPENSE S, VEHICLE RUNNING EXPENSES IN A SUM OF RS. 13,148/- AND RS. 64,039/-. THE ASSESSING OFFICER FOUND THAT ASSESSEE DID NOT MAINTAIN RECORDS OF CAL LS OF TELEPHONE AND MOBILE. THE PERSONAL USE OF THESE FACILITIES COULD NOT BE DENIED BY THE ASSESSEE. FURTHER, NO LOG BOOK HAS BEEN MAINTAINED. THE ASSESSING OFFICER THEREFORE, DISALLOWED 20% OF THESE EXPENSES. THE LD . CIT(A) CONFIRMED THE ADDITION. 7. THE LD. COUNSEL OF THE ASSESSEE REFERRED TO PB-4 3 AND PB-46 WHICH ARE ORDERS U/S 143(3) OF THE ACT IN THE CASE OF SA ME ASSESSEE (SUPRA) IN PRECEDING YEAR IN WHICH ASSESSING OFFICER DISALLOWE D 10% OF THESE EXPENSES. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE ADDITION IS EXCESSIVE IN NATURE. THE ASSESSING OFFI CER IN PRECEDING ASSESSMENT YEARS I.E. 2009-10 AND 2010-11 MADE DISA LLOWANCE OUT OF THESE EXPENSES @ 10%, THEREFORE, FOLLOWING THE HISTORY OF THE ASSESSEE FOR EARLIER YEARS, ADDITIONS ON THESE HEADS ARE RESTRIC TED TO 10% AS AGAINST 20% MADE BY THE ASSESSING OFFICER. GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 5 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ITA N. 824/CHD/2015 (M/S K.S AGROTECH (REGD.), MALE RKOTLA) 10. ON THE GROUND NO1, ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 2,29,693/- MADE U/S 40A(2)(B) OF THE I.T. ACT. THIS ISSUE IS SAME AS HAVE BEEN CONSIDERED IN ITA NO. 825/CHD/2015(SUPRA). THE REFORE, FOLLOWING THE REASONS FOR THE DECISION IN THAT CASE, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. G ROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. ON GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF EXPENSES ON ACCOUNT OF TELEPHONE, MOBILE EXPENSES A ND VEHICLE RUNNING EXPENSES @ 20% IN THE SUM OF RS. 28,628/- AND RS. 2 ,00,280/-. THIS ISSUE IS ALSO THE SAME AS HAVE BEEN CONSIDERED IN ITA NO. 825/CHD/2015 (SUPRA). FOLLOWING THE REASONS FOR THE DECISION IN THAT CASE , I RESTRICT THE DISALLOWANCE TO 10% AS AGAINST 20% MADE BY THE ASSE SSING OFFICER. GROUND NO.2 OF THE APPEAL IS PARTLY ALLOWED. APPEAL PARTLY ALLOWED. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.07.2016 SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 13 TH JULY, 2016 RKK 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR