Lovely Offset Printers P Ltd., Sivakasi V. ACIT, Virudhunagar

ITA 95/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9500 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 17-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 18-01-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 95/MDS/2016 / ASSESSMENT YEAR : 2011-12 LOVELY OFFSET PRINTERS P. LTD. 43-B, VELAYUTHAM ROAD, SIVAKASI 626 123. PAN AABCL1720A APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, VIRUDUNAGAR. RESPONDENT) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 17.03.2016 '# ! / DATE OF PRONOUNCEMENT: 27.04.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 30 .10.2015 - - ITA 95/2016 2 FOR THE ASSESSMENT YEAR 2011-12. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE OF INTEREST PAID ON UNSECURE D LOANS. THE ASSESSEE, CLAIMED INTEREST PAYMENT ON CERTAIN LOANS AT 24% AND SOME OTHER LOANS AT 18%. THE ASSESSING OFFICER CON SIDERED THE INTEREST AT 12% WHICH CAN BE SEEN FROM THE FOLLOWIN G TABLE : DESCRIPTION OF INTEREST AMOUNT INTEREST ALLOW- ABLE @ 12% BALANCE DISALLOWABLE INTEREST PAID @ 24% ` 41,27,154 ` 20,63,577 ` 20,63,577 INTEREST PAID @ 18% ` 8,57,603 ` 5,71,735 ` 2,85,867 TOTAL ` 49,84,757 ` 26,35,312 ` 23,49,444 THUS, HE DISALLOWED A SUM OF ` 23,49,444/-. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME- TAX(APPEALS). 3. BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS), THE ASSESSEES REPRESENTATIVE DID NOT DISPUTE THE FACT THAT THE INTEREST WAS PAID @ 18% OR @ 24% AND THE PERSONS TO WHOM INTEREST WAS PAID, WERE RELATIVES OF THE DIRECTORS HAVING SUBSTANTIAL INTEREST IN THE COMPANY. THE ASSESSEE S COUNSEL ACCEPTED THAT SEC.40A(2) IS APPLICABLE TO THE FACTS OF THIS CASE. HIS CONTENTION WAS THAT BANK CHARGES INTEREST AT 14 % ON CASH - - ITA 95/2016 3 CREDIT AND PACKING CREDIT LOANS, TERM LOANS AND THE SAME HAS TO BE PAID ON TIME FAILING WHICH PENAL INTEREST IS TO BE PAID. THE ASSESSEES COUNSEL FURTHER CONTENDED THAT ONLY WITH ADEQUATE SECURITY, THE BANK WOULD PROVIDE FINANCIAL ASSISTAN CE WHEREAS FROM THE RELATIVES, THE LOANS COULD BE TAKEN WITHOU T ANY SECURITY AND THE INTEREST ALSO COULD BE ACCUMULATED OVER A P ERIOD OF TIME WITHOUT PAYING THE SAME EVERY MONTH OR QUARTER AS I N THE CASE OF BANKS. ACCORDING TO THE ASSESSEES COUNSEL, THE IN TEREST PAID BY THE ASSESSEE WAS REASONABLE HAVING REGARD TO THE MA RKET CONDITIONS AND, THEREFORE, THE DISALLOWANCE IS NOT JUSTIFIED. 3.1 THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVE D THAT THE ASSESSEE PAID INTEREST @18% TO SOME PERSONS AND INTEREST @ 24% TO SOME OTHER PERSONS. FURTHER, THE COMMISS IONER OF INCOME-TAX(APPEALS) OBSERVED THAT THE BANK CHARGES AT 14% INTEREST AND ADEQUATE SECURITY IS TO BE GIVEN APART FROM PAYMENT OF INTEREST EITHER ON MONTHLY BASIS OR QUARTERLY BA SIS, WHEREAS IN THE CASE OF THE RELATIVES, INTEREST CAN BE ACCUMULA TED OVER A PERIOD OF TIME AND IT CAN BE CREDITED TO THEIR ACCO UNT WITHOUT ACTUAL PAYMENT EVEN AT THE END OF THE YEAR. THERE FORE, ACCORDING TO HIM, INTEREST @ 18% WOULD BE REASONABL E HAVING - - ITA 95/2016 4 REGARD TO THE MARKET CONDITIONS. ACCORDINGLY, THE COMMISSIONER OF INCOME-TAX(APPEALS) DIRECTED THE ASSESSING OFFIC ER TO REWORK THE DISALLOWANCE BY TAKING THE INTEREST RATE @ 18% AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD. THE LD. AR REITERATED THE SUBMISSIONS, WHICH WERE ADVANCED BEFORE THE LOWER AUTHORITIES. IN OUR OPIN ION, IT IS AN ADMITTED FACT THAT THE INTEREST WAS PAID TO THE REL ATIVES OF THE DIRECTORS, WHO IS HAVING SUBSTANTIAL INTEREST IN T HE COMPANY. AT THE RELEVANT TIME, IN THE MARKET, BANK INTEREST RAT E IS AROUND AT 14%. AS THE ASSESSEE AVAILED LOANS WITHOUT ADEQUAT E SECURITY, THE SAID LOAN INTEREST WILL BE MORE THAN THE BANK I NTEREST RATE. CONSIDERING THIS, THE COMMISSIONER OF INCOME-TAX(AP PEALS) DIRECTED THE ASSESSING OFFICER TO ALLOW THE INTERES T RATE AT 18% PER ANNUM. IN OUR OPINION, THIS IS REASONABLE AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE COMMI SSIONER OF - - ITA 95/2016 5 INCOME-TAX(APPEALS). ACCORDINGLY, THIS GROUND OF A PPEAL OF THE ASSESSEE IS REJECTED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 27 TH OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 27 TH APRIL, 2016. MPO* 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.