M/s. Rocket EngineeringCorporation (P) Ltd., Kolhapur V. Joint Commissioner of Income-tax,

MA 89/PUN/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 2719 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. MA.NO.89/PN/2014 (ARISING OUT ITA NO.849/PN/2013 (ASSESSMENT YEAR : 2009-10) ROCKET ENGINEERING CORPORATION PRIVATE LIMITED, D-19, MIDC, SHIROLI, KOLHAPUR 416 122 PAN NO.AADCR3595D .. APPLICANT VS. JCIT, RANGE-1, KOLHAPUR .. RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 02-01-2015 DATE OF PRONOUNCEMENT : 12-01-2015 ORDER PER R.K. PANDA, AM : THE ASSESSEE THROUGH THIS MISCELLANEOUS APPLICATION REQUESTS THE TRIBUNAL TO EITHER MODIFY OR RECALL THE ORDER OF TH E TRIBUNAL IN RESPECT OF GROUNDS OF APPEAL NO.1 TO 3 OF THE ASSESSEE. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS ING OFFICER IN THE ASSESSMENT ORDER PASSED U/S.143(3), DISALLOWED AN A MOUNT OF RS.33,37,059/- BEING EXCESS INTEREST PAID TO THE DI RECTORS/MEMBERS AND RELATED PARTIES BY INVOKING THE PROVISIONS OF SECTI ON 36(1)(III) READ WITH SECTION 40A(2)(B) OF THE I.T. ACT. WHILE DOING SO, HE HAD ALSO CONSIDERED THE OFFER OF THE ASSESSEE FOR ADDITION OF RS.33,37, 059/- FOR TAXATION. ACCORDINGLY, THE ASSESSING OFFICER MADE THE ADDITIO N. THE ASSESSEE CHALLENGED THE SAME BEFORE THE CIT(A) WHO UPHELD TH E ADDITION SO MADE 2 BY THE ASSESSING OFFICER. ON FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL REJECTED THE GROUNDS RAISED BY THE ASSESSEE BY OBSE RVING AS UNDER : 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A ) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING O FFICER DISALLOWED AN AMOUNT OF RS.33,37,059/- BEING EXCESS INT EREST PAID TO THE DIRECTORS, MEMBERS AND RELATED PARTIES BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE I.T. ACT. WHILE DOING SO, H E HAD ALSO CONSIDERED THE OFFER OF THE ASSESSEE FOR ADDITION OF RS.3 3,37,059/- FOR TAXATION . THE ASSESSEE AFTER GIVING IN WRITING TO T HE ASSESSING OFFICER REGARDING THE REASONS FOR PAYMENT OF EXCESS INTEREST @2 1% TO THE SPECIFIED PERSONS HAS CATEGORICALLY STATED THAT TO BUY PEACE OF MIND HE WANTS TO OFFER THE INTEREST PAID OVER AND ABOVE THE B ANK RATE FOR TAXATION. THEREFORE, HAVING OFFERED THE SAME TO TAX IN WRITING AND BY GIVING THE INDIVIDUAL DETAILS FOR CALCULATING THE DI SALLOWANCE THE ASSESSEE IS NOW AGITATING ON THE GROUND THAT THERE WAS MISCONCE PTION OF LAW. 6.1 IN OUR OPINION, IT IS NOT A LEGAL ISSUE AND IS PUR ELY A FACTUAL ISSUE. THE ASSESSING OFFICER HAD CLEARLY BROUGHT ON RECORD THE RATE OF INTEREST PAID TO OUTSIDE CREDITORS AT 9%, TO THE BANKS AT 14.75 % AND 21% PAID TO THE RELATED PARTIES. SINCE THERE WAS HUGE DIFFERENC E BETWEEN THE RATE OF INTEREST PAID TO THE BANK AND THE RATE OF INTEREST PAID TO THE RELATED PARTIES, THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO JU STIFY THE REASONABLENESS OF SUCH HUGE INTEREST PAID TO THE DIRECTO RS. THE ASSESSEE HAD GIVEN THE REASONS AND THEREAFTER TO BUY PEAC E OF MIND HAD OFFERED THE EXCESS INTEREST PAID TO TAX. THEREFORE, T HERE IS NO QUESTION OF ANY LEGAL MISCONCEPTION WHICH THE ASSESSEE HAD FOREGO NE BY WAY OF CONCESSION. IT IS PURELY A FACTUAL MATTER. THEREFOR E, WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE CHALLENGING THE DISALLOWANCE OF ADDITION OF RS.33,37, 079/-. 6.2 SO FAR AS THE DECISIONS RELIED ON BY THE LD. COUNSE L FOR THE ASSESSEE ARE CONCERNED, NONE OF THE CASE RELATES TO A SITU ATION WHERE THE ASSESSEE HAVING OFFERED FOR TAXATION OF THE EXCESS AMOUN T OF INTEREST HAS GOT RELIEF. NO DOUBT, THE BANKS ASK LOT OF FORMALITI ES FOR SANCTIONING OF LOAN WHICH ARE NOT REQUIRED FOR LOANS OBTAINED FROM PRIVATE PARTIES. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS ALSO OBTAI NED LOAN FROM PRIVATE PARTIES AND HAS PAID INTEREST @9%. THE ASSESSEE I TSELF HAS CALCULATED THE INTEREST TO BE PAID TO THE DIRECTORS A ND RELATED PARTIES @15.60% AND OFFERED THE BALANCE AMOUNT FOR TAXATION . THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE VARI OUS CASE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE NOT AP PLICABLE. 6.3 WE FURTHER FIND THAT THE ASSESSEE IN THE GROUNDS HAS MENTIONED THAT IT HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WH ICH ARE FAR IN EXCESS OF THE LOANS ADVANCED TO PERSONS COVERED U/S.40A(2)(B). IN THE INSTANT CASE, THERE IS NO QUESTION OF DISALLOWANCE OF INTEREST ON ACCOUNT OF INTEREST FREE ADVANCES GIVEN TO RELATED PARTIES. IT IS A REVERSE CASE WHEREIN THE ASSESSEE HAS OBTAINED THE LOAN FROM RELATED PARTIES BY PAYING EXORBITANT RATE OF INTEREST FOR WHICH THE ASSESSI NG OFFICER DISALLOWED THE EXCESS INTEREST PAID TO THE RELATED PART IES BY INVOKING THE PROVISIONS OF SECTION 40A(2)(B) OF THE I.T. ACT. SINC E THE ASSESSEE ITSELF HAS AGREED FOR THE ADDITION OF RS.33,37,059/- TO TAX BEING EXCESS INTEREST 3 PAID TO THE RELATED PARTIES COVERED U/S.40A(2)(B), TH EREFORE, THE CIT(A) IN OUR OPINION WAS FULLY JUSTIFIED IN UPHOLDING THE A DDITION MADE BY THE ASSESSING OFFICER. THE GROUNDS RAISED BY THE ASSESSEE ARE AC CORDINGLY DISMISSED. 2.1 NOW THE ASSESSEE HAS FILED THIS MISCELLANEOUS A PPLICATION BEFORE THE TRIBUNAL ON THE GROUND THAT CERTAIN MISTAKES HA D CREPT IN THE ORDER OF THE TRIBUNAL SINCE THE ORDER OF THE TRIBUNAL IS BAS ED ON WRONG APPRECIATION OF FACTS. 3. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO TH E MISCELLANEOUS APPLICATION SUBMITTED THAT THE AUTHORITIES BELOW HA VE NOT RECORDED ANY FINDING THAT THE BORROWED FUNDS ON WHICH INTEREST W AS PAID WAS NOT UTILISED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F S.R PROJECTS LTD., REPORTED IN 365 ITR 363, HE SUBMITTED THAT THE HON BLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT INTEREST PAID ON BO RROWED FUNDS WHICH WERE UTILISED FOR THE PURPOSE OF BUSINESS IS AN ALLOWABL E DEDUCTION U/S.36(1)(III) OF THE ACT. REFERRING TO VARIOUS DECISIONS, HE SUB MITTED THAT IF THERE IS A MISTAKE APPARENT FROM RECORD AND THE ASSESSEE BRING S IT TO THE NOTICE OF THE TRIBUNAL, IT MEANS EXERCISE OF POWER UNDER SUB SECT ION (2) OF SECTION 254. HE ACCORDINGLY SUBMITTED THAT SINCE THE ADMISSION B EFORE THE ASSESSING OFFICER WAS ERRONEOUSLY MADE AND THE TRIBUNAL HAS P ROCEEDED ON WRONG APPRECIATION OF FACTS, THEREFORE, THIS BEING A MIST AKE APPARENT FROM RECORD, THE ORDER SHOULD BE RECALLED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY OPPOSED THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE. HE SUBMITTED THAT BEFORE THE ASSESSING OFFICER THE ASS ESSEE HAD ADMITTED FOR 4 DISALLOWANCE OF SUCH EXCESS INTEREST PAID U/S.40A(2 )(B) OF THE I.T. ACT. THE LD.CIT(A) ALSO UPHELD THE ADDITION SO MADE BY T HE ASSESSING OFFICER IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO HIS NOTICE. THE TRIBUNAL HAS PASSED A SPEAKING ORDER ON THIS ISSUE CONSIDERI NG EVERY ASPECT INCLUDING THE VARIOUS DECISIONS CITED BEFORE THE TR IBUNAL. NOW THE ASSESSEE IS TRYING TO REQUEST THE TRIBUNAL TO REVIE W ITS OWN ORDER WHICH IS NOT PERMISSIBLE. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. WE FIND BEFORE THE ASSESSING OFFICER THE ASSESSEE H AS GIVEN REPLY IN WRITING REGARDING THE DISALLOWANCE OF SUCH INTEREST WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN PARA 3.6 OF HIS ORDER. THE RELEVANT REPLY GIVEN BY THE ASSESSEE WHICH HAS BEEN INCORPORATED BY THE ASSESSING OFFICER AS WELL AS THE CIT(A) READS AS UN DER : CONSIDERING THE ADVANTAGES OF RAISING A LOAN FROM PER SONS COVERED U/S.40A(2)(B) OF THE I.T. ACT, THE COMPANY HAS PAID A HIGHER RATE OF INTEREST THAN THE BANK RATE TO THESE LOAN CREDITORS. HOWEVER, TO KEEP THE PEACE OF MIND, WE HEREWITH OFFER THE DIFFERENCE BETWEEN 21% AND 15.60% (I.E. RS.33,37,059/-, AS WORKED OUT BY THE ASSESSE E IN PAGE NOS. 13 AND 14 OF VOL.NO. X, SUBMITTED ON 03-10-2011) FOR TAXATION. AS THE DIFFERENCE OF INTEREST PAID TO LOAN CREDITORS IS OFFE RED FOR TAXATION, I REQUEST YOUR HONOUR NOT TO INITIATE PENALTY U/S.271(1 )(C) OF THE I.T. ACT ON THE SAME. IN THIS REGARD, WE HAVE CALCULATED THE SAID INTEREST DIFFERENTIAL INDIVIDUALLY FOR EACH RESPECTIVE DEPOSIT OR AND A LIST OF THE SAME SHOWING THE INTEREST ACTUALLY PAID, THE INTEREST T HAT SHOULD BE HAVE BEEN PAID @15.60% AND THE DIFFERENCE THEREIN IS ENCL OSED HEREWITH FOR YOUR HONOUR KIND PERUSAL. THE ASSESSING OFFICER ACCORDINGLY MADE ADDITION OF RS.33,37,059/-. WE FIND THE LD.CIT(A) HAS UPHELD THE ASSESSING OFFICER S ORDER ON THE GROUND THAT THE ASSESSEE HIMSELF HAS ADMITTED FOR THE DISA LLOWANCE OF THE EXCESS INTEREST PAID OVER AND ABOVE THE INTEREST PAYABLE T O THE BANK. WE FIND THE TRIBUNAL AFTER CONSIDERING ALL ASPECTS HAS UPHELD T HE ORDER OF THE CIT(A). 5 NOW THE ASSESSEE THROUGH THIS MISCELLANEOUS APPLICA TION REQUESTS THE TRIBUNAL TO MODIFY/RECALL ITS ORDER, WHICH IN OUR O PINION AMOUNTS TO REVIEW OF ITS OWN ORDER BY THE TRIBUNAL AND WHICH IS NOT P ERMISSIBLE IN LAW. WE THEREFORE DO NOT FIND ANY MERIT IN THE MISCELLANEOU S APPLICATION FILED BY THE ASSESSEE AND ACCORDINGLY DISMISS THE SAME. 6. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 12-01-2015. SD/- SD/- (SUSHMA CHOWLA ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, 12 TH JANUARY, 2015. COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, PUNE