9911796707
TMI Blog2017 (3) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. In the instant case, what is being compared is a rate of interest on an unsecured borrowing vis-à-vis a secured borrowing. In absence of a comparable case being highlighted by the Assessing Officer, we are unable to accept the stand of the revenue that the interest paid is on a higher side. In light of above, the ground No.2 of the assessee is allowed. - Decided in favour of assessee - ITA No. 276/JP/2014 - - - Dated:- 23-2-2017 - Shri Kul Bharat, Jm And Shri Vikram Singh Yadav, AM Assessee by : Shri Satish Gupta (C.A.) Revenue by : Shri Prithivi Raj Meena (Add. CIT) ORDER Per Vikram Singh Yadav, A. M. This is an appeal filed by the assessee against the order of Ld. CIT(A) dated 21.02.2014 for A.Y. 2010-11. The grounds of appeal taken by the assessee are as under:- 1. On the facts circumstance of the case in law, Ld. Lower authorities grossly erred in confirming the addition of ₹ 25 lacs on a/c of disallowance of job work exp. on lumpsum basis. The observation of Ld. CIT(A) that since the disallowance is less than 3% of the total job work charges paid the same in not exorbitant or disproportionate. Ld. A.O. or CIT(A) even could not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s such as certain bills not bearing signature, description of factual work done not there etc. The disallowance made by the assessing officer is less than 3% of the total job work charges paid and therefore it can be seen that disallowance made by the Assessing Officer is not exorbitant or disproportionate. During appeal proceedings this issue was again examined and it is found that apart from the defects noticed by the Assessing Officer, appellant made cash payment on account of job work charges to associated concerns. Payment of job work charges to the extent of more than ₹ 20 lakhs were made by cash to M/s Pawansut. In the tax audit report, payment for job work and others to related parties was reported to be more than ₹ 1 crore therefore the genuineness and business purpose of these expenses are not beyond doubt. Considering the defects in vouchers and substantial cash payment to related parties, part disallowance of job work charges is justified. Since assessing Officer disallowed less than 3% expense which is quite reasonable and even less than cash payments made for job work charges, disallowance deserves to be confirmed. The appellant s arguments that no such di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A/C. It has been mentioned by the AO at Para 3 of page 1 of the assessment order that the Assessee company was asked to furnish bills of job work. It has also been admitted by the AO that the assessee produced all the bills. As per the AO, some of the bills were unsigned and in some of the bills signature were found to be in same handwriting and in some cases description was not there. However, the AO did not mention any such specific instance in the assessment order. In this respect, we further submit that the entire expenditure was vouched. Almost all the payments have been made through A/C payee cheque/banking channel. In all eligible cases, TDS has been deducted and deposited on job work payments. TDS returns have also been filed. The same was also verified. All such parties are income tax assesses and LD AO could have made enquires directly for verification of payment/work, if there was any doubt on account of any unsigned bill or same handwriting. It is not understandable that how signatures can be in different handwriting on the bills. The necessary description was there on the bills. If some of the bills were not upto the mark of LD AO the enquiry should have been made fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, hence the disallowance is unlawful. 4.6 It was further submitted that the disallowance made with the remark that it is only less than 3% of the expenses should not be allowed to be made and the assessment should be made on the basis of books of accounts, vouchers and bills. 4.7 It was submitted that the assessee claimed deduction u/s 37(1) of the Income Tax Act, 1961 and as per the provision of the said section, disallowance can be made only in the circumstances where the alleged expenditure is capital expenditure, personal expenses of the assessee or was not incurred wholly and exclusively for the purpose of business or which is unlawful. In this case before making disallowance, none of the above defect has been brought on the record therefore the disallowance is bad in law. It is also submitted that the expenditure was supported by proper supporting and bills. The expenditure was incurred wholly and exclusively for the business purposes. 4.8 It was submitted that all the payments are subject to TDS and cash payment was also made to the person who is assessed to income tax and the payment was within the permissible limits of Section 40A(3) of the Act. The expenses are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific instance where the payment is not verifiable or the expenses claimed by the assessee are bogus or have not been incurred for the purpose of business. Further, no specific instance of cash payment has been highlighted which has violated the provisions of Section 40A(3) of the Act. In light of above, we hereby delete the disallowance of ₹ 25 lacs made by the Assessing Officer. In the result, ground No.1 of the assessee is allowed. 7. In respect of ground no. 2, the brief facts of the case are that the assessee has paid interest of ₹ 17,88,712 to M/s Poddar Consultancy Organization @ 16.8%. Since M/s Poddar Consultancy Organization is a shareholder in Supersonic Turners (P) Ltd., the excess claim of interest paid to this concern was disallowed and restricted to 12%, being the normal rate of interest at which interest was paid to other concerns. Hence, the excess interest paid of ₹ 5,11,060/- was disallowed and added back to the total income of the assessee. 6. Being aggrieved, the assessee preferred appeal before the ld. CIT(A), who has confirmed the order of the AO by observing in para 3.3 of his order as under: I have considered the facts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of interest @ 16.8% to a private lender is quite reasonable and justified. We rely on Hon ble ITAT Ahmedabad in the case of Omkarmal Gaurishanker v/s ITO 92 TTJ (Ahd.) 223, in the case of Y. Mehta v/s ACIT ITA No.869/Ahd/2010 and in the case of ACIT v/s M/s Raj Steel Industries ITA No.2245/AHD./2010. 8. The ld DR is heard who has relied upon the order of lower authorities. 9. We have heard the rival contentions and pursued the material available on record. The assessee has paid interest @ 16.8% to M/s Poddar Consultancy Organization. The Assessing Officer has restricted the allowance of interest @ 12% on the ground that firstly M/s Poddar Consultancy Organization is a shareholder in the assessee company and being a related party, the payment would be subject to Section 40A(2)(b) of the Act and secondly, the rate of interest paid to banks was 12% and amount over and above that is disallowable under Section 40A(2)(b) of the Act. The appellant has contended that firstly M/s Poddar Consultancy Organization is not a shareholder of the assessee company and secondly, the payment of interest is quite reasonable and genuine because the finance from banks and finance from private pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
