ITO 6(1)(3), MUMBAI v. AR-EX LABORATORIES P. LTD, MUMBAI

ITA 2552/MUM/2009 | 2005-2006
Pronouncement Date: 22-12-2010 | Result: Dismissed

Appeal Details

RSA Number 255219914 RSA 2009
Bench Mumbai
Appeal Number ITA 2552/MUM/2009
Duration Of Justice 1 year(s) 8 month(s)
Appellant ITO 6(1)(3), MUMBAI
Respondent AR-EX LABORATORIES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 22-12-2010
Assessment Year 2005-2006
Appeal Filed On 21-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO.2552/MUM/2009 ASSESSMENT YEAR : 2005-06 INCOME TAX OFFICER-6(1)(3) ROOM NO.508 5 TH FLOOR AAYAKAT BHAVAN M.K. ROAD MUMBAI-400 020. ..( APPELLANT ) VS. M/S. AR-EX LABORATORIES PVT. LTD. GROUND FLOOR BOTAWALA BUILDING SITLADEVI TEMPLE ROAD MAHIM MUMBAI-400 016. ..( RESPONDENT ) P.A. NO. (AAACA 4479 N) APPELLANT BY : SHR I HARI GOVIND SINGH RESPONDENT BY : NONE O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 23.1.2009 PASSED BY THE LD. CIT(A) FOR TH E ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTIC ALS AND BULK DRUGS FILED RETURN DECLARING AN INCOME OF RS.14 09 690 /-. DURING THE COURSE OF ASSESSMENT PROCEEDING IT WAS INTERALIA OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS PAID INTEREST TO DIFFE RENT PARTIES AT THE RATES RANGING FROM 12% TO 18% WHEREAS T HE PREVAILING MARKET RATE OF INTEREST FOR THE YEAR UNDER CONSIDERATI ON WAS @ 12%. ITA NO.2552/M/09 A.Y:05-06 2 THE ASSESSING OFFICER AFTER CONSIDERING THE ASSESSEE'S SUBMISSION THAT THE RATE OF INTEREST ON UNSECURED LOANS IS AGREED UPON A T 18% PER ANNUM SINCE 1990-91 WHEREAS THE BANKS LOANS ARE SECURED A ND THE COMPANY HAS DEDUCTED REQUIRED TDS WAS OF THE VIEW THA T THE SAME IS NOT ACCEPTABLE LOOKING TO THE FACTS AND CIRCUMSTANCES OF T HE CASE THEREFORE HE DISALLOWED THE RATE OF INTEREST PAID BE YOND THE RATE OF 12% AND WORKED OUT THE DISALLOWANCE RS.9 90 744/- AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) IN T HE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE MARKET RATE OF INTEREST IS LOWER THAN 18% DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING EFFECTIVE GROUND OF APPEAL. 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) ERRED IN DELETING THE ADDITION OF EXCESS INTEREST OF RS.9 90 744/- PAID TO THE DIRECTORS AND THEIR RELATIVES AT THE RATE OF 18% INSTEAD OF MARKET RATE OF INTEREST OF 12% BEING PAID ON THE UNSECURED LOAN TA KEN BY THE ASSESSEE COMPANY. 4. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT THE ASSESSEE HAS PAID INTEREST @ 18% TO THE DIRECTORS AND THEIR RELATIV ES INSTEAD OF MARKET RATE OF INTEREST AT 12% THEREFORE THE LD. C IT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.9 90 744/- M ADE BY THE ASSESSING OFFICER. HE THEREFORE SUBMITS THAT THE ADDITION MADE BY THE ASSESSING OFFICER BE RESTORED. 5. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE LD. DR A ND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THA T THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE COMPANY HAS TAKEN THE UNSECURED LOANS FROM THE DIRECTORS AND THEIR R ELATIVES SINCE ITA NO.2552/M/09 A.Y:05-06 3 1990-91 FOR ITS BUSINESS. IT WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE PREVAILING MARKET RATE OF INTER EST FOR THE YEAR UNDER CONSIDERATION WAS 12%. IN THE ABSENCE OF ANY SUPPO RTING MATERIAL TO SHOW THAT THE PREVAILING MARKET RATE OF INTEREST WAS AT 12% AND KEEPING IN VIEW THAT THE ASSESSEE IS PAYING INT EREST @ OF 18% PER ANNUM ON THE SAID UNSECURED LOANS SINCE 1990-91 WE ARE OF THE VIEW THAT THE SAME CANNOT BE SAID TO BE EXCESSIVE AND ACCORDINGLY THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE DI SALLOWANCE OF RS.9 90 744/- MADE BY THE ASSESSING OFFICER. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. 6. IN THE RESULT REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 22.12.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.