United India Exporters, CHENNAI v. ACIT, CHENNAI

ITA 385/CHNY/2017 | 2009-2010
Pronouncement Date: 27-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 38521714 RSA 2017
Assessee PAN AAAFU8010G
Bench Chennai
Appeal Number ITA 385/CHNY/2017
Duration Of Justice 9 month(s) 13 day(s)
Appellant United India Exporters, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 27-11-2017
Date Of Final Hearing 17-08-2017
Next Hearing Date 17-08-2017
First Hearing Date 17-08-2017
Assessment Year 2009-2010
Appeal Filed On 14-02-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . !' . #$#% & '' ( [BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER ] ./I.T.A. NO. 385/MDS/2017 / ASSESSMENT YEAR : 2009-2010. & S.P. NO. 39/MDS/2017 . M/S. UNITED INDIA EXPORTERS 73 PURSWALKAM HIGH ROAD CHENNAI 600 007. [ PAN AAAFU 8010G ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX BUSINESS CIRCLE 7 CHENNAI. ( )* / APPELLANT) ( + )* /RESPONDENT) / APPELLANT BY : SHRI. K. RAVI ADVOCATE /RESPONDENT BY : SMT S. VIJAYAPRABHA IRS JC IT. /DATE OF HEARING : 09-11-2017 ! /DATE OF PRONOUNCEMENT : 27-11-2017 / O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER ASSESSEE IN THIS APPEAL ASSAILS AN ORDER DATED 11 .11.2016 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10 CHENNA I. GROUNDS RAISED BY THE ASSESSEE ARE ON A DISALLOWANCE OF INT EREST OF ITA NO. 385/MDS/2017. :- 2 -: RS.7 25 910/ ADDITION FOR UNDERVALUATION OF STOCK RS.17 99 213/- AND DISALLOWANCE OF RS.3 45 000/- U/S.40(A)(IA) OF THE ACT. 2. FACTS APROPOS ARE THAT ASSESSEE AN EXPORTER OF FI LM AND AUDIO RIGHTS HAD FILED A RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF RS.75 90 460/-. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE LD. ASSESSING OFFICER THAT PARTNERS OF THE ASSESSEE FIRM HAD WITHDRAWN M ONEY IN EXCESS OF THEIR CAPITAL CONTRIBUTION. AS PER THE LD. ASSESSI NG OFFICER ASSESSEE HAD TAKEN LOANS FROM OUTSIDE PARTIES AND PAID INTE REST OF RS.7 25 910/- THEREON. SINCE THE PARTNERS HAD NOT PAID INTEREST ON THEIR WITHDRAWALS LD. ASSESSING OFFICER WAS OF TH E OPINION THAT INTEREST OF RS.7 25 910/- PAID BY THE ASSESSEE TO ITS LOAN CREDITORS COULD NOT BE ALLOWED. 3. LD. ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HAD ACQUIRED AUDIO AND VIDEO RIGHTS OF VARIOUS FILMS. AS PER THE LD. ASSESSING OFFICER VALUATION OF THE DIGITAL RIGHTS WERE NOT CO RRECTLY VALUED. FURTHER AS PER THE LD. ASSESSING OFFICER CLOSING S TOCK OF THEATRICAL AND DIGITAL RIGHTS WERE UNDERVALUED BY RS.17 99 213/-. ITA NO. 385/MDS/2017. :- 3 -: 4. LD. ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HA D MADE VARIOUS PAYMENTS WITHOUT DEDUCTING TDS WARRANTING D ISALLOWANCE U/S.40(A)(IA) OF THE ACT. 5. ASSESSMENT WAS THEREAFTER COMPLETED BY MAKING DISALLOWANCE OF INTEREST RS.7 25 910/- ADDITION FO R UNDERVALUATION OF STOCK RS.17 99 213/- AND DISALLOWANCE OF RS.3 45 00 0/- U/S.40(A)(IA) OF THE ACT. 6. AGGRIEVED ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). CONTENTION O F THE ASSESSEE VIZ-A-VIZ INTEREST DISALLOWANCE WAS THAT PARTNERS A CCOUNT HAD ONLY CREDIT BALANCE IN THE AGGREGATE. AS PER THE ASSESS EE THERE WAS NO NEXUS BETWEEN LOANS AVAILED BY IT AND DRAWINGS MA DE BY THE PARTNERS. 7. VIZ-A-VIZ ADDITION FOR UNDERVALUATION OF CLOSING S TOCK ARGUMENT OF THE ASSESSEE WAS THAT VALUATION OF THE ATRICAL RIGHTS HAD BE DONE AS PER RULE 9A AND 9B OF THE INCOME TAX RUL ES 1962. AS PER THE ASSESSEE FOR NON THEATRICAL RIGHTS IT HAD ADOP TED A VALUATION BASED ON THE AGING OF SUCH RIGHTS. ITA NO. 385/MDS/2017. :- 4 -: 8. VIZ-A-VIZ DISALLOWANCE MADE U/S.14A OF THE ACT O NE OF THE ARGUMENTS OF THE ASSESSEE WAS THAT THE RECIPIENTS HAD PAID TAXES ON SUCH AMOUNT AND THEREFORE DISALLOWANCE COULD NOT BE MADE CONSIDERING THE AMENDMENT TO SEC. 40(A)(IA) OF THE ACT THROUGH FINANCE ACT NO.2012. 9. LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONS IDERING THE SUBMISSIONS HELD THAT DISALLOWANCE OF INTEREST ON ACCOUNT OF OVERDRAWING MADE BY THE PARTNERS WAS RIGHTLY DONE B Y THE LD. ASSESSING OFFICER. AS PER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PARTNERS OF THE ASSESSEE FIRM HAD OVER D RAWN MONEY FROM THE FIRM WITHOUT PAYING ANY INTEREST WHEREAS ASSES SEE HAD PAID INTEREST ON LOANS TAKEN BY IT. IN SO FAR AS ISSUE REGARDING UNDERVALUATION OF CLOSING STOCK WAS CONCERNED LD. COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE LD. ASSESSING OFF ICER TO EXAMINE THE CONTENTIONS OF THE ASSESSEE AND RECOMPUTE THE VAL UE OF THE CLOSING STOCK. VIZ-A-VIZ DISALLOWANCE U/S.40(A)(IA) OF THE ACT LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE ITS CONTENTION THAT RECIP IENTS HAD PAID TAXES ON SUCH AMOUNTS. ITA NO. 385/MDS/2017. :- 5 -: 10. NOW BEFORE US THE LD. AUTHORISED REPRESENTATIVE STRONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT DETAILED SUBMISSIONS MADE BY THE AS SESSEE ON EACH OF THE ISSUES BEFORE THE LOWER AUTHORITIES WERE NOT P ROPERLY CONSIDERED. AS PER THE LD. AUTHORISED REPRESENTATIVE THERE WAS NO NEXUS BETWEEN THE AMOUNTS DRAWN BY THE ASSESSEE PARTNERS AND IN TEREST BEARING LOANS TAKEN BY THE ASSESSEE. IN SO FAR AS DISALLOW ANCE U/S. 40(A)(IA) OF THE ACT WAS CONCERNED SUBMISSION OF THE LD. AU THORISED REPRESENTATIVE WAS THAT ASSESSEE WAS NEVER GIVEN A CHANCE TO SUBSTANTIATE ITS CONTENTION THAT PAYEE HAD PAID TA XES ON SUCH AMOUNTS. 11. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE STRONGL Y SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IN SO FAR AS DISAL LOWANCE OF INTEREST IS CONCERNED THERE IS NOTHING ON RECORD WHICH WOULD S HOW WHAT WAS THE AMOUNT BORROWED BY THE ASSESSEE DURING THE RELEVAN T PREVIOUS YEAR ON WHICH INTEREST WAS PAID BY IT. LD. ASSESSING OFF ICER HAD NOT EXAMINED THE NEXUS BETWEEN SUCH BORROWED AMOUNTS AN D DRAWINGS MADE BY THE PARTNERS OF THE ASSESSEE. NO DOUBT D RAWINGS MADE BY ITA NO. 385/MDS/2017. :- 6 -: PARTNERS IN EXCESS OF HIS CAPITAL CONTRIBUTION CAN RESULT IN PRO-RATA DISALLOWANCE OF INTEREST ON LOANS BORROWED BY THE ASSESSEE. HOWEVER IN OUR OPINION THE FACTS RELATING TO THIS ISSUE HAS NOT PROPERLY EXAMINED BY THE LOWER AUTHORITIES. 13. VIZ-A-VIZ UNDER VALUATION OF THE THEATRICAL AND DI GITAL RIGHTS OF FILMS LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD SET ASIDE THE ORDER OF THE LD. ASSESSING OFFICER WITH THE FOLLOWI NG COMMENTS:- 5.3.2. IT IS CLEAR FROM THE AR'S SUBMISSION THAT THE AO HAS NOT CONSIDERED THE STOCK VALUATION IN ALL THE ITEMS . THE APPELLANT'S SUBMISSION THAT THE AO HAS NOT APPRECIA TED THE FACTS CORRECTLY IS PRIMA FACIE ACCEPTABLE. HOWEVER IN SPITE OF SEVERAL OPPORTUNITIES GIVEN THE APPELLANT COULD NOT SUBMIT QUANTITATIVE ANALYSIS AND STOCK VALUATION. A S MENTIONED ABOVE UNDER PARA 2.1. THE APPELLANT DID NOT APPEAR ON BOTH THE OCCASIONS OF FINAL HEARING POSTE D BY THE CIT(A). UNDER THE CIRCUMSTANCE THE AO IS DIRECTED TO EXAMINE THE APPELLANT'S SUBMISSION AS MENTIONED ABO VE AND TO RE-COMPUTE THE CLOSING STOCK VALUATION AS PER TH E PROVISIONS OF SECTION 145 AND SECTION 145A OF THE I NCOME TAX ACT 1961. IN VIEW OF THE ABOVE REMARKS THE AP PELLANT'S GROUND ON THIS ISSUE IS PARTLY ALLOWED . IN OUR OPINION LD. COMMISSIONER OF INCOME TAX (APP EALS) HAVING SET ASIDE THE ISSUE TO THE FILE OF THE LD. ASSESSING OF FICER FOR CONSIDERING THE SUBMISSIONS OF THE ASSESSEE GRIEVANCE RAISED B Y THE ASSESSEE ON THIS IS ILL CONVINCED. 14. VIZ-A-VIZ DISALLOWANCE U/S. 40(A)(IA) OF THE ACT ASSESSEE CAN DEFINITELY TAKE REFUGE TO SECOND PROVISION TO SEC.40(A)(IA) OF THE ITA NO. 385/MDS/2017. :- 7 -: ACT IF IT CAN SHOW THAT RECIPIENTS HAD PAID TAXES ON THE AMOUNTS RECEIVED BY THEM FROM THE ASSESSEE WITHOUT DEDUCTI ON OF TAX. 15. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE LOWER A UTHORITIES BELOW ON THE ISSUES RELATING TO DISALLOWANCE OF INT EREST RS.7 25 910/- AND DISALLOWANCE OF RS.3 45 000/- MADE U/S.40(A)(I A) OF THE ACT AND REMIT THESE BACK TO THE FILE OF THE LD. ASSESSING O FFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. 17. STAY PETITION HAVING BECOME INFRUCTUOUS IS DISMISSE D. ORDER PRONOUNCED ON MONDAY THE 27TH DAY OF NOVEMB ER 2017 AT CHENNAI. SD/- SD/- ( . . . ' (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 27TH NOVEMBER 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. + ' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF