Muthoot Bankers, Kollam v. ACIT, Kollam

ITA 587/COCH/2010 | 2005-2006
Pronouncement Date: 25-11-2011

Appeal Details

RSA Number 58721914 RSA 2010
Assessee PAN AADFM0987H
Bench Cochin
Appeal Number ITA 587/COCH/2010
Duration Of Justice 1 year(s) 9 day(s)
Appellant Muthoot Bankers, Kollam
Respondent ACIT, Kollam
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Bench Allotted SMC
Tribunal Order Date 25-11-2011
Assessment Year 2005-2006
Appeal Filed On 15-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORESHRI N.R.S. GANESAN JM I.T.A NO. 587 /COCH/2010 ASSESSMENT YEAR: 2005-06 M/S. MUTHOOT BANKERS MAIN ROAD KOLLAM. [PAN:AADFM 0987H] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 KOLLAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R.SREENIVASAN CA REVENUE BY MS. S. VIJAYAPRABHA JR.DR DATE OF HEARING 31/10/2011 DATE OF PRONOUNCEMENT 25/11/2011 O R D E R PER N.R.S.GANESAN JM THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(A)-I TRIVANDRUM DATED 19.10.2010 AND PERTAINS TO THE ASS ESSMENT YEAR 2005-06. 2. SHRI R. SREENIVASAN THE LD. CHARTERED ACCOUNTAN T-REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED INTEREST PAID TO THE PARTNERS AS EXPENDITURE. THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM O N THE GROUND THAT THE ASSESSEE HAS NOT CARRIED ON ANY BUSINESS DURING THE YEAR UNDER CONSI DERATION. ON APPEAL OF THE ASSESSEE THE CIT(A) FOUND THAT THE ASSESSEE WAS CARRYING ON BUSINESS DURING THE YEAR UNDER CONSIDERATION. HOWEVER THE CIT(A) CONFIRMED THE DI SALLOWANCE ON THE GROUND THAT ONLY ONE PARTNER WAS PAID INTEREST AND THE OTHER PARTNER S WERE NOT PAID. ACCORDING TO THE LD. CHARTERED ACCOUNTANT-REPRESENTATIVE OF THE ASSESSEE WHEN THE PARTNERSHIP DEED PROVIDES FOR PAYMENT OF INTEREST ON THE CAPITAL CONTRIBUTED BY EACH PARTNER MERELY BECAUSE INTEREST I.T.A. NO. /COCH/200 2 WAS PAID TO ONLY ONE PARTNER THAT CANNOT BE A REASO N TO DISALLOW THE CLAIM OF THE ASSESSEE. ACCORDING TO THE LD. CHARTERED ACCOUNTANT-REPRESENT ATIVE OF THE ASSESSEE IT IS FOR THE ASSESSEE TO PAY EITHER ALL THE PARTNERS OR SOME OF THE PARTNERS IN ACCORDANCE WITH THE PARTNERSHIP DEED. MERELY BECAUSE THE PARTNERSHIP D EED PROVIDES FOR PAYMENT OF INTEREST TO ALL THE PARTNERS THE ASSESSING OFFICER CANNOT D ISALLOW THE CLAIM OF THE ASSESSEE ON THE GROUND THAT ONLY ONE PARTNER WAS PAID INTEREST. 3. ON THE CONTRARY MS. VIJAYAPRABHA THE LD. DEPAR TMENTAL REPRESENTATIVE SUBMITTED THAT SECTION 40(B)(III) CLEARLY SAYS THAT THE PAYME NT WHICH WAS NOT AUTHORISED BY THE PARTNERSHIP DEED CANNOT BE ALLOWED WHILE COMPUTING INCOME OF THE ASSESSEE. EVEN THOUGH THE PARTNERSHIP DEED AUTHORISES PAYMENT TO A LL THE PARTNERS THE ASSESSEE HAS NOT PAID INTEREST IN ACCORDANCE WITH THE PARTNERSHIP DE ED THEREFORE IT CANNOT BE ALLOWED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE. IN THIS CASE THE LD. DEPARTMENTA REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS PAI D INTEREST TO ONLY ONE PARTNER. THE OTHER PARTNERS WERE NOT PAID. THEREFORE THE PAYME NT WAS NOT MADE IN ACCORDANCE WITH THE PARTNERSHIP DEED. ACCORDINGLY THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. THE RIVAL CONTENTIONS OF EITHER SIDE WERE CONSID ERED IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE L D. DEPARTMENTAL REPRESENTATIVE THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT THE ASSESSEE HAS NOT CARRIED ON ANY BUSINESS DURING THE YEAR UND ER CONSIDERATION. HOWEVER THE CIT(A) FOUND THAT THE ASSESSEE WAS CARRYING ON BUS INESS ACTIVITY. FROM THE ORDERS OF THE BOTH THE AUTHORITIES BELOW IT APPEARS THAT THE ENT IRE ASSETS AND LIABILITIES OF THE ASSESSEE - FIRM WAS TAKEN OVER BY M/S. MUTHOOT FINCORP LTD.. SINCE THERE WAS A DELAY IN THE PAYMENT OF DUES TO THE ASSESSEE-FIRM MUTHOOT FINCO RP LTD. PAID INTEREST TO THE ASSESSEE AS COMPENSATION FOR THE DELAYED PAYMENT. THE CIT(A ) ACCEPTED THE CLAIM OF THE ASSESSEE FOR THE REASONS APPARENTLY STATED IN THE ARGUMENT N OTES FILED BEFORE THE CIT(A). HOWEVER THE COPIES OF THE ARGUMENT NOTES SAID TO B E FILED BEFORE THE CIT(A) HAS NOT BEEN FILED BEFORE THIS TRIBUNAL. THEREFORE IT IS NOT KNOWN FOR WHAT REASON THE CIT(A) I.T.A. NO. /COCH/200 3 CAME TO THE CONCLUSION THAT THE ASSESSEE WAS CARRY ING ON ITS BUSINESS ACTIVITY FOR THE YEAR UNDER CONSIDERATION. ADMITTEDLY THE PROCEEDINGS U NDER THE INCOME TAX ACT ARE JUDICIAL PROCEEDINGS THEREFORE THE ASSESSING OFFICER AS WE LL AS THE FIRST APPELLATE AUTHORITY IS BOUND TO GIVE REASONS FOR THEIR CONCLUSION SO AS TO ENABLE THE APPELLATE FORUM TO APPRECIATE THE REASON FOR ARRIVING AT A PARTICULAR CONCLUSION. SIMPLY BY SAYING THAT FOR THE REASONS STATED IN THE ARGUMENT NOTES THE CIT(A) AG REED WITH THE LD. REPRESENTATIVE WITHOUT BRINGING ON RECORD WHAT IS STATED IN THE AR GUMENT NOTES. AND WHAT FOR THE CIT(A) AGREED WITH THE LD. REPRESENTATIVE OF THE ASSESSEE. THIS TRIBUNAL IS OF THE OPINION THAT THE CIT(A) IS DUTY BOUND TO BRING ON RECORD THE REASONS FOR COMING TO A PARTICULAR CONCLUSION. UNFORTUNATELY THE CIT(A) HAS NOT RECO RDED SUCH A REASON FOR COMING TO THE CONCLUSION. THE CIT(A) FURTHER FOUND THAT THE ASSE SSEE HAS NOT PRODUCED THE COPY OF THE PARTNERSHIP DEED WHICH AUTHORISES THE PAYMENT OF IN TEREST. IN THE NEXT LINE THE CIT(A) SAYS THAT FROM THE ASSESSMENT RECORD SHE FOUND AT PAGE 3 PARA 5 OF PARTNERSHIP DEED PROVIDES FOR PAYMENT OF INTEREST AT THE RATE OF 12% ON ALL CREDIT BALANCES IN THE CAPITAL ACCOUNT OF THE PARTNERS. THE CIT(A) HOWEVER FOUND THAT THERE IS NO JUSTIFICATION FOR MAKING THE PAYMENT TO ONLY ONE PARTNER WHEN THERE A RE OTHER CREDIT BALANCES IN THE CAPITAL ACCOUNT OF THE OTHER PARTNERS. THE CIT(A) HAS ALSO FOUND THAT THE ASSESSEE HAS NOT PRODUCED THE DETAILS OF INTEREST PAID TO THE PA RTNER AS PER THE PARTNERSHIP DEED. THE SPECIFIC CASE OF THE ASSESSEE IS THAT INTEREST IS P AID AT THE RATE OF 12% AS AUTHORISED BY THE PARTNERSHIP DEED. WHEN THE CIT(A) FOUND THAT THE P ARTNERSHIP DEED WHICH WAS AVAILABLE ON THE ASSESSMENT RECORDS AUTHORISED THE ASSESSEE TO PAY INTEREST AT 12% AND THE CREDIT BALANCES OF EACH PARTNER ARE AVAILABLE ON RECORD I T IS NOT KNOWN WHAT PARTICULARS WAS NOT PRODUCED BY THE ASSESSEE. THE CIT(A) HERSELF ADMIT TED THAT THERE ARE CREDIT BALANCES IN THE CAPITAL ACCOUNT OF ALL THE PARTNERS THEREFORE THE CIT(A) IS WITHIN HER KNOWLEDGE ABOUT THE CREDIT BALANCES AVAILABLE IN THE ACCO UNTS OF EACH OF THE PARTNERS. IN VIEW OF THE CONTRADICTORY FINDING RECORDED BY THE CIT(A) WI TH REGARD TO THE DETAILS AVAILABLE ON RECORD THIS TRIBUNAL IS OF THE OPINION THAT THE MA TTER NEEDS TO BE RECONSIDERED BY THE CIT(A). THE CIT(A) SHALL CALL FOR DETAILS IF ANY R EQUIRED FOR COMPLETING THE ASSESSMENT EITHER FROM THE ASSESSEE OR FROM THE ASSESSING OFF ICER. IF THE ASSESSEE FURNISHES ANY OTHER MATERIAL WHICH WAS NOT PRODUCED BEFORE THE AS SESSING OFFICER EARLIER THEN IT IS I.T.A. NO. /COCH/200 4 OPEN FOR THE CIT(A) TO CALL FOR REMAND REPORT FROM THE ASSESSING OFFICER BEFORE TAKING ANY DECISION. HOWEVER FOR WANT OF PARTICULARS WHEN TH E DETAILS OF THE CREDIT BALANCES AND THE RATE OF INTEREST ARE AVAILABLE ON RECORD THE CIT(A ) CANNOT REJECT THE APPEAL OF THE ASSESSEE. 5. IN VIEW OF THE ABOVE FINDING THE ORDER OF THE C IT(A) IS SET ASIDE AND THE ISSUE OF PAYMENT OF INTEREST TO THE PARTNERS IS REMITTED BAC K TO THE FILE OF THE CIT(A) FOR CONSIDERATION. THE CIT(A) HALL RECONSIDER THE ISSU E AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO T HE ASSESSEE. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. SD/- (N.R.S.GANESAN) JUDICIAL MEMBER PLACE: ERNAKULAM DATED: 25TH NOVEMBER 2011 GJ COPY TO: 1. M/S. MUTHOOT BANKERS MAIN ROAD KOLLAM 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1 KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I TRIV ANDRUM. 4. THE COMMISSIONER OF INCOME-TAX TRIVANDRUM. 5. D.R. I.T.A.T. COCHIN BENCH COCHIN. 6. GUARD FILE .