Income Tax Appellate Tribunal - Mumbai
New Drug & Chemical Co, Mumbai vs Assessee on 27 April, 2016
आयकर अपीऱीय अधिकरण, मुंबई न्यायपीठ 'फी', मुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL "B", BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM आमकय अऩीर सं./ITA No.153/Mum/2013 ( नििाारण वषा / Assessment Year :2009-10) M/s New Drug & Vs. DCIT-14(2), Mumbai Chemical Co., 20/48, Lohar Chawl, 2 n d Floor, Jay Mahal Estate, Room No.4, Mumbai-400002 स्थामी रेखा सं ./ जीआइआय सं ./ PAN/GIR No. : AAAFN 1029 L (अऩीराथी /Appellant) .. (प्रत्मथी / Respondent) ननधाारयती की ओर से /Assessee by : Shri Nishit Gandhi याजस्व की ओर से /Revenue by : Shri Piyush Sonkar सन ु वाई की तायीख / Date of Hearing : 05/04/2016 घोषणा की तायीख/Date of Pronouncement 27/04/2016 आदे श / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the assessee against the order of CIT(A)-
Mumbai, dated for the assessment year 2009-2010, in the matter of order passed u/s.143(3) of the I.T.Act.
2. First grievance of the assessee relates to addition of Rs.2,51,810/- on account of MVAT refund.
3. We have considered rival contentions and found that assessee was consistently following the method of accounting prescribed by ICAI for accounting of VAT and CST. The assessee had shown less purchases in trading account to the extent of MVAT. Similarly sales were also shown without including the amount of MVAT so collected. Since MVAT was neither included in 2 ITA No.153/13 purchases nor included in sales, there was no justification for taxing the MVAT refund. As defined under sub-section 25 of section 2 of the MVAT Act sales prices does not include tax paid or payable to the seller. Similarly sub-section 20 of section 2 of the MVAT Act purchase prices does not include tax paid or payable by a purchaser to a seller. Also as per the provisions of MVAT Act if the credit exceeds the tax payable on sale in period of return, the excess credit will be available for carried forward to the end of the financial year. If there is excess input tax credit at the end of the financial year then the same will be eligible for refund. It is similar to Income Tax refund due on account of excess of tax paid over the liability.
4. In view of the above, we do not find any merit in the action of the AO for taxing the MVAT refund. In the interest of justice, we restore this issue back to the file of AO with a direction to verify the purchases and sales so as to ascertain that MVAT paid on purchases has neither been included in purchases nor MVAT received from customers on sales is included in the amount of sales. The AO is directed to delete the addition of refund of MVAT amount if he finds that purchase and sales are shown 'net' without inclusion of MVAT paid and received. We direct accordingly.
4. The next grievance of the assessee relates to addition made on account of interest paid by assessee to the unsecured creditors on the plea that assessee has paid interest @18% to the some of the creditors who are relatives as defined u/s.40(A)(2)(b).
5. We have considered rival contentions and perused the record. Under section 40(A)(2) addition can be made if the AO records a finding to the effect that the expenditure incurred by the assessee are excessive or unreasonable as compared to the fair market value of services of goods for which such payment 3 ITA No.153/13 is made. In the instant case before us, revenue authorities have not brought on record any material to suggest that funds were available in the open market at the rate of interest lower than 18%. Looking to the rate of interest prevailing in the market during the year under consideration from the bank and private parties, we are of the view that interest rate of 18% was reasonable. Accordingly, disallowance made by the AO u/s.40A(2) is not sustainable. Accordingly, the AO is directed to delete the disallowance of interest so made.
6. In the result, appeal of assessee is allowed in part.
Order pronounced in the open court on this 27/04/2016.
Sd/- Sd/-
(PAWAN SINGH) (R.C.SHARMA)
न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER
भंफ
ु ई Mumbai; ददनांक Dated 27/04/2016
प्र.कु.मभ/pkm, नन.स/ PS
आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :
1. अऩीराथी / The Appellant
2. प्रत्मथी / The Respondent.
3. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai.
4. आमकय आमुक्त / CIT
5. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भंफ ु ई / DR, ITAT, Mumbai आदे शािसार/ BY ORDER,
6. गार्ा पाईर / Guard file.
सत्मावऩत प्रनत //True Copy// उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भुंफई / ITAT, Mumbai