TaxTMI 
TaxTMI 
2013 (10) TMI 756
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....cer found that the taxpayer had taken loan to the extent of Rs.135 lakhs from its partners and debited the interest paid on such loans as revenue expenditure. According to the ld.counsel, part of the loans borrowed from its partners was advanced to its sister concern, M/s Oberon Edifies & Estates (P) Ltd, who in turn, used the same for its business purposes. However, as required by the assessing officer, the taxpayer has also filed a revised return disallowing the interest paid on the borrowed funds which were diverted to sister concern. Placing reliance on the judgment of the Apex Court in S.A. Builders 288 ITR 1 (SC), the ld.counsel for the taxpayer submitted that once the funds were used by the sister concern for its business purpose, there cannot be any disallowance. 4. On the contrary, Smt. Vijayaprabha, the ld.DR submitted that the taxpayer himself has filed a revised return before the assessing officer disallowing the interest to the extent of Rs.7,01,233 being proportionate amount of the interest on the borrowed funds diverted to the sister concern. According to the ld.DR, once the taxpayer accepted the disallowance by filing a revised return, the same cannot be re-agita....
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....e the drugs and pharmaceuticals of a few multinational and Indian companies. According to the ld.counsel, when the partner was retired a lump sum amount was paid towards his share and right on the goodwill of the firm. The amount paid towards the goodwill to the retiring partner is eligible for depreciation. According to the ld.counsel, the lower authorities disallowed the claim of the taxpayer on the ground that no part of the amount could be attributed to transfer of drug licence or acquiring of any business right. On a query from the bench, after retirement of the partners whether the firm continued its business, the ld.counsel fairly submitted that after retirement of the partners, the very same firm continued its business. Since amounts were paid to the retiring partner on the value of the goodwill, depreciation on the same has to be allowed while computing the taxable income of the firm. We have also heard the ld.DR. 9. We have considered the rival submissions on either side and also perused the material available on record. The assessing officer disallowed the depreciation on the ground that goodwill is not a commercial right eligible for depreciation. This was confirmed ....
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....ground in ITA Nos 02 to 05/Coch/2011. 10. The next issue is with regard to profit on sale of vehicle. The ld.counsel for the taxpayer submitted that the vehicle was sold at the book value as per the depreciation schedule. The vehicle was sold to the taxpayer's former partners. According to the ld.representative, when the vehicle was sold at its book value, the genuineness of such transaction cannot be doubted. 11. On the contrary, Smt. S Vijayaprabha, the ld.DR submitted that the taxpayer has sold a motor car having its written down value to the extent of Rs.6,77,046 and the motor cycle having a written down value of Rs.46,983. The profit & loss account does not contain any particulars about the sale of the vehicles. The taxpayer has claimed that the assets were sold at its book value. The name of the person to whom the vehicle was sold was also not furnished to the department. Therefore, according to the ld.DR, in the absence of the details, the profit was estimated at 10% of the book value and an addition of Rs.72,403 was made. 12. We have considered the rival submissions on either side and also perused the material available on record. The written down value of the vehi....
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....iling rate of interest charged by the banks varies from 16% to 25% on various types of loans. The rate of interest payable on loan taken from private parties is more than 24% apart from various hidden cost. Therefore, according to the ld.counsel, payment of interest @18% to the relatives of the partners is very reasonable. The taxpayer has furnished comparative chart showing the rate of interest charged by various banks. Therefore, the disallowance of Rs.6,30,000 is not called for. 16. On the contrary, Smt. S Vijayaprabha, the ld.DR submitted that the taxpayer has paid interest only @12% to the partner. Therefore, it is not known why the taxpayer has paid interest @18% to the relatives of the partners on the unsecured loans taken from them. According to the ld.representative, since the taxpayer has paid interest @12% to the partners, the same rate would be applicable in respect of loan taken from relatives of the partners also. Therefore, the assessing officer has rightly restricted the interest payable on unsecured loan from the relatives of the partners. 17. We have considered the rival submissions on either side and also perused the material available on record. We have ca....
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....es below. The appeal of the taxpayer fails. 19. Now coming to appeal for assessment year 2006-07 in ITA No.514/Coch/2010, the Commissioner of Income-tax(A) confirmed the penalty levied u/s 271(1)(c) of the Act. 20. The main contention of the ld.counsel for the taxpayer is that though the amount was given to the sister concern for business purposes and the same was utilized for purchase of property by sister concern, there is no need for disallowance of interest in view of the judgment of the Apex Court in the case of SA Builders 288 ITR 1 (SC). However, at the instance of the department the taxpayer has filed the revised return accepting the disallowance made by the assessing officer. According to the ld.counsel, the taxpayer has a reasonable cause for claiming the payment of interest on the borrowed funds since the same was given to the sister concern for business purpose. It is not the case of the revenue that the funds given to sister concern were used for any personal purposes of the directors or partners. Admittedly, the funds were used for purchase of property which, in turn, could be used for business of the sister concern. Therefore, there was a commercial expediency.....