TaxTMI 
TaxTMI 
TaxTMI 
2010 (7) TMI 1238
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....- thereby allowing the relief of Rs.5,95,367/-". 2.2. The grounds raised by the assessee in its appeal for the assessment year 2004-05 are as under :- (1) That on the facts and circumstances of the case, the learned CIT(A.) has erred in sustaining addition of Rs.10,12,500/- made by the learned A.O. out of interest paid on unsecured loans to directors and their relatives on the ground that the rate of interest of 18% on unsecured loans availed from directors and their relatives is higher as compared to the rate of interest paid on secured loans availed from the Bank @ 11.25%. (2) That on the facts and circumstances of the case, the learned CIT(A.) has erred in sustaining the addition of Rs.6,00,000/- out of Rs.11,95,367/- made by the learned A.O. on account of fall in gross profit margin on an ad hoc basis, ignoring the fact that the fall in gross profit had been on account of routine business expenses which the appellant company had to incur ordinarily in the course of business, purely out of commercial prudence and business expediency. That on facts and circumstances of the case, the learned CIT(A.) has erred in sustaining the subject addition also without having verified a....
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....rectors and their relatives on the ground that the rate of interest of 18% for unsecured loans from directors and their relatives is higher as compared to the rate of secured loans availed from the Bank at the rate of 11.25%. The ld. counsel of the assessee submitted that the assessee had obtained secured loan from the Bank at the rate of 11.25%, but relying on the decision of ITAT, Gauhati in the case of ITO -vs .- K.S. Bhasin [17 TTJ 134] stated that the bank rate cannot be relied upon as a guide because in the case of bank loans certain securities have to be pledged. The assessee relied on the judgment of the Hon'ble Gujarat High Court in the case of Sirhind Steel (P) Ltd. - vs .- CIT reported in 184 CTR 312, wherein it was held that department has to show that the excessive payment has been made while invoking the provisions of section 40A(2)(b). The ld. counsel contended that the rate of interest @ 18% is fair and reasonable, because by paying this interest, the assessee-company has received cash discount from two of its principal suppliers for an amount around Rs.10,66,858/- during the subject financial year, which has been plausible when Company had made payment to those....
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....he fall in G.P. at Rs.41,82,996/ -. On being asked to explain the fall in G.P., the assessee explained that there was a strike in the Textile Industry and receipts of grey cloth had reduced but factory had to run. Plant and machineries of the assessee were also old by seven years, therefore, it requires more repairs. Before the Assessing Officer, the assessee explained the fall in G.P. as under :- Particulars Amount (Rs.) Incremental expense on account of electricity duty on power charges 8,59,487/- Fall in average rate of job charges 9,12,724/- Incremental expense on account of inferior quality of coal and lignite vis-à-vis increase in rate of coal and lignite 7,55,396/- Incremental expense of sugar agro waste to test as substitute of coal & lignite 1,78,309/- Incremental expense on account of repairs & maintenance 5,37,583/- Incremental expense on account of stores & spares 4,31,469/- Incremental cost of power & fuel 8,82,716/- Non receipt of rebate on electricity expenses 1,45,006/- Total 47,02,690/- In the assessment order, the Assessing Officer after considering the various factors, which affected the G.P. of the assessee worked out the G.P. additio....
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....tent explained by the assessee, the Learned Commissioner of Income Tax(Appeals) restricted the addition on account of work-in-progress as well as fall in G.P. to Rs.6,00,000/- instead of Rs.11.9 lakhs made by the Assessing Officer, which is almost 50%. Thus the addition of Rs.6,00,000/- sustained by the Learned Commissioner of Income Tax(Appeals) includes Rs.3,20,983/- on account of work-in-progress. Aggrieved by the order of Learned Commissioner of Income Tax(Appeals), both the sides are in appeals before the Tribunal. 10. At the time of hearing before us, the ld. D.R. pointed out that the reasons put forth by the assessee for fall in GP was carefully considered by the Assessing Officer and the fall in GP to the extent of Rs.29,87,628/- was considered as explained and the reasons for the fall in GP given by the assessee was not accepted and the Assessing Officer made the addition of Rs.11,95,367/- and the Learned Commissioner of Income Tax(Appeals) erred in restricting the same to Rs.6,00,000/ -. The ld. D.R. pointed out that the assessee had two stenter machines having 7 chambers and 9 printing machines. The assessee has shown processing of 0.91 crore meters which is considered ....
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.... of interest of 24% on unsecured loans availed from directors and their relatives is higher as compared to the rate of interest paid on secured loans availed from the bank @ 11.25%". 15. Brief facts relating to controversy involved in this ground of appeal are that in the assessment year under consideration, the assessee-company had paid interest on unsecured loans @ 24% to the directors and their relatives. The assessee-company had also obtained secured loan from bank @ 11.25%. The Assessing Officer on the basis of comparison of rate of interest on unsecured loans with the rate of interest on secured loans made disallowance of interest expenses in respect of alleged difference in rates, i.e. interest of Rs.19,12,500/- proportionate to 12.75% was disallowed. 16. On appeal, in the impugned order, the Learned Commissioner of Income Tax(Appeals) reduced the disallowance of Rs.13,50,000/-, i.e. interest rate of 15%. Aggrieved by the order of Learned Commissioner of Income Tax(Appeals), the assessee is in appeal before the Tribunal. 17. At the time of hearing, on behalf of assessee Shri Avinash Saxena, ld. counsel appeared and pointed out that the creditors, who supplied the goods, w....