Itxa/3372/2010 Of The Commissioner Of Income Tax -3 Mumbai v. Hotmelt Packaging Pvt Ltd

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.3372 OF 2010 The Commissioner of Income Tax-3, Mumbai V/s.Hotmelt Packaging Pvt. Ltd. ..Appellant. ..Respondent. Mr. Vimal Gupta for the appellant.Mr. M.A. Baxi for the respondent. CORAM : J.P. DEVADHAR AND K.K. TATED, JJ. DATED : 16TH AUGUST, 2011 P.C. :- 1.Two questions of law are raised by the revenue in this appeal, which read thus :- (A)Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in deleting the addition of Rs.11,55,557/- out of interest expenses made by the assessing officer u/s.40A(2(b) of the Income Tax Act ?law, the Tribunal was justified in deleting the addition of Rs.11,55,557/- out of interest expenses made by the assessing officer u/s.40A(2(b) of the Income Tax Act ? (B)Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in allowing deduction u/s.80IB to the assessee company without appreciating that the assessing officer had given a clear finding that the assessee company had not employed more than 10 workers in its manufacturing process and therefore, the conditions of Section 80IB(2)(iv) were not fulfilled by the assessee ?law, the Tribunal was justified in allowing deduction u/s.80IB to the assessee company without appreciating that the assessing officer had given a clear finding that the assessee company had not employed more than 10 workers in its manufacturing process and therefore, the conditions of Section 80IB(2)(iv) were not fulfilled by the assessee ? 2.In the present case, the assessee had taken loan on interest at 18% from its Directors and shareholders. However, in respect of loan taken from one of the shareholders, the assessee had paid interest at 12%. The assessing officer by applying the provisions of Section 40A(2)(b) of the Income Tax Act, 1961 disallowed interest in excess of 12%. The Tribunal deleted the disallowance by recording a finding of fact that the assessee company paid lower rate of interest to one of the shareholders who was an NRI and as per RBI guidelines interest exceeding 12% could not be given to such an NRI. Moreover, in the assessee's own case for the earlier years, the revenue has accepted the borrowings at the rate of 18% from the Directors of the Company. Thus, reasonableness of the interest paid by the assessee was not in dispute. In these circumstances, deleting the addition made under Section 40(2)(b) of the Act cannot be faulted. Accordingly, question (A) cannot be entertained. 3.As regards question (B) is concerned, the finding of fact recorded by the ITAT is that apart from the permanent employees, the assessee company had employed casual workers and other workers who were directly and incidentally engaged in the manufacturing process and were liable to be regarded as workers engaged in the manufacturing process. Thus, according to the ITAT, the assessee had employed more than 10 workers as required under Section 80IB of the Act. The decision of the Tribunal is based on finding of fact, therefore, question (B) cannot be entertained. Accordingly, the appeal is dismissed with no order as to costs. (K.K. TATED, J.) (J.P. DEVADHAR, J.)