TaxTMI 
TaxTMI 
2013 (10) TMI 602
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 15% p.a., as against the allowed and claimed rate of 24% p.a. The Prime Lending Rate (PLR) of the bank at the relevant time being in the range of 12% p.a., the assessee was during the course of the assessment proceedings show caused qua the incurred interest rate of 24% p.a. The assessee sought to justify the same in terms of the relevant deposits being unsecured and the assessee being an unrated customer, while the PLR, with reference to which the reasonability of the interest rate was being reckoned by the Revenue, is for an AAA rated customer. Finally, the assessee would submit that the bulk of the interest stands subject to tax rate of 30%, i.e., the rate at which the assessee- company is assessed to tax, so that there was no tax motivation for the said claim of interest. The same did not find favour with the Revenue inasmuch as the assessee was unable to justify the interest rate of 24% p.a., and which stood restricted to 15% p.a. Aggrieved, the assessee is in second appeal. 3.1 Before us, like contentions stood raised by the assessee. The assessee had shown progressive results for the current year, and it is not for the Revenue to decide on the commercial expediency or the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he reasonability of the expenditure under reference, though no doubt the initial onus for the same is on the Revenue, inasmuch as it is it that seeks to invoke the section, but once it makes out a prima facie case, as in the instant case, with the contracted interest rate being at about twice the PLR, the burden to prove or exhibit the same with reference to the FMV of the goods or services availed of shifts to the assessee. Reference in this context may be made to the decision in the case of CIT vs. Shatrunjay Diamonds [2003] 261 ITR 258 (Bom). No doubt, the PLR is for an AAA customer, for which the assessee may not qualify, but then the Revenue has not applied the PLR but a rate which is 25% higher. The PLR under the circumstances only signifies or represents the base rate. It is for the assessee to show as to what it's rating, in terms of the relevant parameters, is or would be, and the interest rate applicable to a customer with that rating. In fact, the assessee declaring a healthy profit of Rs.73.75 lakhs, implies a significantly lower financial as well as business risk, inasmuch as it indicates sound financial and strong business fundamentals and, consequently, a good debt r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rest rate in the range of 16% to 18% p.a., i.e., 33% to 50% over the PLR, would represent the FMV of the interest on the unsecured deposits as raised by the assessee. The Revenue has also not brought any material on record to justify the assessed rate of 15% p.a. and, besides, the assessee has claimed its business to be relatively new. We, therefore, taking a liberal view of the matter, consider an interest rate of 18% p.a. as very reasonable, and which would meet the ends of the justice. A lower mark-up (than the almost 50%) being endorsed by us, would be so only where it is wrt. the actual bank rate availed (which is not known) and not PLR (base rate). We decide accordingly. 5.4 Before parting with the matter, we may also clarify that the assessee's reliance on the Board's Circular dated 07.06.1968 would not be of much consequence, given the wide difference in the interest rates, as discussed above. Also, there is nothing on record to show, as claimed, of the bulk of the interest disallowed having suffered tax (in the hands of the individual depositors) at the same rate as applicable to the assessee- company. We may also clarify that the decisions by the tribunal being relied up....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion in the name of the company entails a much higher incidence of tax, which has been evaded by the assessee-company thereby, i.e., assuming that the company has the beneficial ownership of the vehicle. 9. Before us, the ld. AR would state the assessee's case with reference to the decision by the hon'ble jurisdictional High Court in the case of CIT vs. Dilip Singh Sardarsingh Bagga [1993] 201 ITR 995 (Bom). The ld. DR, on the other hand, relied on the orders by the authorities below. 10. We have heard the parties, and perused the material on record. Without doubt, it is a beneficial ownership, and not the titular ownership, that is relevant for pressing a valid claim for depreciation allowance under the Act. This is by now trite law, even as explained by the apex court in the case of CIT vs. Poddar Cement (P.) Ltd. [1997] 226 ITR 625 (SC) and Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC), a view also expressed by the hon'ble high court in the case Dilip Singh Sardarsingh Bagga (supra). The motor car stands purchased in the name of one of the employees of the assessee- company. As such, the basis on which the assessee claims the beneficial ownership of the said asset is not....