No disallowance for overpricing if party assessed at maximum marginal rate – ITAT

No disallowance for overpricing if party assessed at maximum marginal rate and there is no loss of Revenue.

ABCAUS Case Law Citation:
ABCAUS 2085 (2017) (09) ITAT

The Challenge/Grievance:
This was an appeal filed by Revenue against the order of CIT(A) whereby he had deleted the additions made by the Assessing Officer (AO) on alleged overpricing of purchases from sister concern and payment of excessive interest charges.

Assessment Year :  2012-13

Brief Facts of the Case:
The assessee was a HUF. During the course of the scrutiny proceedings, the AO noticed that the assessee had made purchases from its sister concern through a corporation and had also paid interest to such corporation. The AO was of the view that the assessee had over invoiced its purchases which was purchased from its sister concern and the payment of to the corporation was made merely to increase interest liability.

Observations made by the Tribunal:
The ITAT observed that the CIT(A) in his order had made a finding of fact that the entities to whom payments were made for purchase of cloth were assessed to tax at maximum marginal rate therefore there is no loss of revenue. As regards interest payments also he had held that the payee was being assessed at maximum marginal rate of tax and thus there was no loss to revenue.

Also the ITAT took note of the fact that that  for AY 2011-12, it had dismissed similar grounds of appeal raised by the Revenue.

Decision/Held:
The tribunal, finding that the issue in appeal was pari materia with the issue already decided, dismissed the appeal filed by Revenue.