M/s Amar Nath Achal Kumar, Barnala V. DCIT, Sangrur

CO 20/CHANDI/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2346 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Depreciation; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.187/CHD/2014 (ASSESSMENT YEAR : 2010-11) THE D.C.I.T. , VS. M/S AMAR NATH ACHAL KUMAR, CIRCLE, SANGRUR. SADAR BAZAR, BARNALA. PAN: AACFA3962F AND C.O.NO.20/CHD/2014 IN ITA NO.187/CHD/2014 (ASSESSMENT YEAR : 2010-11) M/S AMAR NATH ACHAL KUMAR, VS. THE D.C.I.T. , SADAR BAZAR, BARNALA. CIRCLE, SANGRUR. PAN: AACFA3962F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAKESH GUPTA DEPARTMENT BY : SHRI S.K. MITTAL DR DATE OF HEARING : 28.04.2016 DATE OF PRONOUNCEMENT : 02.05.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX ( APPEALS), PATIALA DATED 31.12.2013 FOR ASSESSMENT YEAR 2010-1 1. THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE SAM E. 2 2. WE WILL FIRST TAKE UP THE APPEAL OF THE REVENUE IN ITA NO.187/CHD2014 ITA NO.187/CHD/2014 : 3. IT IS STATED THAT IN THE PRESENT APPEAL THE TAX EFFECT IS LESS THAN THE PRESCRIBED LIMIT PROVIDED BY THE RECE NT CBDT CIRCULAR. 4. ACCORDING TO CIRCULAR NO.21/2015 DATED 10.12.20 15, THE CBDT IN SUPERCESSION OF EARLIER INSTRUCTIONS HAS DI RECTED THAT DEPARTMENTS APPEALS BEFORE ITAT SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMIT O F RS.10 LACS. THE TAX WILL NOT INCLUDE ANY INTEREST THEREON. IT IS FURTHER CLARIFIED THAT IF IN THE CASE OF AN ASSESSEE, DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSMENT YEAR, APPEAL CAN BE FILED IN RE SPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT SO SPECI FIED. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING A PPEALS AND APPEALS TO BE FILED HENCEFORTH BEFORE THE TRIBUNAL. THE PENDING APPEALS BELOW THE SPECIFIED TAX LIMIT MAY BE WITHDR AWN/NOT PRESSED. 5. ADMITTEDLY, IN THE DEPARTMENTAL APPEAL, THE TAX EFFECT IS LESS THAN RS.10 LACS, THEREFORE, DEPARTMENTAL APPEA L IS NOT MAINTAINABLE. THE LEARNED CIT (APPEALS) DECIDED TH E ISSUE IN DEPARTMENTAL APPEAL ON FACTS AND THE CASE OF THE RE VENUE WOULD NOT FALL IN THE EXCEPTIONS PROVIDED IN THE ABOVE CI RCULAR. 3 6. IN VIEW OF THE ABOVE, LEARNED D.R. STATED THAT SINCE DEPARTMENTAL APPEAL IS FILED AGAINST THE CBDT INSTR UCTIONS, THEREFORE, HE WOULD NOT BE PRESSING DEPARTMENTAL AP PEAL. THEREFORE, THE ABOVE DEPARTMENTAL APPEAL IS DISMISS ED BEING NOT PRESSED. 7. THE APPEAL OF THE DEPARTMENT IS DISMISSED. C.O.NO.20/CHD/2014 : 8. THE GROUND NO.1 RAISED BY THE ASSESSEE IN CROSS OBJECTION READS AS UNDER : 1. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ALLOWANCE OF INTEREST @ 13 .5% PER ANNUM ALLOWED TO SOME OF THE PERSONS WHO ARE COVERE D BY THE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME TA X ACT, 1961 WHILE THE LEARNED CIT (APPEALS) SHOULD HAVE ALLOWED THE ENTIRE INTEREST CREDITED / PAID @ 15% PER ANNUM TO S UCH PERSONS AS CLAIMED IN THE RETURN OF INCOME BY THE RESPONDENT I.E. THE CROSS OBJECTOR BECAUSE THE LEARN ED CIT(APPEALS) HIMSELF HAS JUSTIFIABLY ALLOWED INTEREST TO SOME OTHER PERSONS @ 15% P.A. WHO ARE NOT COVERED BY THE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME TAX ACT, 1961 AND A S SUCH THE DISALLOWANCE OF INTEREST WHICH AMOUNTS TO RS. 1.31.109/- IS NOT WARRANTED UNDER THE LAW AND FACTS OF THE CASE. 9. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE PAID INTEREST ON UNSECURED LOANS TO DIFFERENT PERSO NS INCLUDING PERSONS SPECIFIED UNDER SECTION 40A(2B) O F THE ACT AT THE RATE VARYING FROM 12% TO 15%. THE ASSESSING OFFICER DISALLOWED INTEREST IN EXCESS OF 9% CONTENDING THAT THE INTEREST RATE FIXED BY RBI IS 9% AND, THEREFORE, EX CESS INTEREST IS DISALLOWED. 4 10. BEFORE THE LEARNED CIT (APPEALS), IT WAS STATE D THAT INTEREST @ 12% TO 15% PER ANNUM HAS BEEN ALLOWED IN SCRUTINY PROCEEDINGS IN EARLIER YEARS. THE ASSESSI NG OFFICER PREFERRED NOT TO COMMENT ON THIS ISSUE IN THE REMAN D REPORT. THE LEARNED CIT (APPEALS) NOTICED THAT THE MATTER H AS BEEN ADJUDICATED IN SCRUTINY PROCEEDINGS IN EARLIER YEAR S AND THE ASSESSING OFFICER HAD ALLOWED INTEREST @ 12% TO 15% TO PERSON NOT COVERED UNDER SECTION 40A(2)(B) OF THE ACT WHIL E IN RESPECT OF PERSON COVERED UNDER SECTION 40A(2)(B) OF THE AC T, IN THE CURRENT YEAR THE INTEREST RATE WAS RESTRICTED TO 15 %. THE ASSESSING OFFICER HAS SIMPLY RESTRICTED THE INTERES T @ 9% AS PER PRIME LENDING RATE OF RBI BASED ON SOME CIRCULA R WHICH WAS NOT PROVIDED TO THE ASSESSEE. HE WAS OF THE OP INION THAT THE INTEREST GIVEN TO CREDITORS OTHER THAN PERSON C OVERED UNDER SECTION 40A(2)(B) CANNOT BE ALTERED. HOWEVER , IN RESPECT OF PERSON COVERED UNDER SECTION 40A(2)(B) O F THE ACT, THE ASSESSEE HAS HIMSELF ACCEPTED IT RATE @ 13.5% I N PREVIOUS YEAR. IN THIS WAY, HE SUSTAINED THE DISALLOWANCE O F INTEREST IN EXCESS OF 13.5%. 11. AGGRIEVED BY THIS, THE ASSESSEE HAS RAISED THI S GROUND IN CROSS OBJECTION. THE LEARNED COUNSEL FOR THE ASSESSEE APART FROM THE REITERATION OF SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, DREW OUR ATTENTION TO PAPER BOOK PAGE 69, WHEREBY THE COPY OF BANK STATEMENT OF THE CREDIT FACILITY AVAILABLE BY THE ASSESSEE FROM STATE BANK OF PATIALA IS ATTACHED. THE RATE OF INTEREST STATED THEREIN IS 1 2.75%. IT 5 WAS PRAYED THAT IN VIEW OF THE FACT THAT THE INTERE ST @ 15% MAY BE HELD AS REASONABLE. 12. THE LEARNED D.R. RELIED ON THE ORDER OF ASSESS ING OFFICER AS WELL AS THAT OF THE LEARNED CIT (APPEALS ). 13. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. IT IS A FACT ON RECORD THAT THE BANK RATE OF LOANS AVAILED BY THE A SSESSEE DURING THE YEAR IS 12.75%. THE BASIS OF 9% RATE TA KEN BY THE ASSESSING OFFICER IS SOME CIRCULAR OF THE RBI, COPY OF WHICH WAS NOT PROVIDED TO THE ASSESSEE. CONSIDERING THE FACT THAT THE ISSUE IN QUESTION IS THAT OF UNSECURED LOAN, IN COMPARISON TO THE BANK LOANS WHICH ARE MORE RISKY AND, THEREFO RE, RATE OF INTEREST IS ALWAYS MORE THAN THE BANK RATE. WE THI NK IT PROPER TO ALLOW THE INTEREST RATE OF 14% TO THE ASS ESSEE. 14. THE GROUND NO.2 RAISED BY THE ASSESSEE IN CROS S OBJECTION READS AS UNDER : 2. THAT THE LEARNED INCOME TAX OFFICER HAS ERRED IN LAW AND ON FACTS IN DISALLOWING THE EXPENSES TO THE EXTENT FOR A N AMOUNT OF RS. 82,2557- OUT OF TOTAL EXPENSES OF RS, 4.26.27 6/- BEING 175 TH OF THE EXPENDITURE ON ACCOUNT OF PERSONAL USE OF M OBILE, TELEPHONE, PETROL AND DIESEL, CAR REPAIR INCLUDING DEPRECATION OF CAR, DEPRECATION OF SCOOTER, DEPRECATI ON OF MOBILE, AND DEPRECATION ON MOTORCYCLE IN THE CASE OF T HE RESPONDENT USED BY THE PARTNERS OF THE FIRM WHILE FR AMING THE ASSESSMENT IN THE RETURNED INCOME. SUCH DISALLOWANCE I S NOT WARRANTED UNDER THE LAW AND FACTS OF THE CASE. 6 15. THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.4,26,276/- ON ACCOUNT OF MOBILE TELEPHONE, PETRO L AND DIESEL EXPENSES AND DEPRECIATION ON CAR, SCOOTER, M OBILE AND MOTORCYCLE. THE ASSESSING OFFICER DISALLOWED AN AM OUNT OF RS.85,255/- BEING 1/5 TH OF THE ABOVE EXPENSES STATING THAT THE PERSONAL USE OF VEHICLES BY THE FAMILY MEMBERS CANN OT BE RULED OUT. 16. BEFORE THE LEARNED CIT (APPEALS), IT WAS STATE D THAT DISALLOWANCE OF 1/5 TH EXPENDITURE, WITHOUT THERE BEING ANY BASIS FOR THE SAME IS NOT TENABLE. REJECTING THE C ONTENTION OF THE ASSESSEE, THE LEARNED CIT (APPEALS) CONFIRMED T HE ADDITION. 17. BEFORE US, IT WAS STATED BY THE LEARNED COUNSE L FOR THE ASSESSEE THAT EVEN IF PERSONAL ELEMENT CANNOT B E RULED OUT, DISALLOWANCE @ 1/5 TH IS ON A HIGHER SIDE. THE LEARNED D.R. RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 18. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE L EARNED COUNSEL FOR THE ASSESSEE HIMSELF ADMITTED THE FACT THAT THE PERSONAL ELEMENT IN SAID EXPENDITURE CANNOT BE RULE D OUT. HOWEVER, WE FIND THAT THE DISALLOWANCE @ 1/5 TH MADE BY THE ASSESSING OFFICER IS WITHOUT ANY BASIS. IN THE INT EREST OF JUSTICE, WE INTEND TO SUSTAIN THE DISALLOWANCE AT 1 /8 TH OF THE EXPENSES. THE GROUND RAISED BY THE ASSESSEE IN TH E CROSS OBJECTION IS PARTLY ALLOWED. 7 19. THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 20. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISM ISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF MAY, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 2 ND MAY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH