The DCIT, Circle-1, Surat V. Dhiraj Sons Mega Store Pvt. Ltd., Surat

ITA 1020/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6045 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: M J SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 04/06/2010 DRAFTED ON: 04/06 /2010 ITA NO.1020/AHD/2010 ASSESSMENT YEAR : 2005-06 THE DY.CIT CIRCLE-1 SURAT VS. M/S.DHIRAJ SONS MEGA STORE PVT.LTD. CHOWPATI, ATHWALINES SURAT PAN/GIR NO. : AAACW 2104 J (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.C. PANDIT, SR.DR RESPONDENT BY: SHRI M.J.SHAH O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-I, SURAT DAT ED 22/01/2010. 2. THE FIRST GROUND OF THE REVENUE IS AS FOLLOWS:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS .7,20,000/- MADE ON ACCOUNT OF DISALLOWANCE OF PROPORITI8ONATE INTEREST ON THE LOANS AND ADVANCES. 3. FROM THE SIDE OF THE REVENUE MR.M.C. PANDIT AND FROM THE SIDE OF THE RESPONDENT-ASSESSEE MR.M.J.SHAH APPEARED AND BO TH WERE HEARD. 4. AT THE OUTSET, IT WAS INFORMED THAT THE AFORESAI D GROUND HAS ALREADY BEEN DEALT WITH BY THE RESPECTED CO-ORDINATE BENCH AHMEDABAD (CAMP ITA NO. 1020/AHD/2010 THE DY.CIT VS. M/S.DHIRAJ SONS MEGA STROE P.LTD. ASST.YEAR 2005-06- - 2 - AT SURAT) IN ASSESSEES OWN CASE WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2004-05 BEARING ITA NO.3551/AHD/200 7 ORDER DATED 18/09/2009 VIDE PARAGRAPH NOS.13, 14 & 15 AS FOLLOW S:- 13. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) MADE A DISALLOWANCE OF INTEREST FOR FUNDS NOT USED FOR BUS INESS PURPOSES OF RS.60 LACS WHICH CONSISTED OF INTEREST FREE ADVANCES GIVEN TO ITS DIRECTORS. HENCE, THE INCOME BY RS.7,20,000/- BY ESTIMATING INTEREST AT 12%. 14. SHRI R.N.VEPARI, AR OF THE ASSESSEE, APPEARED FOR THE ASSESSEE. HE CONTESTED THE ABOVE MENTIONED ADDITION . HE REPEATED THE ARGUMENTS MADE BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). SHRI A.K. NAYAK, DR, APPEARE D FOR THE REVENUE. HE RELIED ON THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE D O NOT AGREE WITH LD. COMMISSIONER OF INCOME TAX (APPEALS) WHO H AS ENHANCED THE INCOME OF THE ASSESSEE. WE DELETE TH E INTEREST DISALLOWANCE OF RS.7,20,000/- MADE BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OUT OF INTERES T. THE APPEAL OF THE ASSESSEE IS ALLOWED ON THE 3 RD GROUND. 5. SINCE A VIEW HAS ALREADY BEEN TAKEN IN ASSESSEE S OWN CASE BY A CO-ORDINATE BENCH, THEREFORE, ON IDENTICAL FACTS WE HAVE NO REASON TO ADOPT ANY OTHER VIEW FOR THE YEAR UNDER CONSIDERATI ON EXCEPT TO FOLLOW THE SAID VIEW, THEREFORE, ON THE SAME LINES, WE HER EBY DISMISS THIS GROUND OF THE REVENUE. 6. THE NEXT GROUND OF THE REVENUE IS AS FOLLOWS:- 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS .2,42,173/- MADE ON ACCOUNT OF DISALLOWANCE OF EXCESS INTEREST PAID TO PERSONS COVERED U/S. 40A(2)(B) OF THE ACT. ITA NO. 1020/AHD/2010 THE DY.CIT VS. M/S.DHIRAJ SONS MEGA STROE P.LTD. ASST.YEAR 2005-06- - 3 - 7. PARTIES APPEARING BEFORE US HAVE INFORMED THAT E VEN THIS GROUND HAS ALSO BEEN DECIDED BY THE TRIBUNAL(SUPRA) VIDE P ARAGRAPH NOS.3, 4 & 5; FOR REFERENCE REPRODUCE BELOW:- 3. GROUND NO.1 THIS IS REGARDING DISALLOWANCE OF INTEREST OF RS.1, 86,310/- ON UNSECURED LOAN. IN THE ASSESSMENT ORDER THE ASSESS ING OFFICER HAS STATED THAT THE ASSESSEE HAS PAID INTEREST AT THE R ATE OF 12% P.A. AMOUNTING TO RS.14,90,478/- ON UNSECURED LOANS OBTA INED FROM PERSONS COVERED BY THE PROVISIONS OF SECTION 40A(2) (B). THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY THE PAYMENT OF INTEREST AT THE RATE OF 12% TO THE SISTER CONCERN E VEN THOUGH THE PREVAILING MARKET RATE WAS MUCH LESS. THE ASSESSEE SUBMITTED THAT THE PREVAILING MARKET RATE WAS 12% ONLY. THE ASSES SING OFFICER HAS STATED THAT THE ASSESSEE HAS GIVEN INTEREST FRE E ADVANCES OF RS.60 LACS TO ITS DIRECTORS. THE BANK RATE FOR GIV ING SECURED LOAN WAS 10.5% AND THEREFORE THE ASSESSEE HAS GIVEN 1.5% INTEREST EXTRA TO ITS SISTER CONCERN. HE HAS THEREFORE DISA LLOWED RS.1,86,310/- BEING EXCESS RATE OF INTEREST OF 1.5% ON THE LOANS TAKEN FROM SISTER CONCERN. 4. LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD A S GIVEN BELOW: I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND OBSERVATION OF THE ASSESSING OFFICER. THE APPELLANT ITSELF IS GIVING 10.5% INTEREST TO ITS SECURED CREDITORS AS S TATED BY ITS SUBMISSION DATED 4.3.07 DURING THE APPELLATE PROCEE DINGS. THE ARGUMENT THAT FOR OBTAINING SECURED LOAN 2% PROCESS ING FEE ETC. HAS TO BE GIVEN IS NOT JUSTIFIABLE FOR INCURRI NG 1.5% ON RECURRING BASIS. IN ANY CASE, SINCE THE MARKET RA TE ADMITTEDLY IS 10.5%, THE INTEREST OF 12% GIVEN TO ITS SISTER C ONCERN IS EXCESSIVE AND COVERED BY THE PROVISIONS OF SECTION 40A(2)(B). THEREFORE THE DISALLOWANCE OF 1.5% BY THE ASSESSING OFFICER IS JUSTIFIED AND THE SAME IS CONFIRMED AND THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 5. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE U S. SHRI R.N.VEPARI, AR OF THE ASSESSEE, APPEARED FOR THE AS SESSEE. HE REPEATED THE ARGUMENTS MADE BEFORE THE LD. COMMISSI ONER OF INCOME TAX (APPEALS). SHRI A.K. NAYAK, DR, APPEARE D FOR THE ITA NO. 1020/AHD/2010 THE DY.CIT VS. M/S.DHIRAJ SONS MEGA STROE P.LTD. ASST.YEAR 2005-06- - 4 - REVENUE. HE RELIED ON THE ORDERS OF THE LOWER AUTH ORITY. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN MANY CASES DE CIDED BY US EARLIER WE HAVE ALLOWED 12% INTEREST AS LOAN CLAIM BY CLOSE FAMILY MEMBERS OF THE ASSESSEE WHO HAD GIVEN A LOAN. WE, THEREFORE, FIND NO REASON FOR THE DISALLOWANCE MADE BY THE ASSESSIN G OFFICER AND WE ALLOW THE ASSESSEES APPEAL ON THE FIRST GROUND. 6. ONCE ON IDENTICAL FACTS A VIEW HAS BEEN TAKEN IN FAVOUR OF THE ASSESSEE, THEREFORE, RESPECTFULLY FOLLOWING THE DEC ISION OF THE CO-ORDINATE BENCH FOR THIS YEAR AS WELL, THEREFORE, WE DISMISS THE GROUND OF THE REVENUE. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 11/ 06 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MUKUL SHRAWA T ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/ 06 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD