Panchratna The Designer Jewellers, Ahmedabad V. The Dy. Commissioner of Income Tax, Ahmedabad

ITA 1469/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7750 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLADR
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Depreciation

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, B - BENCH,AHMEDABAD . BEFORE : SHRI T.K.SHARMA, JUDICIAL MEMBER , AND SHRI N.S.SAINI, ACCOU NTANT MEMBER. ITA NO. 1469/AHD/2009 (ASSESSMENT YEAR 2005 - 06) PANCHRATNA THE DESIGNER JEWELLERS, 2, TIMES SQUARE , LAL BUNG LOW CROSS ROAD, ROAD. AHMEDABAD. PAN AAGFP 4841 A VERSUS DCIT, CIRCLE 10, AHMEDABAD. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI VIJAY RANJAN, AR FOR THE RESPONDENT SHRI P.M.SHUKLA,DR ORDER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DT.20.2.2009 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) XVI FOR THE ASSESSMENT YEAR 2005 - 06. 2. GROUND NO.1 RELATES TO DISALLOWANCE OF INTEREST OF RS.1,15,000 U/S.40A(2) OF THE INCOME - TAX ACT,1961. 3. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PAID INTEREST ON LOANS OBTAINED FROM RELATED PERSONS @18%, WHEREAS IT HAS PAID INTEREST @15% TO 18% ON THE LOANS OBTAINED FROM OTHERS. THE ASSESSING OFFICER, THEREFORE, HOLDING EXCESS INTEREST OF 3% TO R ELATED PERSONS DISALLOWED A SUM OF RS.1,15,000 U/S.40A(2)(B) OF THE ACT. IN APPEAL, LEARNED CIT(A) CONFIRMED THE SAME. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. LEARNED AR OF THE ASSESSEE CONTENDED BEFORE US THAT THE ASSESSEE HAS PAID INTER EST @18% NOT ONLY TO THE PERSONS COVERED U/S.40A(2) BUT ALSO TO PERSONS NOT RELATED TO THE ASSESSEE. WE FIND THAT COMPARING THE RATE OF INTEREST PAID TO DIFFERENT DEPOSITORS AS DETAILED IN THE APPELLATE ORDER, THE LEARNED CIT(A) HAS OBSERVED THAT THE RATE OF INTEREST IN RESPECT OF ALL THE FAMILY MEMBERS IS 18% WHEREAS THE RATE OF INTEREST TO OTHER VARIES BETWEEN 7%, 12%,15% AND 18%. WE FIND FROM THE SAID DETAILS OF INTEREST THAT THE ASSESSEE HAS ALSO PAID INTEREST @18% ON LOANS/DEPOSITS TO OTHER PARTIES. T HEREFORE, IN OUR CONSIDERED VIEW, THE INTEREST ITA NO. 1469/AHD/2009 2 PAID @18% TO THE RELATIVES CANNOT BE SAID TO BE EXCESSIVE OR UNREASONABLE. IT THE CONTENTION OF THE ASSESSEE THAT THE BANK INTEREST DURING THE RELEVANT PERIOD WAS 13.25% AND IT COMES TO NEARLY 15.25% AFTER TA KING INTO CONSIDERATION THE PROCESSING FEES ETC. HONBLE SUPREME COURT IN UPPER INDIA PUBLISHING HOUSE (P.) LTD. V. CIT [1979] 117 ITR 569 (SC) HAS HELD THAT SECTION 40A(2)(A) CANNOT HAVE ANY APPLICATION, UNLESS IT IS FIRST HELD THAT THE EXPENDITURE WA S EXCESSIVE AND UNREASONABLE. IN THIS CASE BOTH THE DEPARTMENTAL AUTHORITIES BELOW HAVE NOT BROUGHT ON RECORD ANY EVI DENCE WHICH WOULD INDICATE THAT INTEREST PAID @18% AT THE TIME RELEVANT TIME EXCESSIVE AND UNREASONABLE. ON THE OTHER HAND, FACTS OF THE C ASE INDICATE THAT THE ASSESSEE HAS PAID INTEREST @18% TO NON - RELATIVE PARTIES ALSO. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY MATERIAL ON RECORD TO HOLD THAT THE INTEREST PAID @18% TO THE RELATIVES IS EXCESSIVE AND UNREASONABLE AND THEREFORE, THE INTEREST DISALLOWED U/S.40A(2) OF THE ACT IN THE INSTANT CASE IS NOT PROPER. WE, THEREFORE, DELETE THE SAID DISALLOWANCE AND ALLOW THE APPEAL OF THE ASSESSEE IN THIS REGARD. 5. GROUND NO.2 IS AGAINST DISALLOWANCE OUT OF TEL EPHONE EXPENSES, VEHICLE EXPENSES AND DEPRECIATION. 6. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. THE LEARNED CIT(A) HAS OBSERVED IN HIS ORDER THAT THERE ARE THREE PARTNERS AND 17 OTHER FAMILY ME MBERS. THEREFORE, PERSONAL USE OF TELEPHONE AND VEHICLE CANNOT BE RULED OUT. IN SUCH VIEW OF THE MATTER, DISALLOWANCE OF 1/10 TH OUT OF TELEPHONE EXPENSES AND 1/6 TH OUT OF MOTOR CAR EXPENSES AND DEPRECIATION , IN OUR VIEW BEING NOT EXCESSIVE, NEEDS NO INTERF ERENCE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 24.07.09 SD/ - SD/ - ( N.S.SAINI) ACCOUNTANT MEMBER. (T.K.SHARMA) JUDICIAL MEMBER DATE: 24.07.09 (H.K.PADHEE) SE NIOR PRIVATE SECRETARY. ITA NO. 1469/AHD/2009 3 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. THE DR, AHMEDABAD 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, DEPUTY.REGISTRAR.