Shri Anurag Goel, Ahmedabad V. The ITO, Ward-1(1)(4), Ahmedabad

ITA 1567/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8650 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-01-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 21-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEELIPKUMAR
• Keywords: Fair market value
• Section: 201; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ I.T.A. NO.1567/AHD/2018 ( / ASSESSMENT YEAR : 2015-16) SHRI ANURAG GOEL 903, SAFFRON TOWER OPP. CENTRAL MALL PANCHWATI AHMEDABAD- 380 006 / VS. THE ITO WARD 1 (1)(4) AHMEDABAD ./ ./ PAN/GIR NO. : ACDPG4081 G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE (WRITTEN SUBMISSION) / RESPONDENT BY : SHRI DEELIP KUMAR, SR.DR / DATE OF HEARING 09/01/2020 !'# / DATE OF PRONOUNCEMENT 13/01/2020 / O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE O RDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-1, AHMEDABAD [CIT(A) IN SHORT] DATED 30/05/2018 PASSED FOR ASSESSMENT YEAR (AY) 2015-16. 2. THOUGH THE ASSESSEE HAS TAKEN THREE GROUNDS OF APPEAL, BUT HIS GRIEVANCES REVOLVE AROUND A SINGLE ISSUE; NAMELY, L D.CIT(A) HAS ERRED IN ITA NO.1567 /AHD/2018 SHRI ANURAG GOEL VS. ITO ASST.YEAR 2015-16 - 2 - CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES AM OUNTING TO RS.4,16,373/-. 3. IN RESPONSE TO THE NOTICE OF HEARING, ASSESSEE H AS FILED WRITTEN SUBMISSIONS CONTAINING THEREIN THAT ISSUE IN DISPUT E IS SQUARELY COVERED BY THE ORDERS OF ITAT IN HIS CASES PASSED IN AYS 20 13-14 & 2012-13. HE PLACED ON RECORD COPY OF TRIBUNAL ORDERS IN ITA NO.2906/AHD/2015 FOR AY 2012-13 AND ITA NO.2698/AHD/2016 FOR AY 201 3-14. 4. WITH THE ASSISTANCE OF LD.DR, WE HAVE GONE THROU GH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD THAT ASS ESSEE HAS PAID INTEREST @ 24% AMOUNTING TO RS.56,70,655/- TO THE PERSONS CO VERED U/S.40A(2)(B) OF THE ACT ON THEIR DEPOSITS WITH THE ASSESSEE. 5. IN OTHER WORDS, THE UNSECURED LOAN AVAILED BY TH E ASSESSEE WERE USED FOR THE PURPOSE OF BUSINESS AND HE HAS PAID IN TEREST @ 24%. THE ASSESSING OFFICER WAS OF THE VIEW THAT INTEREST PAI D @ 24% IS ON THE HIGHER SIDE AND CONSIDERING THE IMPACT OF SECTION 4 0A(2)(B) OF THE ACT, INTEREST AT THE MOST AT 15% COULD BE ALLOWED TO THE ASSESSEE. HE ACCORDINGLY MADE THE DISALLOWANCE. 6. DISSATISFIED WITH THE DISALLOWANCE, ASSESSEE CAR RIED THE MATTER BEFORE THE CIT(A). ITA NO.1567 /AHD/2018 SHRI ANURAG GOEL VS. ITO ASST.YEAR 2015-16 - 3 - 7. ON APPEAL, THE CIT(A) FOUND THAT IN THIS YEAR IN TEREST HAD BEEN PAID TO 10 RELATIVES. OUT OF THAT, THREE RELATIVES ARE NEW; NAMELY, RAKESH GOEL HUF, TARA GOEL AND NEHA GOEL. IN EARLIER YEA R, TRIBUNAL HAS ACCEPTED THE PAYMENT OF INTEREST @ 24% QUA SEVEN PE RSONS AND HE DELETED THE DISALLOWANCE FOLLOWING THE ORDER OF THE ITAT BUT HE CONFIRMED THE DISALLOWANCE FOR THE REMAINING THREE PERSONS AND IN THIS WAY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS.21,26,650/- HAS BEEN SCALED DOWN TO RS.4,16,373/-. 8. WE FIND THAT IDENTICAL ASPECT WAS CONSIDERED BY THE TRIBUNAL IN AYS 2012-13 & 2013-14. THE DISCUSSION MADE BY THE TRIBUNAL IN AY 2013-14 ON THIS ISSUE READS AS UNDER: 5. WITH THE ASSISTANCE OF THE ID.REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 40A(2)(B) CONTEMPLATES THAT IF A N ASSESSEE INCURS EXPENDITURE FOR AVAILING THE SERVICES OF PERSONS WHO ARE CLOSEL Y ASSOCIATED WITH THE ASSESSEE- COMPANY OR THE MANAGEMENT, AND MADE PAYMENT TO SUCH PERSONS IN EXCESS TO THE MARKET RATE, THEN, THAT EXTRA PAYMENT WILL NOT BE A LLOWED TO THE ASSESSEE AS DEDUCTION. IN OTHER WORDS, IF SERVICE IS BEING AVAI LED BY AN ASSESSEE FROM THE PERSON FALLING UNDER SECTION 40A(2)(B), AND THE SIM ILAR SERVICE WAS AVAILED FROM OPEN MARKET ON A LESSER RATE, THEN, THE DIFFERENCE BETWEEN THOSE RATES COULD NOT BE ALLOWED TO THE ASSESSEE AS DEDUCTION. IN THE PRE SENT CASE, THE ASSESSEE HAS AVAILED LOAN FROM THE PERSONS COVERED UNDER SECTION 40A(2)(B) AND PAID INTEREST AT THE RATE OF 25%. THIS, ACCORDING TO THE AO IS EX CESSIVE AND UNREASONABLE AND HIGHER THAN THE ONE AVAILABLE FROM THE OPEN MARKET. I AM OF THE VIEW THAT THIS OBSERVATION IS FAR FROM REALITY AND WITHOUT BASIS, CONSIDERING THE FACT THAT THE LOAN TAKEN BY THE ASSESSEE IS WHOLLY UNSECURED AND WITHOUT ANY COLLATERAL SECURITIES. IT IS FREE FROM ROUTINE QUAGMIRE OF FOR MALITIES AS ONE WILL BE FACED IN THE CASE OF UNSECURED LOANS PROVIDED BY VARIOUS BAN KS AND FINANCIAL INSTITUTIONS. THEREFORE, CONSIDERING RISK FACTOR INVOLVED IN DISC HARGE OF LOANS WITHOUT ANY ITA NO.1567 /AHD/2018 SHRI ANURAG GOEL VS. ITO ASST.YEAR 2015-16 - 4 - SECURITIES AND PROPER DOCUMENTATION, I DO NOT FIND THAT THE RATE OF INTEREST CHARGED TO THE ASSESSEE TO BE EXCESSIVE OR UNREASON ABLE. FURTHER, EVEN THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR A.Y.2012-13 ALL OWED SIMILAR CLAIM OF THE ASSESSEE ON THE SAME FOOTING. THEREFORE, FOLLOWING THE BINDING ORDER OF THE DIVISION BENCH OF THE TRIBUNAL IN ASSESSEE'S OWN CA SE CITED SUPRA, I ALLOW THE APPEAL OF THE ASSESSEE AND DELETE DISALLOWANCE OF R S.10,18,724/- MADE BY THE REVENUE AUTHORITIES. 9. THERE IS NO DISPARITY ON FACTS. DIFFERENT TREAT MENT COULD NOT BE GIVEN QUA THREE RELATIVES ON THE RATE OF INTEREST R EQUIRED TO BE PAID ON THEIR UNSECURED LOANS. THE LD.CIT(A) HAS ERRED IN CREATING AN ARTIFICIAL DIFFERENCE MERELY ON THE GROUND THAT THESE ARE THE FRESH PARTIES. THE LD.CIT(A) WAS REQUIRED TO ASSESS, WHAT COULD BE THE FAIR MARKET VALUE OF THEIR CREDIT AND HOW MUCH INTEREST CAN BE PAID ON A VAILING SUCH TYPE OF LOANS IN THE OPEN MARKET. THEREFORE, RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASES FOR EARLIER YE ARS, WE ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND DELETE THE DISALLOWANCE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 13-01-20 20 AT AHMEDABAD. SD/- SD/- ( WASEEM AHMED ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/ 01 /2020 &.., .(../ T.C. NAIR, SR. PS ITA NO.1567 /AHD/2018 SHRI ANURAG GOEL VS. ITO ASST.YEAR 2015-16 - 5 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-1, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 9.1.2020 (DICTATION-PAD 9- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..9.1.2020 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.13.1.2020 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.1.2020 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER