Dy. Commissioner of Income Tax , Lucknow V. M/s. Jugal Kishore & Sons, Lucknow

ITA 16/LKW/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83355 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K NIGAM
• Assessee Lawyers: J J MEHROTRA
• Keywords: Proportionate interest
• Section: 5(2); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO S . 16 & 17/LKW/2013 ASSESSMENT YEAR S:2008 - 09 & 200 9 - 1 0 DY. CIT RANGE V LUCKNOW V. M/S J UGAL KISHORE & SONS 17, JHANDEYWALA PARK AMINABAD, LUCKNOW PAN: AADFJ1170B (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. R. K. NIGAM, CIT (DR) RESPONDENT BY: SHRI. J. J. MEHROTRA, C.A. DATE OF HEARING: 26 08 2014 DATE OF PRONOUNCEMENT: 15 10 2014 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS: - GROUNDS IN I.T.A. NO.16/LKW/2013: 1 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING T HE DISALLOWANCE MADE BY THE A.O. OF RS.6,57, 540/ - OUT OF INTEREST EXPENSES CLAIMED U/S 36 ( 1 )(III) OF THE I.T. A CT, 1 961. SUCH INTEREST WAS PAID ON 'GOLD DEPOSITS'. SINCE GOLD DEPOSITS CANNOT BE CAPITAL BORROWED FOR PURPOSES OF BUSINESS, HENCE INTEREST PAI D ON GOLD DEPOSITS CANNOT BE AN ADMISSIBLE EXPENDITURE. HE FAILED TO FOLLOW THE DECISION IN THE CASE OF BOMBAY STEAM NAVIGATION CO. (P) LTD. VS CIT 56 ITR 52 (SC) IN WHICH THE HON'BLE SUPREME COURT HAS; HELD THAT THE TERM 'CAPITAL' MEANS ONLY MONEY AND NOT ANY OTHER ASSESTS, AS FAR AS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : PAYMENT OF INTEREST IS CONCERNED . 2 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE A.O. OF RS.8,40,000/ - ON ACCOUNT OF SALARY PAID TO PARTNERS IN THEIR CAPACITY OF HUF. HE FAILED TO APPRECIATE THAT THE SALARY PAYBLE TO PARTNERS OF A FIRM IS ALLOWABLE TO WORKING PARTNER ONLY AS PER SECTION 40 (B) (I) OF THE I.T. ACT, 1961 AND NOT IN THEIR CAPACITY OF HUF. 3 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE A DDITION MADE BY THE A.O. OF RS. 5,83,32 4/ - ON ACCOUNT OF FICTITIOUS LIABILITY OF CREDITORS. HE FAILED TO APPRECIATE THAT ASSESSEE COULD NOT PRODUCE ANY EVIDENCE OF EXISTENCE OF THESE CREDITORS. 4 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE A.O. OF RS.2,90,083/ - O N ACCOUNT OF DISALLOWANCES OUT OF COMMISSION ON SALES. HE FAILED TO APPRECIATE THAT COMMISSION PAID IS EXCESSIVE AND THE PROVISION OF SECTION 40 A (2) (B ) OF THE I.T. ACT, 1961 ARE ATTRACTED. 5 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLO WANCES MADE BY THE A.O. OF RS.12,6 653/ - OUT OF I NTEREST PAYMENT ON LOANS. HE FAILED TO APPRECIATE THAT THE DISALL OWANCE WAS MADE ON ACCOUNT OF INTEREST CHARGEABLE ON INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE. GROUNDS IN I.T.A. NO.1 7 /LKW/2013: 1 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE MADE BY THE A.O. OF RS.4,76,703/ - OUT OF INTEREST EXPENSES CLAIMED U/S 36 ( 1 )(III) OF THE I.T. ACT, 1961. SUCH INTEREST WAS PAID ON 'GOLD DEP OSITS'. SINCE GOLD DEPOSITS CAN NOT BE CAPITAL BORROWED FOR PURPOSES OF BUSINESS, HENCE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : INT EREST PAID ON GOLD DEPOSITS CAN NOT BE AN ADMISSIBLE EXPENDITURE. HE FAILED TO FOLLOW THE DECISION IN THE CASE OF BOMBAY STEAM NAVIGATION CO. (P) LTD. VS CIT 56 ITR 52 (SC) IN WHICH THE HON'BLE SUPREME COURT HAS HELD THAT THE TERM CAPITAL MEANS ONLY MONEY AND NOT ANY OTHER ASSESTS AS FAR AS PAYMENT OF INTEREST IS CONCERNED. 2 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE A DDITION MADE BY THE A.O. OF RS. 5,60,354/ - ON ACCOUNT OF FICTITIOUS LIABILITY OF CREDITORS. HE FAILED TO APPRECIATE THAT ASSESSEE COULD NOT PRODUCE ANY EVIDENCE OF EXISTENCE OF THESE CREDITORS. 3 . THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE A.O. OF RS.2,54,177/ - ON ACCOUNT OF DISALLOWANCES OUT OF COMMISSION ON SALES. H E FAILED TO APPRECIATE THAT COMMISSION PAID IS EXCESSIVE AND THE PROVISION OF SECTION 40 A (2) (B) OF THE I.T. ACT, 1961 ARE ATTRACTED. 4 . THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCES MADE BY THE A.O. OF RS.22,929/ - OUT OF INTEREST PAYMENT ON LOANS. HE FAILED TO APPRECIATE THAT THE DISALLOWANCE WAS MADE ON ACCOUNT OF INTEREST CHARGEABLE ON INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE. 2 . GROUND NO.1 IN BOTH THE APPEALS RELATES TO THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES CLAIMED UNDER SECTION 36(1)(III) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') ON GOLD DEPOSITS. 3 . THE FACTS , IN THIS REGARD , BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE HAS ACCEPTED GOLD DEPOSITS FROM RELATIVES AND FAMILY MEMBERS AS UNSECURED LOAN TO AUGMENT THE STOCK OF GOLD USED IN BUSINESS AND INTEREST PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : WAS PAID @ RS.18,000/ - PER KG ON GOLD TAKEN AS LOAN FOR BUSINESS PURPOSES. DURING ASSESSMENT YEAR 2008 - 09 INTEREST PAID WAS WORKED OUT AT RS.6,57,540/ - AND RS.4,76,703/ - IN ASSESSMENT YEAR 2009 - 10. THE ASSESSING OFFICER DISALLOWED THE INTEREST BY OBSERVING THAT BORROWING OF GOLD DOES NOT F ALL WITHIN THE DEFINITION OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS AS USED IN SECTION 36(1)(III) OF THE ACT. HE ACCORDINGLY MA DE DISALLOWANCE OF THE INTEREST PAID ON GOLD SO TAKEN AS LOAN. 4 . AGAINST THE DISALLOWANCE, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) EXAMINED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF DEFINITION OF CAPITAL AND WAS OF THE VIEW THAT IN TEREST WAS PAID ON SUCH BORROWED GOLD COULD BE CONSTRUED TO MEAN CHARGES PAID FOR USE OF SUCH GOLD AND IN THAT SENSE THE INTEREST PAID IS ALLOWABLE UNDER SECTION 37 OF THE ACT , AS THE INTEREST HAS BEEN INCURRED FOR THE PURPOSE OF BUSINESS. THE RELEVANT OB SERVATION OF THE LD. CIT(A) IN ASSESSMENT YEAR 2008 - 09 IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: - 4(5)(I) THE TERM CAPITAL AS PER BLACK'S LAW DICTIONARY MEANS IN POLITICAL ECONOMY, THAT PORTION OF THE PRODUCE OF INDUSTRY EXISTING IN A COUNTRY, WHI CH MAY BE MADE DIRECTLY AVAILABLE, EITHER FOR THE SUPPORT OF HUMAN EXISTENCE, OR THE FACILITATING OF PRODUCTION; BUT, IN COMMERCE, AND AS APPLIED TO INDIVIDUALS, IT IS UNDERSTOOD TO MEAN THE SUM OF MONEY WHICH A MERCHANT, BANKER, OR TRADER ADVENTURES IN AN Y UNDERTAKING, OR WHICH BE CONTRIBUTES TO THE COMMON STOCK OF A PARTNERSHIP. AND, WHEN USED WITH RESPECT TO THE PROPERTY OF INDIVIDUALS IN ANY PARTICULAR BUSINESS, THE TERM HAS SUBSTANTIALLY THE SAME IMPORT; IT THEN MEANS THE PROPERTY TAKEN FROM OTHER INVE STMENTS OR USES AND SET APART FOR AND INVESTED IN THE SPECIAL BUSINESS, AND IN THE INCREASE, PROCEEDS, OR EARNINGS OF PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : WHICH PROPERTY BEYOND EXPENDITURES INCURRED IN ITS USE CONSIST THE PROFITS MADE IN THE BUSINESS. 4(5)(II) IN THE WIDER SENSE THE CAPITAL M EANS ANY PROPERTY OR INVESTMENT TAKEN FOR USE IN BUSINESS FOR THE PURPOSE OF EARNING PROFITS. IN THE WIDER SENSE, IN THE INSTANT CASE, THE APPELLANT HAS BORROWED GOLD FROM FAMILY MEMBERS, WHICH HAS BEEN USED TO AUGMENT THE STOCK OF GOLD IN BUSINESS. THERE IS NOTHING ON RECORD TO DENY THAT THE GOLD BORROWED FROM FAMILY MEMBERS WAS NOT USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. GOLD HAS BEEN PHYSICALLY TAKEN AND EMPLOYED IN BUSINESS. THE INTEREST PAID ON SUCH BORROWED GOLD COULD BE CONSTRUED TO MEAN CH ARGES PAID FOR USE OF SUCH GOLD. IN THAT SENSE, THE INTEREST PAID IS ALLOWABLE UNDER SECTION 37 OF THE ACT AS THE INTEREST HAS BEEN INCURRED FOR THE PURPOSE OF B USINESS. (6) THE RELIANCE OF THE AO ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF BOMBAY STEAM NAVIGATION CO. (P) LTD VS CIT 56 ITR 52 (SC) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE CAPITAL WAS DECIPHERED IN THE SENSE OF TAKEOVER OF BUSINESS OF ONE ENTITY BY ANOTHER. INTEREST IN THAT CASE WAS CLAIMED ON THE AMOUNT REMAINING UNPAID. IN THE I NSTANT CASE, INTEREST IS PAID ON THE GOLD TAKEN FOR THE PURPOSE OF BUSINESS AND IS THEREFORE ALLOWABLE SINCE THE GOLD TAKEN AS LOAN IS EMPLOYED IN BUSINESS. 4(7) IN VIEW OF DISCUSSION ABOVE, I AM OF THE CONSIDERED OPINION THAT THE INTEREST PAID ON LOAN TAK EN IN THE FORM OF PHYSICAL GOLD IS ALLOWABLE. THE DISALLOWANCE OF RS.6,57,540/ - IS DELETED GIVING RELIEF TO THE APPELLANT. 5 . AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OF FICER; WHEREAS THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT UNDISPUTEDLY GOLD WAS BORROWED , THOUGH FROM RELATIVES AND FAMILY MEMBERS , AS UNSECURED LOAN TO AUGMENT STOCK OF GOLD USED IN THE BUSINESS. THEREFORE, PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : INTEREST PAID THEREON IS ALLOWABLE UND ER SECTION 37 OF THE ACT, IF NOT UNDER SECTION 36(1)(III) OF THE ACT. NO DISALLOWANCE CAN BE MADE , AS THE GOLD WAS BORROWED FOR BUSINESS PURPOSES. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT IF THE ASSESSEE HAS BORROWED LOAN INSTEAD OF TA KING GOLD AS LOAN AND PURCHASED GOLD THEREFROM TO AUGMENT STOCK OF GOLD TO BE USED IN THE BUSINESS, INTEREST ON THE LOAN WOULD HAVE BEEN ALLOWED UNDER SECTION 36(1)(III) OF THE ACT , AS THE CAPITAL WAS BORROWED. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT IN ANY CASE , INTEREST HA S TO BE ALLOWED. 6 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND FORCE IN THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSE E. UNDISPUTEDLY GOLD TAKEN AS LOAN WAS USED FOR THE BUSINESS PURPOSE AND IF THE INTEREST IS PAID AT A PARTICULAR RATE AFTER VALUING THE GOLD, INTEREST IS TO BE ALLOWED UNDER SECTION 37 OF THE ACT, IF NOT UNDER SECTION 36(1)(III) OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS PROPERLY EXAMINED THE ISSUE AND WE FIND NO INFIRMITY THEREIN. ACCORDINGLY, WE CONFIRM HIS ORDER ON THIS ISSUE. 7 . GROUND NO.2 IN I.T.A. NO.16/LKW/2013 RELATES TO THE DISALLOWANCE OF SALARY PAID TO PARTNERS IN THE CAPA CITY OF HUF. 8 . IN THIS REGARD, IT IS NOTICED THAT THE LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HAVING FOLLOWED THE ORDER OF THE TRIBUNAL IN I.T.A. NOS.230 & 231/LKW/2010 PERTAINING TO ASSESSMENT YEARS 2005 - 06 TO 2007 - 08. THE RELEVANT OB SERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: - 5(1) GROUNDS OF APPEAL NUMBERS 4 TO 6 RELATE TO AN ADDITION OF RS.8,40,000/ - MADE BY THE AO BY WAY OF DISALLOWANCE OF SALARY TO PARTNERS. PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : 5(2) THE ASSESSEE CLAIMED SALAR Y TO AMBUJA RASTOGI, HUF OF RS. 7,20,000/ - AND RAJ KISHORE RASTOGI, HUF OF RS. 1,20,000/ - AS PARTNERS. THE AO DISALLOWED THE SALARY OF RS. 8,4,000/ - AFTER EXAMINING BY OBSERVING THAT THERE WAS NO EMPLOYER - EMPLOYEE RELATIONSHIP. 5(3) THE APPELLANT HAS FILED WRITTE N SUBMISSIONS WHICH ARE PLACED ON RECORD. IT IS STATED THAT SALARY IS ALLOWABLE UNDER SECTION 40(B) OF THE ACT AS PER AMENDED LAW WITH EFFECT FROM 01.04.1989. IT IS STATED THAT THE SALARY WAS PAID TO PARTNERS WHO WERE REPRESENTING THEIR HUFS. 5(4) I HAVE E XAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT SIMILAR DISALLOWANCES WERE MADE IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2005 - 2006 TO ASSESSMENT YEAR 2007 - 2008. THE ISSUE OF ALLOWABILITY OF SALARY TO INDIVIDUAL REPRESENTING HIS HUF AS PARTNER HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT BY HON'BLE ITAT, LUCKNOW IN ITA NO. 230 AND 231/LKW/10 AT PARAGRAPH 6 OF THE ORDER DATED 03.08.2010 AND ITA NO. 113//LKW/11 AT PAR AGRAPH 8 OF THE ORDER DATED 19.08.2011. RESPECTFULLY FOLLOWING THE DECISIONS OF HON'BLE ITAT, LUCKNOW SUPRA, THE ADDITION OF RS. 8,40,000/ - MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPELLANT. 9 . SINCE THE LD. CIT(A) HAS DECIDED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL, WE FIND NO INFIRMITY THEREIN AND WE CONFIRM THE SAME. 10 . GROUND NO.3 IN I.T.A. NO.16/LKW/2013 AND GROUND NO.2 IN I.T.A. NO.17/LKW/2013 RELATE TO THE ADDITION MADE ON ACCOUNT OF FICTITIOUS LIABILITY OF THE CREDITORS. 11 . ON A CAREFUL PERUSAL OF THE ORDERS OF THE LD. CIT(A), WE FIND THAT THIS ISSUE WAS ALSO EXAMINED BY THE LD. CIT(A) IN THE LIGHT OF THE ORDER OF THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 8 - : TRIBUNAL IN I.T.A. NO.113/LKW/2011 RELATING TO ASSESSMENT YEAR 2007 - 08 AND FOLLOWING THE ORDER OF THE TRIBUNAL HAS LD. CIT(A) HAS DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: - 6(1) GROUNDS OF APPEAL NUMBERS 7(A) TO 7 (C) RELATE TO AN ADDITION OF RS. 5,83,224 / - MADE BY THE AO BY WAY OF DISALLOWANCE OF ORDER ACCOU NT INCLUDED IN SUNDRY CREDITORS. 6(2) THE AO EXAMINED THE ORDER ACCOUNT OF RS.5,83,224/ - AN FOUND THAT MOST OF THE EXPENSES WERE INCURRED IN CASH. THE NAMES AND ADDRESSES OF THE CONCERNED PARTIES COULD NOT BE PROVIDED BY THE ASSESSEE. THE AO DISALLOWED THE LIABILITY AS BEING FICTITIOUS. 6(3) THE APPELLANT HAS FILED WRITTEN SUBMISSIONS WHICH ARE PLACED ON RECORD. IT IS STATED THAT ORDER ACCOUNT IS A RUNNING ACCOUNT AND IS IN THE NATURE OF MISCELLANEOUS CUSTOMER ACCOUNT. EACH ENTRY IS VERIFIABLE WITH CORRESPO NDING ENTRY IN THE BILLS. 6(4) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT SIMILAR DISALLOWANCES WERE MADE IN THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2 007 - 2008. THE ISSUE OF ALLOWABILITY OF ORDER ACCOUNT HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT BY HON'BLE ITAT, LUCKNOW IN ITA NO. 113//LKW/11 AT PARAGRAPH 33 TO 39 OF THE ORDER DATED 19.08.2011. RESPECTFULLY FOLLOWING THE DECISIONS OF HON'BLE ITAT, LUCK NOW SUPRA, THE ADDITION OF RS.5,83,324/ - MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPELLANT. 12 . DURING THE COURSE OF HEARING, THESE FACTS WERE NOT CONTROVERTED BY THE REVENUE. THEREFORE, SINCE THE LD. CIT(A) HAS DECIDED THE ISSUE FOLLOWING THE ORDER O F THE TRIBUNAL, WE FIND NO INFIRMITY THEREIN. ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE . PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 9 - : 13 . GROUND NO.4 IN I.T.A. NO.16/LKW/2013 AND GROUND NO.3 IN I.T.A. NO.17/LKW/2013 RELATE TO THE DISALLOWANCE OF COMMISSION PAID, HAVING INVOKED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT AND IN THIS REGARD IT WAS CONTENDED THAT THE LD. CIT(A) HAS DECIDED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08. THE RELEVANT OBSERVATIONS OF THE LD. CIT( A) IN THIS REGARD ARE ALSO EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: - 8(1) GROUNDS OF APPEAL NUMBER 11(A) AND 11(B) RELATE TO ADDITIONS OF RS.2,90,083/ - MADE BY THE AO BY WAY OF DISALLOWANCE OUT OF COMMISSION ON SALES. THE AO FOUND THAT COMMISSION OF RS.2,90,083/ - WAS PAID TO SHRI ARPIT RASTOGI. THE AO FOUND THE COMMISSION EXCESSIVE AND DISALLOWED THE SAME UNDER SECTION 40A(2)(B) OF THE ACT. THE APPELLANT HAS FILED WRITTEN SUBMISSIONS WHICH ARE PLACED ON RECORD. IT IS STATED THAT COMMISSION HAS BEEN PA ID SINCE LAST DECADE AND WAS ALWAYS ACCEPTED. 8(2) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT SIMILAR DISALLOWANCES WERE MADE IN THE ASS ESSMENT ORDER FOR ASSESSMENT YEAR 2007 - 2008. THE ISSUE OF ALLOW ABILITY OF SALES COMMISSION HAS BEEN DECIDED IN FAVOUR OF THE APPELLANT BY HON'BLE ITAT, LUCKNOW IN ITA NO. 113//LKW/11 AT PARAGRAPH 21 TO 26 OF THE ORDER DATED 19.08.2011. RESPECTFULLY FOLLOW ING THE DECISIONS OF HON'BLE ITAT, LUCKNOW SUPRA, THE ADDITION OF RS.2,90,083/ - MADE BY THE AO IS DELETED GIVING RELIEF TO THE APPELLANT. 14 . DURING THE COURSE OF HEARING OF THE APPEAL, THIS FACTUAL ASPECT WAS NOT DISPUTED BY THE REVENUE. HOWEVER, THE LD. D. R. HAS SIMPLY PLACED RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER. 15 . HAVING CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS DECIDED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL IN PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 10 - : THE ASSESSEES OWN CASE FOR ASSESSMENT YE AR 2007 - 08 IN I.T.A. NO.113/LKW/2013. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND WE ACCORDINGLY CONFIRM THE SAME. 16 . GROUND NO.5 IN I.T.A. 16/LKW/2013 AND GROUND NO.4 IN I.T.A. NO.17/LKW/2013 RELATE TO THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER OUT OF INTEREST PAYMENT ON LOAN. 17 . ON PERUSAL OF RECORD, IT IS NOTICED THAT THIS ADDITION WAS MADE ON AD HOC BASIS AND WE THEREFORE FIND NO MERIT THEREIN. WE, HOWEVER, CAREFULLY EXAMINED THE ORDER OF THE LD. CIT(A) WHO HAS RIGHTLY ADJUDICATED THE ISSUE. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) IN THIS REGARD ARE EXTRACTED HEREUNDER: - 9(1) GROUNDS OF APPEAL NUMBER 12(A) RELATES TO ADDITION OF RS.12,653/ - MADE BY THE AO BY WAY OF DISALLOWANCE OUT OF INTEREST. THE ASSESSEE CLAIMED INTEREST P AYMENTS OF RS. 19,15,061/ - ON LOANS OF RS.1,40,47,115/ - . THE ASSESSEE ALSO HAD GIVEN LOAN AND ADVANCES OF RS.29,37,363/ - . THE AO DISALLOWED PROPORTIONATE INTEREST @12% AMOUNTING TO RS.12,653/ - . THE APPELLANT HAS FILED WRITTEN SUBMISSIONS WHICH ARE PLACED O N RECORD. IT IS STATED THAT INTEREST HAS BEEN PAID SINCE LAST DECADE AND WAS ALWAYS ACCEPTED. 9(2) I HAVE EXAMINED THE FACTS AND CIRCUMSTANCES OF THE CASE. I HAVE CONSIDERED THE FINDINGS OF THE AO AND THE SUBMISSIONS OF THE APPELLANT. I FIND THAT THE ASSES SEE MADE AN ADVANCE OF RS.29,37,363/ - OUT OF WHICH RS.28,31,919/ - IS INTEREST BEARING ADVANCE TO M/S LALA JUGAL KISHORE AND SONS, KANPUR ON WHICH INTEREST @12% CHARGED. INTEREST HAS NOT BEEN CHARGED ON AMOUNT OF RS.1,05,443/ - AS IT REPRESENTED BROUGHT FORW ARD TRADING ADVANCES ON WHICH THERE IS NO PROVISION FOR CHARGING OF INTEREST. I ALSO FIND THAT THE AO HAS NOT BEEN ABLE TO IDENTIFY SPECIFICALLY WHETHER ON THE DATE OF MAKING OF THE ADVANCE THE ASSESSEE DID NOT HAVE ITS OWN CAPITAL TO DEMONSTRATE THAT INTE REST BEARING LOANS HAVE BEEN GIVEN INTEREST FREE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 11 - : TO OTHER PARTIES AND THEREFORE THE PROPORTIONATE DISALLOWANCE OF INTEREST MADE BY THE AO IS NOT JUSTIFIED. THE ADDITION OF RS.12,653/ - IS DELETED GIVING RELIEF TO THE APPELLANT. 18 . SINCE WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 19 . IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION PAGE. SD/ - SD/ - [ A. K. GAR ODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH OCTOBER , 2014 JJ: 2409 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )