Smt. Manisha Kalani, Indore V. The DCIT, 1(1), Indore

ITA 162/Ind/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9720 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 10-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AVINASH GAUR A RS
• Keywords: Proportionate interest; Commercial expediency; Set aside
• Section: 143(3); 201; 44AB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE RAJPAL YADAV HON'BLE VICE PRESIDENT AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING ITA NO.162/IND/2020 ASSESSMENT YEAR:2014-15 SMT. MANISHA KALANI INDORE / VS. ITO - 1(3) INDORE (APPELLANT) (RE SPONDENT ) P.A. NO. ACBPK8197P ITA NO.163/IND/2020 ASSESSMENT YEAR:2014-15 SMT. NAMITA KALANI INDORE / VS. ITO - 1(3) INDORE (APP ELLANT) (RE SPONDENT ) P.A. NO. ABMPK6861C APPELLANT BY SHRI MANJIT SACHDEVA & AVINASH GAUR, AR S RE SPONDENT BY SHRI HARSHIT BARI, SR. DR DATE OF HEARING: 05.07.2021 DATE OF PRONOUNCEMENT: 20.07.2021 / O R D E R PER MANISH BORAD: THE ABOVE CAPTIONED APPEALS AT THE INSTANCE OF ASS ESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF LD. COMMI SSIONER OF SMT. MANISHA & NAMITA KALANI ITANO.162 & 163/IND/2020 2 INCOME TAX(APPEALS)-1, (IN SHORT CIT(A)), INDORE DATED 03.02.2020 WHICH IS ARISING OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 27.12.2016 & 28.12.2016 FRAMED BY ITO-1(3) INDORE. GROUNDS OF APPEAL IN ITANO.162/IND/2020 (MANISHA KA LANI) 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANC E MADE BY THE ASSESSING OFFICER OF RS.1173666/- ON ACCOUNT OF INT EREST EXPENSE. 2. THAT THE LD. CIT(A) FAILED TO APPRECIATE THE SUBMIS SION MADE BY THE APPELLANT. 3. THAT THE DISALLOWANCE MADE IS NOT BASED ON THE FACT S OF THE CASE AND NEEDS TO BE DELETED. GROUNDS OF APPEAL IN ITANO.163/IND/2020, (NAMITA KA LANI) 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING DISALLOWANC E MADE BY THE ASSESSING OFFICER OF RS.7,36,649/- ON ACCOUNT OF IN TEREST EXPENSE. 2. THAT THE LD. CIT(A) FAILED TO APPRECIATE THE SUBMIS SION MADE BY THE APPELLANT. 3. THAT THE DISALLOWANCE MADE IS NOT BASED ON THE FACT S OF THE CASE AND NEEDS TO BE DELETED. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE COMMON ISSUE RAISED IN THE INSTANT TWO APPEALS RELA TING TO DISALLOWANCE OF INTEREST EXPENSE IS SQUARELY COVERE D IN FAVOUR OF THE ASSESSEE BY DECISION OF THE HON'BLE INDORE BENC H VIDE ITANO.87/IND/2020 & 956/IND/2019 DATED 30.04.2021 IN THE CASE OF SMT. PADMA KALANI [WHO IS ALSO FROM THE SAME FAMILY AS SMT. MANISHA & NAMITA KALANI ITANO.162 & 163/IND/2020 3 THAT OF THE ASSESSEE(S)] DECIDED IN FAVOUR OF THE A SSESSEE ADJUDICATING COMMON ISSUE UNDER THE IDENTICAL FACTS . 3. LD. DEPARTMENTAL REPRESENTATIVE (DR) THOUGH SUPP ORTED THE FINDING OF BOTH LOWER AUTHORITIES COULD NOT CONTROV ERT THE SUBMISSIONS THAT THE COMMON ISSUE RAISED IN THE INS TANT APPEALS IS COVERED BY THE DECISION OF THIS TRIBUNAL IN CASE OF PADMA KALANI (SUPRA) . 4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THOUGH THE ASSESSEE(S) HAVE RAISE D VARIOUS GROUNDS OF APPEAL BUT THE COMMON ISSUE RELATES TO D ISALLOWANCE OF INTEREST EXPENSE CONFIRMED BY THE LD. CIT(A) WHI CH WERE MADE BY THE LD. AO, ON THE BASIS OF HIS OBSERVATION DURI NG THE COURSE OF SCRUTINY PROCEEDINGS REGARDING LOW RATE OF INTER EST CHARGED ON LOANS GIVEN IN SOME CASES AS COMPARED TO HIGHER RAT E OF INTEREST PAID ON THE LOAN TAKEN. 5. ON PERUSAL OF RECORDS, WE OBSERVE THAT COMMON FA CTS ARISE IN BOTH THE CASES ARE THAT THE ASSESSEE(S) TOOK LOANS AND PAID INTEREST RANGING FROM 12 TO 16.2 % BUT CHARGED THE INTEREST BETWEEN 6 TO 18% ON LOANS GIVEN. LD. AO DISALLOWED THE SMT. MANISHA & NAMITA KALANI ITANO.162 & 163/IND/2020 4 PROPORTIONATE INTEREST EXPENSE FOR THE LOANS ON WHI CH ASSESSEES RECEIVED THE INTEREST @ 6%. THUS DISALLOWANCE OF RS .11,73,666/- AND RS. 7,36,649 /- WAS MADE BY LD. AO IN THE CASE OF SMT. MANISHA KALANI & SMT. NAMITA KALANI, WHICH WAS SUBS EQUENTLY CONFIRMED BY THE LD. CIT(A). 6. WE FURTHER FIND THAT THE SIMILAR ISSUE OF DISALL OWANCE OF INTEREST EXPENSE IN CASE OF ANOTHER FAMILY MEMBER N AMELY PADMA KALANI CAME UP FOR ADJUDICATION BEFORE THIS TRIBUNA L IN ITANO.87/IND/2020 & 956/IND/2019 AND IN THIS CASE A LSO UNDER SIMILAR FACTS, BASIS OF DISALLOWANCE OF INTEREST EX PENSE WAS SAME. THIS TRIBUNAL AFTER CONSIDERING THE FACTS OF THE CA SE DECIDED IN FAVOUR OF THE ASSESSEE OBSERVING AS FOLLOWS: 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE SUBMISSION S MADE BY THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS FINDING OF BOTH THE LOWER AUTHORITIES. THE INSTANT APPEAL PERTAINS TO ASSESSMENT YEARS 201 3-14 AND 2014-15. THOUGH VARIOUS GROUNDS ARE RAISED BUT THE SOLE GRIE VANCE IS COMMONLY RAISED AGAINST THE DISALLOWANCE OF INTEREST EXPENDI TURE OF RS. 9,22,643/- AND RS.11,20,776/- FOR ASSESSMENT YEARS 2013-14 AND 2014-15 RESPECTIVELY. 10. WE OBSERVE THAT THE ASSESSEE IS INTO MONEY LEND ING BUSINESS AND HOLDS REGISTRATION CERTIFICATE FOR RUNNING THIS BUS INESS GIVEN BY THE LOCAL AUTHORITY. BOOKS OF ACCOUNTS ARE REGULARLY MAINTAI NED AND AUDITED U/S 44AB OF THE ACT. ASSESSEE IS REGULARLY ACCEPTING BO TH SECURED AND UNSECURED LOANS ON INTEREST AND GIVING LOANS AND AD VANCES FOR EARNING INCOME. DETAILS FOR PARTY WISE INTEREST RECEIVED A ND INTEREST PAID HAVE BEEN FILED BEFORE US. FOR ASSESSMENT YEAR 2013-14, WE FIND THAT THE ASSESSEE HAS CHARGED THE INTEREST IN THE RANGE OF 6 % TO 18% MORE SPECIFICALLY INTEREST @18% PER ANNUM HAS BEEN CHARG ED FROM KALANI SMT. MANISHA & NAMITA KALANI ITANO.162 & 163/IND/2020 5 INDUSTRIES PVT LTD, 6% PER ANNUM HAS BEEN CHARGED F ROM P.S. KALANI. IN THE DETAILS OF INTEREST PAID WE OBSERVE THAT ON THE UNSECURED LOANS THE RATE OF INTEREST PAID IS RANGING FROM 9% TO 15%. I NTEREST RANGING FROM 12% TO 15% HAS BEEN PAID TO THE BANK. REVENUE HAS N OT DOUBTED THE GENUINENESS OF ALL OTHER INTEREST EXPENSES AND INT EREST RECEIPTS DURING THE YEAR EXCEPT THOSE DISPUTED. NO ADVERSITY HAVE BEEN FOUND IN THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY THE ASSES SEE. ASSESSEE ALSO ENJOYS OVER DRAFT FACILITY FROM BANK OF BARODA AND ALSO ON 31.3.2014 THE OUTSTANDING BALANCE OF OVER DRAFT OF BANK OF BA RODA WAS RS.2,02,07,718/-. 11. THE ABOVE STATED FACTS CLEARLY DEMONSTRATES THA T ASSESSEE IS REGULARLY CARRYING OUT THE BUSINESS OF MONEY LENDIN G AND FOR BUSINESS AND COMMERCIAL EXPEDIENCY RATE OF INTEREST PAID AN D RECEIVED VARIES FROM CASE TO CASE. THE ASSESSEE IS VERY MUCH INDEPE NDENT TO CARRY OUT ITS BUSINESS ACTIVITY IN THE BEST OF HER INTEREST. CHARGING OF INTEREST AT HIGH RATE AND LOW RATE DEPENDS ON VARIOUS CIRCUMSTA NCES. IF THE FUNDS ARE IDLE AND DUE TO PRE COMMITMENTS THE INTEREST ON UNSECURED LOANS ARE TO BE PAID CONSISTENTLY THEN EVEN IF INTEREST RATE IS LOW AND IF THE PERSON FINDS THAT THE INVESTMENT IS SAFE, ONE CAN VERY WEL L GO FOR RECEIVING LOWER INTEREST RATE. IT IS A WELL-KNOWN FACT THAT IN BANKING INDUSTRIES ALSO PER ANNUM RATES OF INTEREST ON FIXED DEPOSIT N ORMALLY RANGE BETWEEN 5% TO 7% WHEREAS FOR THE CASH CREDIT LOANS AND OTHER BUSINESS LOANS THE BANKS ARE CHARGING MUCH HIGHER INTEREST. THERE CANNOT BE A STRAIGHT JACKET FORMULA THAT IF UNSECURED LOAN IS T AKEN @12% PER ANNUM ONE WILL HAVE TO CHARGE INTEREST MORE THAN 12% ON L OAN GIVEN. THE SAME MAY OR MAY NOT HAPPEN. IT IS UP TO THE BUSINESSMEN TO TAKE A WISE DECISION AT THE GIVEN POINT OF TIME AND THE RISK IN VOLVED IN GIVING LOAN ON INTEREST. IN FINANCE BUSINESS, ONE IS CONCERNED TO EARN PROFITS BUT MAJOR CONCERN IS OF RECEIVING THE PRINCIPLE AMOUNT BACK A S AND WHEN DUE TO BE RECEIVED. 12. IN THE INSTANT CASE THE TRANSACTIONS OF TAKING MONEY ON LOAN AND GIVING THEM AS ADVANCE OR LOAN FOR INTEREST IS BEIN G CARRIED OUT REGULARLY ROUND THE YEAR. IT SHOWS THAT INTEREST PAID ON SEC URED AND UNSECURED LOAN IS WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PUR POSE OF EARNING INCOME FROM LOANS AND ADVANCES. 13. THE ALLOWABILITY OF INTEREST PAID ON BORROWED C APITAL WHERE INTEREST BEARING FUNDS HAVE BEEN ADVANCED INTEREST FREE TO THE SISTER CONCERN WAS DELIBERATED UPON BY THE HONBLE SUPREME COURT IN S.A. BUILDERS (SUPRA) 288 ITR 1 (SC). THE RATIO LAID D OWN BY THE HONBLE SUPREME COURT IS AS UNDER:- IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORR OWED BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G., A SUBSIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION UNDER SE CTION 36(1)(III) OF THE INCOME TAX ACT, 1961, ONE HAS TO ENQUIRE WHETHE R THE LOAN WAS GIVEN BY THE ASSESSEE AS A MEASURE OF COMMERCIAL EX PEDIENCY. THE SMT. MANISHA & NAMITA KALANI ITANO.162 & 163/IND/2020 6 EXPRESSION COMMERCIAL EXPEDIENCY IS ONE OF WIDE I MPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURES F OR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRE D UNDER ANY LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS BUSINESS EXP ENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. 14. EXAMINING THE INSTANT CASE AND ON THE FACTS OF ABOVE JUDGMENT WE ARE OF THE VIEW THAT FIRSTLY THERE IS A CLEAR NE XUS OF INTEREST PAID AGAINST THE INCOME RECEIVED DURING THE YEAR, THE TR ANSACTIONS CARRIED OUT BY THE ASSESSEE ARE FOR THE COMMERCIAL EXPEDIENCY A ND FOR THIS PURPOSE THE RATE OF INTEREST PAID AND RECEIVED BY THE ASSE SSEE ARE VARYING FROM CASE TO CASE WHICH IS DULY EVIDENT FROM THE RECORDS PLACED BEFORE US AND THE AUDITED FINANCIAL STATEMENTS. UNDER GIVEN FACT S AND CIRCUMSTANCES OF THE CASE THE ACTION OF LD. A.O WAS NOT JUSTIFIED IN TAKING UP FEW OUT OF MANY ADVANCES GIVEN BY THE ASSESSEE TO ARBITRARILY LEVY INTEREST RATE ON LOAN GIVEN AT AN AGREED RATE OF INTEREST WHICH MAY BE LOWER THAN THE INTEREST RATE CHARGED FROM OTHER PERSONS OR NO INTE REST IS CHARGED FOR COMMERCIAL EXPEDIENCY PURPOSES. WE THUS SET ASIDE THE FINDING OF LD. CIA(A) AND DELETE THE DISALLOWANCE OF INTEREST AT R S.9,22,643/- AND RS.11,20,776/- MADE FOR ASSESSMENT YEARS 2013-14 & 2014-15 RESPECTIVELY. THE COMMON ISSUE RAISED BEFORE US IS DECIDED IN FAVOUR OF THE ASSESSEE. EFFECTIVE GROUNDS RAISED IN THESE TWO APPEALS ARE ALLOWED 7. ONGOING THROUGH THE ABOVE FINDING WE OBSERVE THA T THE SAME IS SQUARELY APPLICABLE ON THE ISSUES RAISED IN THE INS TANT APPEALS. LD. DR FAILED TO CONTROVERT AND DISTINGUISH THE FAC TS. WE, THUS, DECIDE TO TAKE A CONSISTENT VIEW, SINCE THE FACTS A ND ISSUE ARE IDENTICAL, SET ASIDE THE FINDING OF LD. CIT(A) AND DELETE THE DISALLOWANCE OF INTEREST EXPENSE AT RS.11,73,666/- IN CASE OF SMT. MANISHA KALANI AND RS.7,36,649/- IN CASE OF SMT. NA MITA KALANI. ALL THE EFFECTIVE GROUNDS RAISED IN THE INSTANT APP EALS STANDS SMT. MANISHA & NAMITA KALANI ITANO.162 & 163/IND/2020 7 ALLOWED. OTHER GROUNDS BEING GENERAL IN NATURE WHIC H NEEDS NO ADJUDICATION. 8. IN THE RESULT, BOTH THE APPEALS AT THE INSTANCE OF ASSESSEE(S) IN ITANO.162/IND/2020 & ITANO.163/IND/2020 ARE ALLOWED . ORDER WAS PRONOUNCED AS PER RULE 34 OF I.T.A.T., RU LES 1963 ON 20.07.2021. SD/- (RAJPAL YADAV) SD/- (MANISH BORAD) VICE PRESIDENT A CCOUNTANT MEMBER INDORE; DATED : 20/07/2021 PATEL/PS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSISTANT REGISTRAR, INDORE