The DCIT, Circle-5, Ahmedabad V. M/s. Rivera Polymers Pvt.Ltd., Ahmedabad

ITA 1624/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9814 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHASUDAN SRDR
• Assessee Lawyers: G C PIPARA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1624/AHD/2010 [ASSTT.YEAR: 2006-07] DCIT, CIRCLE-5, -VS- M/S. RIVIERA POLYMERS PVT. L TD. AHMEDABAD 203, N.R. HOUSE, OPP. AIR INDIA, ASHRAM ROAD, AHMEDABAD PAN NO.AABCR2901F (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K. MADHASUDAN, SR-DR ASSESSEE BY: SHRI G.C. PIPARA, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD IN APPEAL NO. C IT(A)-XI/653/08-09 DATED 17-02-2010. THE ASSESSMENT WAS FRAMED BY DCIT , CIRCLE-5, AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 12-12-2008 FOR ASSE SSMENT YEAR 2006-07. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT OF U/S.40A(2)(B) OF THE ACT FOR INTEREST EXPENSES. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- ITA NO.1624/AHD/2010 A.Y. 2006-07 DCIT, CIR-5 ABD V. M/S. RIVIERA POLYMERS P. LTD. PAGE 2 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHME DABAD HAS ERRED IN LAW AND O FACTS IN DELETING ADDITION OF RS.11,38 ,904/- MADE ON ACCOUNT OF DISALLOWANCE U/S.40A(2)(B). 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSEE HA S PAID INTEREST ON DEPOSITS AND CLAIMED THE SAME AS EXPENSES AT RS.11, 38,904/- PAID TO THE FOLLOWING PARTIES:- SR NO. NAME OF THE PERSON AMOUNT OF INTEREST PAID @ 12% DIFFERENCE 1. ABHILASH H BAJORIA 141870 47290 2. ABHISHSEK BAJORIA 89096 29699 3. ALPA PODAR 29804 9935 4. AMIT H BAJORIA 337691 112564 5. BABULA M RUNGTA 16782 5594 6. BABULAL M RUNGA (HUF) 17115 5706 7. DAKSH V BAJORIA 71139 23713 8. GITADEVI B RUNGTA 26619 8873 9. KRISHNAKUMAR PODDAR 126232 42077 10. MADANLAL RUNGTA 2320 773 11. MALTIDEVI SEKHSARIA 20061 6687 12. MOHINI H BAJORIA 223384 74461 13. MRS. KAMALA SHARMA 14844 4948 14. PARRY POLYPLAST 17174 5725 15. PRADIP R BHUTORIA 22192 7397 16. PREMA S RUNGTA 189307 63102 17. RAMSARUP SEKHASARIA 98286 32762 18. RASHMI RUNGTA 200890 66963 19. SACHI V BAJORIA 170967 56989 20. SANTOSHDEVI RUNGTA 133495 44498 21. SHARAD RUNGTA 42655 14218 ITA NO.1624/AHD/2010 A.Y. 2006-07 DCIT, CIR-5 ABD V. M/S. RIVIERA POLYMERS P. LTD. PAGE 3 22. SHRI MADANLAL RUNGTA (HUF) 71357 23786 23. SHYAM SUNDER M RUNGTA 175933 58644 24. SNETHA BHUTORIA 21748 7249 25. SUSHSMA BHUTORIA (GRIL) 34619 11540 26. SWETA B RUNGTA 20978 6993 27. UMA V BAJORIA 318009 106003 28. VEDIKA EQUITY CONSULTANCY PVT. LTD. 146007 48669 29. VINOD S BAJAORIA 581679 193893 30. VINOD S BAJORIA (HUF) 54459 18153 TOTAL 3416712 1138904 DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSI NG OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE VARIATION IN RATE OF INTERE ST PAID AT 8% TO 12% AND AS TO WHY A REASONABLE ESTIMATE OF DISALLOWANCE BE NOT MADE. THE AO WAS NOT CONVINCED BY THE REPLY OF THE ASSESSEE AS REGARDS T O DECIMATE IN THE RATE OF INTEREST AND HE DISALLOWED A SUM OF RS.11,38,704/- BY INVOKING OF SECTION 40A(2)(B) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) DELETED THE DISALLOWANCE BY GIVING FOLLO WING FINDING IN PARA-2.2 OF HIS APPELLATE ORDER:- 2.2 I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMIS SIONS FILED BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE DECISIONS, REFERRED TO ABOVE AND THE OBSERVATIONS O F THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IT IS SEEN THAT TH E LOANS RECEIVED BY THE APPELLANT ARE ADMITTEDLY FOR BUSINESS PURPOSES, WHI CH THE ASSESSING OFFICER HAS NOT DOUBTED. APPELLANTS CONTENTION THA T THE INTEREST PAID @ 8% TO M/S. TYPHOON FINANCIAL SERVICES LTD. WAS ON T HE TRADE DEPOSIT AND THEREFORE CANNOT BE CONSIDERED AS BENCH-MARK ST ANDS TO REASON. INTEREST PAID @ 12% IS REASONABLE COMPARED TO MARKE T RATE. A.O HAS NOT MADE OUT ANY CASE THAT THE INTEREST PAID WAS EX CLUSIVE OR UNREASONABLE IN TERMS OF SEC. 40A(2)(A). THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED AB OVE, I AM INCLINED TO ACCEPT THE ARGUMENTS ADVANCED BY THE AUTHORIZED REPRESENTATIVE. ITA NO.1624/AHD/2010 A.Y. 2006-07 DCIT, CIR-5 ABD V. M/S. RIVIERA POLYMERS P. LTD. PAGE 4 HENCE, THE A.O IS DIRECTED TO DELETE THE ADDITION M ADE BY HIM AT RS.11,38,904/-. THUS, THIS GROUND OF APPEAL STANDS ALLOWED. 4. WE FIND FROM THE ABOVE THAT THE ASSESSEE HAS PAI D INTEREST AT 8% TO 12%, WHICH IS VERY REASONABLE KEEPING IN MIND THE R ATE OF INTEREST IN BANKING INDUSTRY FOR GIVING LOANS. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN DELETING DISALLOWANCE FOR A REASONABLE PAYMENT OF INTEREST A ND ACCORDINGLY WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISS ED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS DAY OF 24 TH SEPT,2010 SD/- SD/- ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 24/09/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD