AEP Company, Vallabh Udyognagar V. The DCIT, Anand Circle, Anand

ITA 1708/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0979 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 10-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 1708/AHD/2017 / ASSESSMENT YEAR: 2013-14 AEP COMPANY PLOT NO.108, G|IDC V.U. NAGAR 388 121. VS DCIT, ANAND CIR. ANAND. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI LALIT P. JAIN, SR.DR / DATE OF HEARING : 22/03/2019 /DATE OF PRONOUNCEMENT : 25 03/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)- 4, VADODARA DATED 5.4.2017 PASSED FOR THE ASSTT.YEAR 2013-14. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO RS.1,10,000/-. 3. DESPITE SERVICE OF NOTICE, NONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. ITA NO.1708/AHD/2017 - 2 - 4. WITH THE ASSISTANCE OF THE LD.DR, WE HAVE GONE T HROUGH THE RECORD CAREFULLY AND PROCEED TO DECIDE THE APPEAL EX PARTE QUA THE ASSESSEE- APPELLANT. 5. IT EMERGES OUT FROM THE RECORD THAT THE ASSESSEE HAS TAKEN LOANS FROM THREE PERSONS VIZ. DIPTIBEN K. SHAH OF RS.67,5 00/-; PUSHPABEN R. SHAH, RS.15,000/-; AND SHRI VISHNUBHAI P. PATEL OF RS.2,47,000/-. IT HAS PAID INTEREST AT THE RATE OF 15%. THE LD.AO WAS OF THE VIEW THAT IN FINANCIAL YEARS 2010-11, 2011-12 AND 2012-13 INTERE ST WAS PAID AT THE RATE OF 10% WHILE THE ASSESSEE HAS PAID INTEREST AT THE RATE OF 15% IN THIS ASSESSMENT YEAR. ACCORDINGLY, HE DISALLOWED EXCESS PAYMENT OF 5% AND MADE ADDITION OF RS.1,10,000/-. 6. ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIRC UMSTANCES, WE ARE OF THE VIEW THAT ACTION AT THE END OF THE LD.REVENU E AUTHORITIES ARE TOTALLY UNJUSTIFIED. IT IS FOR THE ASSESSEE TO DEC IDE, AT WHAT RATE IT HAS TO OBTAIN THE FINANCE. IF UNDUE FAVOUR IS BEING EXTEN DED TO ANY PERSON, OVER AND ABOVE MARKET RATE, THEN THE AO CAN MAKE DI SALLOWANCE. IN OTHER WORDS, IF THE RATE OF INTEREST PAID BY THE AS SESSEE TO THESE THREE INDIVIDUALS AT 15% EXCEEDED THE INTEREST RATE PREVA ILING IN THE MARKET, THEN PROBABLY, THE AO COULD HARBOR A BELIEF THAT IT WAS NOT FOR THE PURPOSE OF THE BUSINESS. THE ASSESSEE HAS DEMONSTR ATED THAT THE INTEREST RATE GIVEN TO THE BANK FOR WORKING-CAPITAL WAS AT 1 4.50%. THE LOANS TAKEN FROM THE INDIVIDUALS ARE UNSECURED LOANS WHER E IT WAS NOT REQUIRED TO EXECUTE GUARANTEE DOCUMENTS ETC. THE A O HAS JUST COMPARED THE RATE OF INTEREST FROM EARLIER YEARS. RATHER HIS ANGLE OF INQUIRY SHOULD BE, WHAT IS THE MARKET RATE AVAILABL E DURING THIS YEAR, AND IF THE ASSESSEE HAS GIVEN OVER AND ABOVE THE MA RKET RATE, THEN THE ITA NO.1708/AHD/2017 - 3 - AO COULD DISALLOW THE SAME. BOTH THE REVENUE AUTHO RITIES HAVE FAILED TO APPRECIATE THIS ASPECT. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE ADDITION. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 25 TH MARCH, 2019. SD/- SD/- (WASEEM AHMED) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER