Sri Balaji Metal Industries , Hyderabad V. Asst. Commissioner of Income Tax, Circle-15(1), Hyderabad

ITA 1726/Hyd/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1874 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 04-12-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 20-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: BHAVESH R. VITHLANI
• Section: 201; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 172 6 /HYD/201 8 ASSESSMENT YEAR: 20 15 - 16 SRI BALAJI METAL INDUSTRIES, HY DERABAD. PAN A BIFS 1509 F VS. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 15(1), HYDERABAD. ( APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI B HAVESH R. VITHLANI REVENUE BY : SHRI NILANJAN DEY DATE OF HEARING : 0 4 / 1 2 /201 9 DATE OF PRONOUNCEMENT : 06 / 1 2 / 201 9 O R D E R PER V. DURGA RAO , J .M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 7 , DATED 19 / 0 6 / 201 8 , HYDERABAD FOR AY 20 15 - 16 . 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS IN RESPECT OF ADDITION M ADE BY THE AO ON ACCOUNT OF INTEREST PAID TO THE RELATED PARTIES, WHETHER TO BE CONSIDERED @ 12% OR 15%. 3. THE AO OBSERVED THAT THE ASSESSEE HAS PAID INTEREST TO OTHER PARTIES @ 12% WHEREAS THE INTEREST PAID TO THE RELATED PARTIES @ 15%. HE, THEREFORE, RESTRICTED THE INTEREST PAID TO THE RELATED PARTIES TO 12%. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE 2 ITA NO. 1726/HYD/2018 SRI BALAJI METAL INDUSTRIES, HYD. AUTHORITIES. THE CIT(A) CONFIRMED THE ACTION OF THE AO IN RESTRICTING THE INTEREST PAID TO RELATED PARTIES AT 12% BY OBSERVING AS UNDER: 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND FINDINGS O F THE ASSESSING OFFICER CAREFULLY. THE FACTUAL POSITION GIVEN BY THE ASSESSING OFFICER SEEMS TO BE NOT CORRECT. THOUGH THE ASSESSING OFFICER DISALLOWED RS.80,940/ - , THE REASONS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ARE NOT CLEAR. HOWEVER, IT IS SEEN THAT THE APPELLANT HAD PAID INTEREST @ 15% ON THE LOAN TAKEN FROM SANGEETA J VIRANI FOR RS.37,87,560/ - ON 10 - 6 - 2014 FOR A PERIOD OF 292 DAYS WHICH COMES TO RS . 4 ,54,407/ - AS AGAINST THE MARKET RATE OF INTEREST @ 12% AND THE DIFFERENTIAL INTEREST WAS DISALLOWED BY ASSESSING OFFICER U/S 40A (2)(B) O F THE I. T. ACT. IN THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT STATED THAT IT HAD BORROWED LOAN AT THE RATE OF 15% INTEREST FROM OTHER PERSONS AND SAME RATE OF INTEREST WAS PROVIDED TO SANGEET A J VIRANI AND HENCE - NO DISALLOWANCE CAN BE MADE. I HAVE PERUSED THE DETAILS OF THE RATE OF INTEREST PAID TO OTHER PARTIES. FOR EXAMPLE, THE APPELLANT HAD PAID INTEREST AT THE RATE OF 12% TO VIGHNHAR HOLDING PVT. LTD. ON THE LOANS TAKEN FROM THEM. THE CONF IRMATION LETTER GIVEN BY VIGNHAR HOLDING PVT. LTD. TO THE ASSESSING OFFICER VIDE THEIR LETTER DATED 24 - 10 - 2017 PROVIDING E RATE OF INTEREST AT THE RATE OF 12% IS MENTIONED BELOW: VIGHNHAR HOLDINGS PVT LTD (2013 - 2014) SRI BALAJI METAL INDUSTRIES (LOAN) LEDGER ACCOUNT 1 ST APRIL, 2013 TO 31 ST MARCH, 2014 DATE PARTICULARS VOCH. TYPE VOCH. NO. DEBIT CREDIT 10/12/2013 TO HDFC BANK LTD. A/C NO. 00502560002776 CH. NO. 000037, DT. 10/12/2013 PYMT - HDFC 4 30,00,000 11/12/2013 TO HDFC BANK LTD. A/C NO. 00502560002776 CH. NO. 000038, DT. 11/12/2013 PYMT. HDFC 5 20,00,000 13/12/2013 TO HDFC BANK LTD. A/C NO. 00502560002776 CH. NO. 000040, DT. 13/12/2013 HDFC 7 30,00,000 31/03/2014 TO INTEREST RECEIVED ON LOANS. BEING INTEREST PROVIDED @ 12% ON RS. JOURNAL 2,89,315 3 ITA NO. 1726/HYD/2018 SRI BALAJI METAL INDUSTRIES, HYD. 80,00,000/ - FOR THE PERIOD 10/12/2013 TO 31/03/2014 AS PER STATEMENT BY, TAX DEDUCTED AT SOURCE (AY 2014 - 15) JOURNAL 28,932 JOURNAL BEING TAX DEDUCTED AT SOURCE @10% ON RS. 2,90,959/ - INTEREST CHARGES 82,89,315 28,932 82,60,383 82,89,315 82,89,315 FROM THE ABOVE, IT IS VERY CLEAR THAT THE MARKE T RATE OF INTEREST IS 12%, WHEREAS THE APPELLANT HAD PAID INTEREST @ 15% TO ITS RELATIVES WHICH IS VERY EXCESSIVE. HENCE, THE DISALLOWANCE OF INTEREST MADE AT DIFFERENTIAL RATE OF 3% (15% - 12%) FOR 292 DAYS ON THE LOAN OF RS.37,87,660J - TAKEN FROM SANGEET A J VIRANI U / S 40A (2)(B) IS REASONABLE AND HENCE, THE SAME IS CONFIRMED. 5. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) AND UPHOLDING THE ORDER OF CIT(A) THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 6 TH DECEMBER , 201 9 . SD/ - SD/ - ( D. KARUNAKARA RAO ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 6 TH DECEMBER , 201 9 KV 4 ITA NO. 1726/HYD/2018 SRI BALAJI METAL INDUSTRIES, HYD. C OPY TO: - 1) M/S SRI BALAJI METAL INDUSTRIES, C/ O B. VITHLANI & CO.,CAS., 4 - 1 - 10/B - 12, SHEETAL, TILAK ROAD, ABIDS, HYDERABAD 500 0 01 . 2) AC IT, CIRCLE 15(1), ROOM NO. 545, 5 TH FLOOR, D - BLOCK, IT TOWERS, MASAB TANK, HYDERABAD. 3) CIT(A) 7 , HYDERABAD. 4) PR. CIT - 7 , HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE