The ITO, Ward-4(3), Ahmedabad V. ICALL (INDIA) LTD., Ahmedabad

ITA 1791/AHD/2007

• Counselvise Citation: 179120514 RSA 2007
• Duration Of Justice: 4 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-12-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: P M MEHTA
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) ITA NO. 1791/AHD/2007 A. Y.: 2003-04 THE INCOME TAX OFFICER, WARD 4(3), ROOM NO.105, 1 ST FLOOR, NAVJIVAN TRUST BUILDING, NAVJIVAN P.O., AHMEDABAD VS ICALL (INDIA) LTD., ADANI HOUSE, MITHAKALI SIX ROAD, NAVRANGPURA, AHMEDABAD PA NO. AAACI 8432 K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B. L. YADAV, DR RESPONDENT BY SHRI P. M. MEHTA, AR DATE OF HEARING: 13-12-2011 DATE OF PRONOUNCEMENT: 16-12-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VI II, AHMEDABAD DATED 20-02-2007 FOR ASSESSMENT YEAR 2003-04, CHALL ENGING THE DELETION OF ADDITION OF RS.6,10,823/- MADE ON ACCOU NT DISALLOWANCE OF EXCESS PAYMENT OF INTEREST. 2. THE DEPARTMENTAL APPEAL WAS DISMISSED VIDE ORDER DATED 11-09-2007 HOLDING TAX EFFECT TO BE LESS THAN THE P RESCRIBED LIMIT. HOWEVER, THE SAME ORDER WAS RECALLED ON MISC. APPLI CATION FILED BY THE REVENUE WHEREBY IT WAS CONTENDED THAT THE TAX E FFECT IS MORE THAN THE PRESCRIBED LIMIT. THE MISC. APPLICATION OF THE REVENUE WAS ALLOWED VIDE ORDER DATED 12-08-2011 AND THE DEPARTM ENTAL APPEAL WAS RE-FIXED FOR HEARING ON MERIT. ITA NO.1791/AHD/2007 THE I.T.O., WARD 4(3), AHMEDABAD VS ICALL (INDIA) L TD. 2 3. THE AO DISALLOWED INTEREST OUT OF INTEREST CLAIM OF RS.27.42 LACS HOLDING THAT THE PAYMENT OF INTEREST AT 22% WA S MORE AS INTEREST WAS PAID AT 15% TO ANOTHER PARTY DURING THE IDENTIC AL PERIOD HOLDING THAT THE CONCERNS WERE BELONGING TO THE SAME ADANI GROUP. THE AO CONSIDERED 17% ONLY AS FAIR AND EXCESS 5% WAS DISAL LOWED. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT PAYMENT OF INTEREST WAS MADE AS PER THE TERMS OF BORROWINGS WHICH WERE NEGO TIATED AND SETTLED AND NO AD HOC ADDITION SHOULD BE MADE. IT W AS CONTENDED THAT DISALLOWANCE COULD NOT BE MADE U/S 40A (2) (B) OF T HE IT ACT. THE LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSES SEE AND NOTED THAT NO NOTIONAL DISALLOWANCE COULD BE MADE BECAUSE CLAIM IS ALLOWABLE U/S 36(1) (III) OF THE IT ACT AND FURTHER NOTHING IS BROUGHT ON RECORD TO SHOW HOW EXCESSIVE INTEREST IS PAID. THE LEARNED CIT(A) FURTHER NOTED THAT TOTAL INCOME IS ASSESSED AT LOSS OF RS.768.57 LACS, THEREFORE, NO DESIGN COULD BE ATTRIBUTED IN PAYING INTEREST TO TH4E CREDITORS. ADDITION WAS ACCORDINGLY DELETED. 4. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT SINCE EXCESS INTEREST IS PAID, THEREFORE, DISA LLOWANCE WAS JUSTIFIED. ON THE OTHER HAND, THE LEARNED COUNSEL F OR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITI ES BELOW. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE AO NOTED THAT THE ASSESSEE HAS BORROWINGS FROM M/S. NILKANTH ENTERPRISES AND P AID INTEREST @ 15.10% AND THE ASSESSEE HAS FURTHER BORROWINGS FROM M/S. FORTUNE TRADELINK PVT. LTD. ON WHICH INTEREST @22% HAS BEEN PAID. IT WAS ITA NO.1791/AHD/2007 THE I.T.O., WARD 4(3), AHMEDABAD VS ICALL (INDIA) L TD. 3 SUBMITTED BEFORE THE AO THAT THESE ARE NOT RELATED PARTIES TO BE COVERED U/S 40A (2) (B) OF THE IT ACT AND THERE IS A HUGE LOSS TO THE ASSESSEE. THEREFORE, THE AO SHOULD NOT HAVE APPLIED THESE PROVISIONS AGAINST THE ASSESSEE. THE AO HAS NOT BRO UGHT ANYTHING ON RECORD AS HOW THE INTEREST WAS EXCESSIVE OR UNREASO NABLE AND PARTICULARLY WHEN THE PARTIES ARE NOT RELATED TO TH E ASSESSEE. FURTHER, THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT SI NCE THE ASSESSEE SUFFERED LOSS OF RS.768.57 LACS, THEREFORE, SMALL DISALLOWANCE WOULD BE HIGHLY UNJUSTIFIED BECAUSE NOTHING COULD BE ATTR IBUTED TO THE ASSESSEE TO JUSTIFY PAYMENT OF EXCESSIVE INTEREST. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THE DEPARTMENTAL APPEAL HAS NO MERIT AND IS DISMISSED. 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD