ITO, BHILWARA V. M/s. Axon Global Pvt. Ltd., BHILWARA

ITA 195/JODH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4899 (ITAT-JODHPUR)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-09-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Permanent establishment; Fair market value; Wrong claim
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 195/JODH/2013 (A.Y. 2009-10) THE INCOME-TAX OFFICER VS M/S AXON GLOBAL PVT. LTD WARD 1 S 2, NEAR UCO BANK, BHILWARA NAGORI GARDEN, BHILWARA PAN NO. AAGCA 9003 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 25/09/2013. DATE OF PRONOUNCEMENT : 27/09/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE REVENUE FOR A.Y. 2009-10 IS FIL ED AGAINST THE ORDER OF LD. CIT(A), AJMER, DATED 31/01/2012. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY DERIVED ITS INCOME FROM TRADING AND MANUFAC TURING OF SYNTHETIC FABRIC. FOR THE A.Y. 2009-10, IT E-FILED ITS RETURN OF INCOME [ROI] ON 8.8.2009 DECLARING TOTAL INCOME OF RS. 10, 39,330/-. HOWEVER, 2 THE ASSESSMENT WAS MADE AT A TOTAL INCOME OF RS. 89 ,33,945/-. IN ARRIVING AT THE ABOVE COMPUTATION OF INCOME, THE A. O. HAS MADE THE FOLLOWING ADDITIONS:- INCOME AS PER RETURN OF INCOME RS. 10,39,330/ - ADD 1. DISALLOWANCE OF OVERSEAS COMMISSION RS. 76,81,286/ - 2. DISALLOWANCE U/S 40A(2)(B) RS. 1,18,014/ - 3. DISALLOWANCE OF PACKING MATERIAL EXPENSES RS. 43,392/ - 4. DISALLOWANCE OF LOAN COMMISSION RS. 32,370/ - 5. DISALLOWANCE OF INTEREST RS. 19,553/ - RS. 78,94,615/ - ASSESSED INCOME RS. 89,33,945/ - 2.1AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL A ND THE LD. CIT(A) ALLOWED PART RELIEF. THE ASSESSEE-COMPANY IS FURTH ER AGGRIEVED AND HAS RAISED THE FOLLOWING GROUNDS IN ITS SECOND APPE AL:- ' IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID.CIT(A), AJMER HAS ERRED IN :- 3 1. TREATING THE OVERSEAS PARTIES (TO WHOM THE ASS ESSEE SOLD GOODS) AS 'OVERSEAS COMMISSION AGENTS' WITHOUT APPRECIATING THE ASSESSEE'S OWN REPLY DATED 02.12.2 011; 2. TREATING THE OVERSEAS PARTIES (TO WHOM THE AS SESSEE SOLD GOODS) AS 'OVERSEAS COMMISSION AGENTS' WITHOUT APPRECIATING THE COPIES OF CONTRACTS / SALE INVOICE S PROPERLY; 3. TREATING THE OVERSEAS PARTIES (TO WHOM THE AS SESSEE SOLD GOODS) AS 'OVERSEAS COMMISSION AGENTS' WHEN TH E ASSESSEE FAILED TO EXPLAIN AS TO HOW THE BUYERS OF GOODS COULD ALSO BE THE COMMISSION AGENTS; 4. ALLOWING THE OVERSEAS COMMISSION TO THE LOCAL AGENTS AS WELL AS OVERSEAS BUYERS ON THE SAME SALE INVOICE WHEN IT IS A SIMPLE TRANSACTION OF SALE / PURCHASE; 5. IN HOLDING THAT THERE WAS NO LIABILITIES FOR TDS U/S 195 OF THE I.T. ACT, 1961 AS THE SERVICES WERE RENDERED OUTSIDE INDIA. AMOUNT WAS NOT TAXABLE AS IT DID NOT ACCRUE OR ARISE IN INDIA WHEREAS THERE WERE NO SO CALLED OVERSEAS A GENT AND NO SERVICES WERE RENDERED. THE SO CALLED OVERSE AS AGENTS WERE NOTHING BUT THESE WERE OVERSEAS BUYERS OF ASSESSEE'S GOODS; 6. IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF COMMISSION PAID TO THE SO CALLED OVERSEAS COMMISSIO N AGENT RELYING UPON THE DECISION OF SANJAY JAIN VS. DCIT, SPECIAL BENCH OF THE HON'BLE ITAT, AHMEDABAD IN ITA NO. 4 1533/AHM/2008 DATED 16.12.2009 AND NARENDRA D. MODH VS. ACIT, CIRCLE 2 IN ITA NO. 453/AHD/2009 AND AC IT VS. RACHNA EXPORTS IN ITA NO. 3791/AHM/2007. WHEN THESE DECISIONS ARE NOT APPLICABLE IN THE INSTANT CASE. I N THE CITED CASES, COMMISSION WAS TREATED AS ADDITIONAL I NCOME OF THE ASSESSEE BUT INSTANT CASE IS RELATED TO THE BOGUS CLAIM OF COMMISSION. IN THE CITED CASES, .COMMISSIO N WAS DECIDED AT THE TIME OF SALE CONTRACT ITSELF, BUT IN THE INSTANT CASE NOTHING MENTIONED ON THE CONTRACTS; 7. DELETING THE ADDITION OF RS. 1,18,014/- MADE BY THE AO U/S 40A(2)(B) HOLDING THAT THE ASSESSEE AS WELL AS ITS SISTER CONCERN ARE FALLING IN THE SIMILAR TAX BRACK ETS WHICH IS IRRELEVANT TO THE ISSUE; 8. DELETING THE ADDITION MADE BY THE AO U/S 40A(2)( B) OF THE I.T. ACT, 1961 OF RS. 1,18,014/- OBSERVING T HAT THE AO DID NOT CITE ANY INSTANCES THAT ON SIMILAR MARKE T CONDITIONS OF SIMILAR QUALITY OF THE YARN HIGHER PR ICE WAS PAID TO THE SISTER CONCERN THAN THE OUTSIDERS WITHO UT REMANDING THE CASE TO THE AO; 9. IN DELETING THE ADDITION OF RS. 19,553/- ON ACCO UNT OF DISALLOWANCE OF EXCESS INTEREST PAID TO TRADE CREDI TORS IGNORING THE FACT THAT THE ASSESSEE FAILED TO FURNI SH THE PAYMENT POLICY TO THE CREDITORS IN SUPPORT OF PAYME NT OF INTEREST @ 18% TO SOME TRADE PARTIES AND @ 21% TO O THER PARTIES; 5 10. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELE TE OR MODIFY THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING.' 2.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE MATERIAL ON RECORD WITH REFERENCE TO THE FACTS EMERGING FROM THE RECORDS. BOTH THE PARTIES HAVE REITERATED THEIR EARLIER STAND. THE LD. A.R. HAS FILED A LENGTHY PAPER BOOK ALONGWI TH A WRITTEN SUBMISSION, WHOSE COPIES WERE PROVIDED TO THE LD. D .R. AS PER RULES. 2.3 THE FIRST INTER-CONNECTED ISSUE HAS BEEN RAISED VIDE GROUND NOS. 1 TO 6. THE FACTS OF THIS ISSUE ARE THAT DURING TH E YEAR, IN THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS DEBITED AGENCY C OMMISSION OF RS. 23,35,975/- AND OVERSEAS COMMISSION OF RS. 76,81,28 6/-. THE AGENCY COMMISSION IS STATED TO HAVE BEEN PAID TO THE LOCAL AGENTS FOR THEIR SERVICES PROVIDED FOR INTRODUCING TO OVERSEAS PARTI ES WHO ARE BIG ADATIAS, TO WHOM ASSESSEE-COMPANY SELLS GOODS ON PR INCIPAL TO PRINCIPAL BASIS. IN THE INVOICES FROM THE GROSS AM OUNT OF SALES A DEDUCTION UPTO 12.5% HAS BEEN FOUND GIVEN IN THE NA ME OF COMMISSION. THE ASSESSEE RECEIVED NET OF THE INV OICE PRICE. IN ITS BOOKS AFTER RECORDING GROSS SALES, THE DEDUCTION IS SEPARATELY RECORDED AS OVERSEAS COMMISSION. THE A.O. HAS ACCEPTED LO CAL COMMISSION 6 PAID BUT HAS DISALLOWED OVERSEAS COMMISSION OF RS. 76,81,286/- U/S 37(1) OF THE ACT WITH THE FOLLOWING REASONS: I) NO SERVICES HAVE BEEN RENDERED BY THE OVERSEAS AGENTS IN AS MUCH AS NO DETAILS/DOCUMENTS OF FURTHE R SALES BY THESE AGENTS HAVE BEEN FURNISHED BY THE ASSESSEE . II) FROM THE PERUSAL OF SAMPLE CONTRACT NOTES FURNI SHED BY THE ASSESSEE WITH OVERSEAS AGENTS IT IS EVIDENT THAT THE SAME IS A CONTRACT FOR PURCHASE AND SALE OF GOODS A ND COMMISSION HAS BEEN MERELY DEDUCTED FROM THE SALES INVOICE AT A FLAT RATE WITHOUT RENDERING OF ANY SE RVICES BY THESE OVERSEAS AGENTS. III) IN ALL SUCH CONTRACT NOTES, NAME OF THE INDIAN AGENTS WHO INTRODUCED THE ASSESSEE TO THESE OVERSEAS PARTI ES HAVE BEEN WRITTEN FOR WHICH COMMISSION HAS ALREADY BEEN PAID BY THE ASSESSEE TO THE INDIAN AGENTS. THUS, FOR TH E SAME INVOICE, COMMISSION HAS BEEN PAID TO LOCAL AGENTS A S WELL AS OVERSEAS AGENTS. THE A.O. HAS NOT ACCEPTED THE DECLARATION OF THE OV ERSEAS PARTIES THAT THEY DO NOT HAVE ANY PERMANENT ESTABLISHMENT [PE] I N INDIA. 2.4 AS AGAINST THE ABOVE, THE LD. CIT(A) HAS ALLOW ED THIS CLAIM OF THE ASSESSEE WITH THE AID OF THE FOLLOWING REASONS: 7 (I) IT IS APPARENT THAT THE SALE PROCEEDS HAVE BEE N RECEIVED NET OF THE COMMISSION EXPENSES AND OVERSEA S COMMISSION AGENT/BUYER IS NO MORE LIABLE TO MAKE AN Y PAYMENTS TO THE ASSESSEE AGAINST THE SALES. THE ASS ESSEE IS CONCERNED ONLY WITH THE AMOUNT RECEIVED AGAINST THE SALE AND NOT WITH FURTHER SALES MADE BY THE OVERSEAS COMMISSION AGENT/BUYER. (II) IN SIMILAR CIRCUMSTANCES, WHERE THE NET SALES (AFTER DEDUCTING OVERSEAS COMMISSION) WAS SHOWN BY THE ASS ESSEE, ADDITION MADE ON ACCOUNT OF COMMISSION INCOME WAS DELETED BY HON'BLE IT AT AHMEDABAD IN ITANO. 1533/AHD./2008 ORDER DT. 16.12.2009 IN CASE OF SH. SANJAY JAIN VS. DCIT. THIS DECISION WAS FOLLOWED BY HON'BL E ITAT IN ITA NO. 453/AHD./2009 IN CASE OF SH. NARENDRA D. MO DH VS. ACIT AND IN ITA NO. 3791/AHD./2007 IN CASE OF ACIT VS. RACHNA EXPORTS AS CITED BY THE APPELLANT. (III) AS REGARD THE DISALLOWANCE ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE, AO HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE THAT OVERSEAS PAYMENTS WERE MADE TO NR'S. HOWEVER, AS PER THE ASSESSMENT ORDER ITSELF, IT IS APPARENT THAT ASSESSEE HAD SUBMITTED THE PROOF OF THE RESIDE NTIAL STATUS OF THE OVERSEAS AGENTS LIKE BANK PAYMENT ADV ICE OF THE FOREIGN BANKER, TELEPHONE BILL, COMMERCIAL REGI STER ETC. THE REJECTION OF THE SAID DOCUMENTS CANNOT BE UPHELD WITHOUT ANY CONTRARY FINDINGS BY WAY OF ENQUIRY PARTICULARLY WHEN CONTRACTS FOR SALE, COPY OF SHIPP ING BILLS 8 FOR EXPORT, BANK CERTIFICATE OF EXPORT AND REALIZAT ION ARE ON RECORD. ASSESSEE HAS ALSO SUBMITTED THE CERTIFIC ATES ATTESTED BY THE SYNTHETICS & RAYONS TEXTILE EXPORT PROMOTION COUNCIL AND THE ALL INDIA EXPORTERS CHAMB ERS STATING THAT THE IMPORTERS/OVERSEAS AGENTS ARE NOT REGISTERED WITH THE ROC AND DO NOT HAVE PE IN INDIA . ALL THESE DOCUMENTS CANNOT BE REJECTED MERELY BY STATIN G THAT RESIDENCY CERTIFICATES HAVE NOT BEEN SUBMITTED. (IV) THE COMMISSION INCOME OF THE NON-RESIDENT IS N OT CHARGEABLE TO TAX IN VIEW OF CIRCULAR NO. 23 DT. 23 .07.1969 AND CIRCULAR NO. 786 DT. 07.02.2000. CIRCULAR NO. 7 DT. 22.10.2009 CANNOT BE APPLIED RETROSPECTIVE TO MAKE IT APPLICABLE TO PAYMENTS MADE BEFORE THAT DATE. FURTH ER, IT IS CLEAR FROM THE DECISION OF HON'BLE SUPREME COURT IN CASE OF G.E. TECHNOLOGY CENTRE VS. CIT DT. 09.09.2010 TH AT TDS LIABILITY ARISES ONLY WHEN ANY SUM CHARGEABLE TO TA X UNDER THE ACT I.E. U/S 4, 5 AND 9 OF THE I.T. ACT IS PAID TO A NON RESIDENT. IN THE PRESENT CASE, THE SERVICES ARE REN DERED OUTSIDE INDIA AND AMOUNT IS NOT TAXABLE AS IT DOES NOT ACCRUED OR ARISE IN INDIA. THUS, IT IS HELD THAT TH ERE WAS NO LIABILITY FOR DEDUCTION OF TAX AT SOURCE U/S 195 OF THE I.T. ACT ON THE OVERSEAS PAYMENTS MADE TO THE NR COMMISS ION AGENTS. ACCORDINGLY, NO DISALLOWANCE U/S 40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE CAN BE MADE IN THE APPEL LANT'S CASE. 9 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE I N AGREEMENT WITH THE FINDING OF THE LD. CIT(A). THE ASSESSEE HAS BE EN EXPORTING ITS GOODS TO THE NON-RESIDENTS INTRODUCED TO IT BY LOCA L AGENTS ON COMMISSION BASIS. THE MODUS OF DRAWING INVOICES AN D RECORDING THE TRANSACTION IN THE BOOKS HAS BEEN STATED ABOVE. IN FACT, THIS AMOUNT REPRESENTS A DISCOUNT GIVEN TO THE PURCHASES AND NO T A BUSINESS COMMISSION. ONCE THE EXPORT INVOICE IS RAISED AND THE GOODS ARE DELIVERED, THE SALE TRANSACTION IS COMPLETE. THESE TRANSACTIONS ARE FOUND TO BE ON PRINCIPAL TO PRINCIPAL BASIS. THERE IS NO ELEMENT OF AGENCY TO ATTRACT THE PROVISIONS OF SECTION 194H. THE OVERSEAS PARTIES DO NOT SELL THE GOODS AS AGENTS OF THE ASSE SSEE-COMPANY. THE ASSESSEE IS NOT CREDITING THE PERSONAL ACCOUNTS OF THE OVERSEAS PARTIES. IT IS A SETTLED PRINCIPLE OF LAW THAT EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNT IS NOT A DECISIVE OR A CONCLUS IVE FACTOR IN ASCERTAINING THE INCOME OR CLAIMING THE EXPENDITURE . THEREFORE, NO SUCH DISALLOWANCE U/S 37(1) CAN BE MADE WITHOUT APP RECIATING THE REAL NATURE OF THE ENTRIES MADE IN THE BOOKS OF ACCOUNT. THE DECISIONS RELIED ON BY THE LD. CIT(A) ARE ON THE IDENTICAL FA CTS AND ARE APPLICABLE TO THE FACTS OF THIS CASE. THEREFORE, THE LD. CIT( A) HAS CORRECTLY DELETED THE IMPUGNED ADDITION. THUS, GROUND NOS. 1 TO 6 CANNOT BE ALLOWED AND ARE DISMISSED. 10 4. GROUND NOS. 7 AND 8 OF THE REVENUES APPEAL CAN BE DECIDED IN ONE GO. THE FACTS OF THESE GROUNDS ARE THAT THE AS SESSEE-COMPANY HAD PURCHASED YARN WORTH RS. 63,45,267/- AND FINISHED F ABRIC WORTH RS. 54,56,083/- TOTALING TO RS. 1,18,01,350/- FROM A CO MPANY NAMED M/S PSL INTERNATIONAL. THIS IS A COMPANY AS SPECIFIED U/S 40A(2)(B) OF THE ACT. THEREFORE, THE A.O. DEMANDED JUSTIFICATION OF THESE TRANSACTIONS OF PURCHASES WITH PROOF. THE ASSESSEE-COMPANY REPL IED VIDE LETTER DATED 24.8.2011 AND ALSO FURNISHED A COMPARATIVE RA TE CHART AT WHICH YARN IN PURCHASED FROM M/S PSL INTERNATIONAL VIS A VIS FROM OTHER PARTIES. AS PER THIS CHART THE AVERAGE RATE OF RS. 125/- PER KG AT WHICH YARN IS PURCHASED FROM M/S PSL INTERNATIONAL IS COM PARABLE WITH THE RATE RANGING BETWEEN RS. 121.15 PER KG TO RS. 163.8 4 PER KG. AT WHICH PURCHASES WERE MADE FROM THE UNRELATED PARTIES. RE GARDING FINISHED FABRIC THE ASSESSEE PRODUCED ITS OWN MANUFACTURING SHEET SHOWING THE PERCENTAGE OF SHRINKING AND VALUE OF LOSS TO JUSTIF Y THE REASONABLENESS OF RATE PAID TO M/S PSL INTERNATIONAL P. LTD. BUT THE A.O. HAS REJECTED THE ASSESSEES SUBMISSIONS BY OBSERVING AS UNDER: (I) PURCHASES OF YARN FROM M/S PSL INTERNATIONAL @ RS. 125/KG IS AT A HIGHER RATE AS COMPARED TO FEW PURCH ASES MADE FROM OTHER PARTIES AT LOWER RATES I.E. @RS.L24 .04/KG AND RS.121.15/KG. 11 (II) IN RESPECT OF FINISHED FABRIC, ASSESSEE HAS NO T SUBMITTED ANY EVIDENCE TO SUBSTANTIATE THE % OF SHR INKAGE TAKEN BY IT IN THE COST SHEETS @6.75%. IF THE % OF ACTUAL SHRINKAGE WOULD COME LESS THAN 6.75% AS TAKEN BY TH E ASSESSEE, THEN SURELY THE COST ARRIVED THROUGH THE COST SHEET WILL BE REDUCED RESULTING IN THE FACT THAT TH E RATE CHARGED BY THE SISTER CONCERN IS HIGHER THAN THE RA TE AS PER ASSESSEE'S SHEET. THUS HE HAS DISALLOWED A SUM OF RS. 1,18,014/- BEIN G 1% OF PURCHASES OF RS. 1,18,01,350/- MADE FROM M/S PSL INTERNATIONA L P. LTD BY CONSIDERING IT AS EXCESSIVE AND UNREASONABLE TO THA T EXTENT. 4.1 AS AGAINST THE ABOVE, THE LD. CIT(A) HAS HELD A S UNDER: I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT AS REGARDING T HE YARN PURCHASE OF RS. 63,45,267/-, IT WAS EXPLAINED BY TH E ASSESSEE THAT FROM THE OUTSIDE PARTIES ASSESSEE HAS PURCHASED YARN @ RS. 121.15 TO RS. 163.84 PER KG WH ILE AVERAGE RATE OF PURCHASES FROM SISTER CONCERN IS RS . 125 PER KG. THE AO HIMSELF HAS ACCEPTED THAT PURCHASE R ATE FROM OUTSIDE PARTIES IT WAS FOUND TO BE ON THE HIGH ER SIDE IN VARIOUS CASES. THERE ARE NO INSTANCES CITED THAT ON SIMILAR MARKET CONDITIONS FOR SIMILAR QUALITY OF TH E YARN, HIGHER PRICE HAS BEEN PAID TO THE SISTER CONCERN TH AN THE 12 OUTSIDERS. SO, NO ADHOC DISALLOWANCE IN THIS ACCOUN T IS SUSTAINABLE. FURTHER, AS REGARDING THE FINISHED FABRIC PURCHASE, ASSESSEE HAD FURNISHED ITS OWN COST WORKING FOR THE COST OF THE FABRIC SHOWING SHRINKAGE @ 6.57% BASED ON THE CHALL ANS. THE AO HAS REJECTED THE FIGURE OF SHRINKAGE WITHOUT ANY BASIS OR COMPARATIVE CASE. IN ABOVE CIRCUMSTANCES, IT CANNOT BE HELD THAT ASSESSEE HAS PAID HIGHER PRICE TO ITS SISTER CONCERN THAN WHAT WAS THE COST TO THE ASSESS EE FOR PRODUCING THE SIMILAR QUALITY OF THE FINISHED FABRI C. THE ASSESSEE'S CONTENTIONS ARE ALSO SUPPORTED BY THE FA CT THAT ASSESSEE AS WELL AS ASSESSEE'S SISTER CONCERN I.E. PSL INTERNATIONAL ARE FALLING IN THE SIMILAR TAX BRACKE T. 4.2 AFTER HEARING BOTH THE PARTIES WHO HAVE REITERA TED THEIR ARGUMENTS WE HAVE FOUND THAT THE COMPARATIVE CHART OF YARN PURCHASED FROM M/S PSL INTERNATIONAL AT AN AVERAGE RATE OF RS. 125/- PER KG IS SUPPORTED BY COPIES OF INVOICES. IT IS N OTICED THAT THE PURCHASES FROM M/S PSL INTERNATIONAL IS AT THE PREV AILING MARKET RATE. THUS THE RATE AT WHICH PURCHASE OF YEARN IS MADE FR OM M/S PSL INTERNATIONAL P. LTD IS COMPARABLE TO THE RATE AT W HICH PURCHASES ARE MADE FROM THIRD/OTHER PARTIES. THE ADHOC DISALLOWA NCE AT THE RATE OF 1% CANNOT BE APPROVED IN THE GIVEN FACTS AND THE CI RCUMSTANCES OF THE CASE. THE A.O. HAS NOT GIVEN A FINDING THAT THE P AYMENT MADE BY THE 13 ASSESSEE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS. THIS OPINION HAS TO BE FRAMED BEFORE INVOKING SECTION 40A(2)(A) OF THE ACT. IN THIS REGARD, THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF UPPER INDIA PUBLI SHING HOUSE [P] LTD VS. CIT IS RELEVANT. IN VIEW OF THIS OBSERVATION, WE HAVE TO DISMISS GROUND NOS. 7 & 8 OF REVENUES APPEAL. 5. THE FACTS APROPOS GROUND NO. 9 OF REVENUES APPE AL ARE THAT DURING THE YEAR, THE ASSESSEE-COMPANY HAS DEBITED I NTEREST EXPENSES OF RS. 46,18,426/- UNDER THE HEAD INTEREST PAID TO OTHERS WHICH ALSO INCLUDE INTEREST PAID TO THE TRADE PARTIES [UPTO 30 DAYS] @ 19% AMOUNTING TO RS. 2,06,172/- AND INTEREST PAID TO TR ADE PARTIES [BEYOND 30 DAYS @ 21% AMOUNTING TO RS. 1,36,874/-. THE A.O . HAS DISALLOWED THE INTEREST EXCEEDING 18% WHICH COMES TO RS. 19,53 3/- WITH THE REASONING THAT INTEREST @ 18% HAD BEEN PAID TO SOME OF THE TRADE PARTIES. HE HAS ALSO OBSERVED THAT THE ASSESSEE-CO MPANY HAS FAILED TO FURNISH THE POLICY OF THE PAYMENT OF INTEREST ETC. TO CREDITORS, AND THEREFORE, HAS DRAWN SUPPORT FROM THIS INSTANCE. H OWEVER, THE LD. CIT(A) HAS DELETED THIS ADDITION. 14 5.1 BEFORE US, BOTH THE PARTIES HAVE REITERATED THE IR EARLIER ARGUMENTS. WE HAVE FOUND THAT THE ASSESSEE-COMPANY HAS EXPLAINED THAT WHERE PAYMENT IS MADE WITHIN 30 DAYS INTEREST IS PAID @ 18% AND IN OTHER CASES, INTEREST IS PAID @ 21%. THIS FACT HAS NOT BEEN DISPUTED BY THE REVENUE. THE RATE OF INTEREST CHARGEABLE FO R DELAYED PAYMENTS ARE MENTIONED IN THE INVOICES ITSELF. SO, IN OUR C ONSIDERED OPINION, THIS CLEARLY ESTABLISHES PAYMENT POLICY OF THE ASSE SSEE-COMPANY. ACCORDINGLY, WE DO NOT FIND ANY FALLACY IN THE FIND ING OF THE LD. CIT(A) WHICH WARRANTS APPROVAL BY US. WE CONFIRM HIS FIND ING AND CANNOT ALLOW GROUND NO. 9 OF THIS APPEAL. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 27 TH SEPTEMBER, 2013. SD/- SD/- (N.K.SAINI) [HARI OM MARATH A] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH SEPTEMBER, 2013. VL/- 15 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR