M/s. Dharamraj Jewellers, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 2025/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9281 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 23-06-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Depreciation
• Section: 234B

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI A.N.PAHUJA ITA NO.2025/AHD/2009 (ASSESSMENT YEAR : 2005-06 ) M/S DHARAMRAJ JEWELERS 5-6, NAVNIT PLAZA, NR. MUNICIAPL MARKET, C.G.ROAD, AHMEDABAD. VS. ACIT CIRCLE-10, AHMEDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY RANJAN, A.R. RESPONDENT BY : SHRI M.C.PANDIT, SR. D.R. ( (( ( )/ )/)/ )/ ORDER PER KARWA, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER OF CIT(A)-XVI, AHMEDABAD DATED 15.4.2009 RELATING TO A SSESSMENT YEAR 2005-06. 2. GROUND NO. 1 OF THE APPEAL READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN INVOKING THE PROVISIONS OF SECTION 40A(2) FOR DISALLOWING A PART OF I NTEREST PAID TO THE RELATED PARTIES AND FURTHER ERRED IN FI XING THE QUANTUM OF DISALLOWANCE AT RS.1,50,000. 3. SHRI VIJAY RANJAN, THE LEARNED COUNSEL FOR THE ASSESSE E SUBMITTED THAT FOR FINANCING ITS BUSINESS, ASSESSEE HAD TO BORROW MONE Y ON WHICH IT HAD PAID INTEREST. THE ASSESSEE HAD PAID INTEREST TO THE PARTIES COVERED BY SECTION 40A(2) @ 18%. THE ASSESSING OFFICER HAS NOTICED THAT INTEREST WAS PAID FROM 15% TO 18% TO THE PARTIES WHO ARE NOT CO VERED BY SEC. 40A(2). EVEN THEN DEPARTMENTAL OFFICERS HAVE HELD THA T INTEREST PAID AT 18% TO THE RELATED PARTIES IS HIGHER AND HAVE CONSEQUEN TIALLY ALLOWED 2 ONLY 15% WHICH HAS RESULTED IN A DISALLOWANCE OF RS. 1,50 ,000/-. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRME D BY THE CIT(A). WHILE CONFIRMING THE DISALLOWANCE OF RS.1,50,00 0/- THE CIT(A) HAS FOLLOWED HIS ORDER PASSED IN THE CASE OF PANCHTANTRA, THE DESIGNER JEWELLERS, 2, TIMES SQUARE, LAL BUNGALOW, CROSS ROAD, AHMEDABAD. SHRI VIJAY RANJAN, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE ORDER OF CIT(A) DATED 20.2.2009 PASSED IN THE CASE OF P ANCHTANTRA (SUPRA) WAS A SUBJECT MATTER OF ASSESSEES APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 24.7.2009 IN ITA N O.1469/AHD/2009 RELATING TO ASSESSMENT YEAR 2005-06 DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. ON THE OTHER HAND, SHRI M.C.PANDIT, TH E LD. D.R. STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF I.T.A.T. D-BENCH AHMEDABAD DATED 24.7 .2009 IN THE CASE OF PANCHTANTRA IN ITA NO.1469/AHD/2009 RELATING TO A SSESSMENT YEAR 2005-06. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE A S UNDER: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. LEARNED AR OF THE ASSESSEE CONTENDED BEFORE US THAT THE A SSESSEE HAS PAID INTEREST @18% NOT ONLY TO THE PERSONS COVERED U /S.40A(2) BUT ALSO TO PERSONS NOT RELATED TO THE ASSESSEE. WE FIND T HAT COMPARING THE RATE OF INTEREST PAID TO DIFFERENT DEPO SITORS AS DETAILED HI THE APPELLATE ORDER, THE LEARNED CIT(A) HAS OBSERVED THAT THE RATE OF INTEREST HI RESPECT OF ALL THE FAMIL Y MEMBERS IS 18% WHEREAS THE RATE OF INTEREST TO OTHER VARIES BETWEEN 7 %, 12%, 15% AND 18%. WE FIND FROM THE SAID DETAILS OF INTEREST THAT THE ASSESSEE HAS ALSO PAID INTEREST @18% ON LOANS/DEPOSITS TO OT HER PARTIES. THEREFORE, IN OUR CONSIDERED VIEW, THE INTER EST PAID @18% TO THE RELATIVES CANNOT BE SAID TO BE EXCESSIVE OR UNREASO NABLE. IT THE CONTENTION OF THE ASSESSEE THAT THE BANK INTEREST DUR ING THE RELEVANT PERIOD WAS 13.25% AND IT COMES TO NEARLY 15.2 5% AFTER TAKING INTO CONSIDERATION THE PROCESSING FEES ETC. HON'BLE SUPREME COURT HAS HELD THAT SECTION 40A(2)(A) CANNOT HAVE ANY APPLICATION, UNLESS IT IS FIRST HELD THAT THE EXPENDITURE WAS EXCESSIVE AND UNREASONABLE. IN THIS CASE BOTH THE DEPARTMENTAL AUTHOR ITIES BELOW 3 HAVE NOT BROUGHT ON RECORD ANY EVIDENCE WHICH WOULD IN DICATE THAT INTEREST PAID @18% AT THE TIME RELEVANT TIME EXCESSIVE AND UNREASONABLE. ON THE OTHER HAND, FACTS OF THE CASE INDI CATE THAT THE ASSESSEE HAS PAID INTEREST @18% TO NON-RELATIVE PARTIES AL SO. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CA SE, WE DO NOT FIND ANY MATERIAL TO HOLD THAT THE INTEREST P AID @18% TO THE RELATIVES IS EXCESSIVE AND UNREASONABLE AND THEREFORE, TH E INTEREST DISALLOWED U/S. 40 A(2) OF THE ACT IN THE INSTANT CASE I S NOT PROPER. WE, THEREFORE, DELETE THE SAID DISALLOWANCE AND THE AP PEAL OF THE ASSESSEE IN THIS REGARD. THE FACTS ARE SIMILAR AND, THEREFORE, RESPECTFULLY FOLLO WING THE ORDER OF THE TRIBUNAL PASSED IN THE CASE OF PANCHTANTRA (SUPRA), WE A LLOW THE GROUND RAISED BY THE ASSESSEE AND DELETE THE DISALLOWANCE OF RS.1, 50,000/-. 5. GROUND NO.2 OF THE APPEAL READS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE DEPARTMENTAL AUTHORITIES HAVE ERRED IN DISALLOWING PA RT OF TELEPHONE EXPENSES, VEHICLE EXPENSES AND DEPRECIATION AND , AT ANY RATE, THE DISALLOWANCES MADE ARE HEAVY AND DESE RVE TO BE DRASTICALLY REDUCED. 6. AFTER HEARING THE PARTIES WE FIND THAT WHILE DECID ING THE ISSUE, THE CIT(A) HAS FOLLOWED HIS ORDER PASSED IN THE CASE OF PANCHT ANTRA, THE DESIGNER JEWELLERS. THE TRIBUNAL VIDE ITS ORDER DATED 24.7.2009 HAS CONFIRMED THE ORDER OF THE CIT(A) IN THE CASE OF PANCHT ANTRA, THE DESIGNER JEWELLERS(SUPRA). THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: 6. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE TH ROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. THE LEARNED CIT(A) HAS OBSERVED IN HIS ORDER THAT THERE ARE THREE PARTNERS A ND 17 OTHER FAMILY MEMBERS. THEREFORE, PERSONAL USE OF TELEPHONE A ND VEHICLE CANNOT BE RULED OUT. IN SUCH VIEW OF THE MATTER, DISALL OWANCE OF 1/10 TH OUT OF TELEPHONE EXPENSES AND 1/6 TH OUT OF MOTOR CAR EXPENSES AND DEPRECIATION, IN OUR VIEW BEING NOT EXCESSIV E NEEDS NO INTERFERENCE. 4 RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL (SUP RA), WE HOLD THAT DISALLOWANCE OF 1/10 TH OUT OF TELEPHONE EXPENSES AND 1/6 TH OUT OF MOTOR CAR EXPENSES AND DEPRECIATION CANNOT BE CONSIDERED EXCESSIVE IN ANY MANNER WHATSOEVER. CONSEQUENTLY, WE DISMISS GROUND NO.2 OF THE APPEAL. 7. GROUND NO.3 OF THE APPEAL RELATES TO CHARGING OF I NTEREST U/S 234B OF THE I.T.ACT, 1961. AT THE TIME OF HEARING OF THE APPEAL SHRI VIJAY RANJAN, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT T HIS GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE AND WE HOLD ACCORDING LY. 8. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28.8 .2009. SD/- (A.N.PAHUJA) ACCOUNTANT MEMBER SD/- (H.L.KARWA) JUDICIAL MEMBER AHMEDABAD, DATED: 28.8.2009 PSP* COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.