Ram Murti Jagdish Raj, Kanpur V. Income Tax officer-3(3) , Kanpur

ITA 209/LKW/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3247 (ITAT-LUCKNOW)
• Duration Of Justice: 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 02-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW SMC BENCH, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NOS.209 & 277/LKW/2013 ASSESSMENT YEARS:2006-07 & 2007-08 RAM MURTI JAGDISH RAJ 48/209, GENERAL GANJ KAN P UR V. ITO 3(3) KANPUR PAN:AAHFR16030 ( A PP ELLANT ) ( RES P ONDENT ) A PP ELLANT B Y : SHRI. RAKESH GAR G , ADVOCATE RESPONDENT BY: SHRI. ALOK MITRA, D.R. DATE OF HEARING: 12.06.2013 DATE OF P RONOUNCEMENT: 24.07.2013 O R D E R THESE APPEALS ARE PREFERRED BY TH E ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) ON A COMMON GR OUND THAT THE LD. CI T(A) HAS ERRED IN UPHOLDING THE APPLICATION OF PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALL ED IN SHORT THE ACT') A ND ALSO UPHOLDING THAT THE RATE OF INTEREST @ 18% PAID ON UNS ECURED LOAN TAKEN BY THE FIRM WAS EXCESSIVE AND HELD THAT ONLY 12% WAS REASONABLE RATE. 2. THE FACTS IN BRIEF ARE THAT THE AS SESSEE HAS PAID INTEREST @ 18% PER ANNUM ON UNSECURED LOAN OBTAINED FR OM THE PERSONS NOTIFIED UNDER SECTION 40A(2)(B) OF THE ACT. THE ASSESSING OFFICER TREATED THIS PAYMENT OF INTEREST ON HIGHER SIDE AND RESTRICTED IT TO 12% PER ANNUM, THE RATE ON WHICH INTEREST WAS PAID TO THE PARTNERS. 3. THE ASSESSEE PREFERRED APPEALS BEFORE THE LD. CIT(A) IN BOTH THE YEARS BUT DID NOT FIND FAVOUR WITH HIM. 4. NOW THE ASSESSEE IS BEFORE THE TRI BUNAL WITH THE SUBMISSION THAT THE INTEREST TO THE NOTIFIED PE RSONS WERE PAID AT THE RATE PREVAILING IN THE MARKET. THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE INTEREST @ 18% PER ANNUM :-2-: IS NOT ON HIGHER SIDE AS THE ASSESSEE IS NOT REQUIRED TO FURNISH ANY SECURITY WHILE OBTAINING LOAN WHEREAS FOR OBTAININ G LOAN FROM THE BA NK THE ASSESSEE IS REQUIRED TO FULFILL CERTAIN CONDITIONS. IT WAS FURTHER CONTENDE D THAT IN THE LIGHT OF THE PREVAILING RATE OF INTEREST IN THE MARKET AT THE RELEVANT POINT OF TIME, NO DISALLOWANCE IS CALLED FOR. MOREOVER, THE RATE OF INTEREST PAID TO THE PARTNERS CANNOT BE CONSIDERED TO BE THE BASE FOR ADJUDICATING THE REASONABLENESS OF RATE OF INTEREST PAID TO THE NOTIFIED PERSONS. 5. THE LD. D.R., ON THE OTHER HAND, HA S PLACED RELIANCE UPON THE ORDERS OF THE LD. CIT(A). 6. HAVING GONE THROUGH THE ORDERS OF TH E LOWER AUTHORITIES, I FIND THAT INTEREST @ 18% PER ANNUM WAS PAID ON UN SECURED LOAN TO TH E PERSONS NOTIFIED UNDER SECTION 40A(B)(2) OF THE ACT. IN THE INSTANT CASES, THE ASSESSMENT YEARS INVOLVED ARE 2006-07 AND 2007- 08 AND AT THE RELEVANT POIN T OF TIME THE RATE OF INTEREST @ 18% PER ANNUM CA NNOT BE CONSIDERED TO BE ON HIGHER SIDE IN THE LIGHT OF THE FACT THAT FO R OBTAINING SUCH UNSECURED LOAN THE ASSESSEE IS NOT REQUIRED TO FULFILL ANY RE QUIREMENT AS REQUIRED BY THE BANK WHILE GRANTING LOAN. MOREOVER, THE DIFFERENCE IN RATE OF INTEREST, FROM TH E LOAN GIVEN BY THE BANK AND THE RATE OF INTEREST ON WHICH THE IMPUGNED LOAN WAS BORROWED, IS NOT THAT MUCH ON THE BASIS OF WHICH IT CAN BE PRES UMED THAT THE HIGHER RATE OF INTEREST WAS PAID TO THE PERSONS NO TIFIED UNDER SECTION 40A(B)(2) OF THE ACT. I, THEREFORE, FIND NO MERIT IN THE ADDITI ON MADE BY THE A SSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). ACCORDI NGLY I SET ASIDE THE ORDERS OF THE LD. CIT(A) IN BOTH THE YEARS AND DELETE THE ADDITION MADE IN THIS REGARD. 7. IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.7.2013. SD/- [SUNIL KUMAR YADAV] JUDICIAL MEMBER DATED:24.7.2013 JJ:2606 :-3-: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR