Ratnadip Amarchand Shah L/H of Late Amarchand M. Shah, Gandhinagar V. The Income Tax Officer, Ward-1, Gandhinagar

ITA 2156/AHD/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1274 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 21-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS MEETA SHAH
• Keywords: Fair market value

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.2156/AHD/2015 / ASSTT. YEAR: 2011-2012 RATNADIP AMARCHAND SHAH LEGAL HEIR OF LATE SHRI AMACHAND M. SHAH PLOT NO.555/2, MAHAVIR SOCIETY SECTOR 21, GANDHINAGAR. VS ITO, WARD-1 GANDHINAGAR. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : MRS.MEETA SHAH REVENUE BY : SMT. SMITI SAMANT, SR.DR ! / DATE OF HEARING : 21/09/2015 '#$ ! / DATE OF PRONOUNCEMENT: 24/09/2015 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE CIT(A), GANDHINAGAR DATED 16.4.2015 PASSED FOR THE ASSTT.YEAR 2011- 12. 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT T HE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.78,891/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ELECTRONICALLY ON 24.9.2011 SHOWING TOTAL IN COME OF RS.7,43,220/-. THE ASSESSEE WAS ENGAGED IN TRADING OF TELECOMMUNICATION PRODUCT. THE ASSESSEE HAD AVAILE D LOAN FROM M/S.CAVITAK FINANCE. HE HAS PAID INTEREST AT THE RA TE OF 20.50%. THE ITA NO.2156/AHD/2015 2 LD.AO HAS OBSERVED THAT INTEREST AT THE RATE OF 20. 5% IS AN EXORBITANT RATE WHICH THE ASSESSEE CANNOT BE EXPECTED TO INCUR . HE ALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF RS.18%. THE AO HAS DISALLOWED THE INTEREST EXPENDITURE OVER AND ABOVE 18% AND IN THIS WAY, HE MADE AN ADDITION OF RS.78,891/- BEING 2.5% (20.50% MINUS 18%). 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT THE LD. AO HAS MADE DISALLOWANCE OF INTEREST EXPENDITURE WITH THE HELP OF SECTION 40A(2)(A) OF THE INCOME TAX ACT. THIS PROVISION PROVIDES THA T IF THE ASSESSEE INCURRED ANY EXPENDITURE IN RESPECT OF WHICH PAYMEN T HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB-SECTION, AND THE AO IS OF OPINION THAT SUCH EXPENDITURE IS EXCES SIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS , OR SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEG ITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE, THEN SO MUC H OF THE EXPENDITURE AS IS SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREA SONABLE SHALL NOT BE ALLOWED AS A DEDUCTION. 6. THE LD.AO FAILED TO NOTE THAT PAYMENT WAS NOT MA DE TO ANY PERSON MENTIONED IN CLAUSE (B) OF THIS PROVISO. M/ S.CAVITAK FINANCE IS NOT AN ENTITY COVERED IN THE LIST OF PERSONS PROVID ED IN SECTION 40A(2)(B) OF THE INCOME TAX ACT. IN OTHER WORDS, M/S.CAVITAK FINANCE IS NOT AN ASSOCIATE PERSON WITH THE ASSESSEE TO WHO M IT CAN BE ALLEGED THAT SOME UNDUE BENEFITS IN GARB OF EXCESSIVE PAYME NT OF INTEREST WAS EXPENDED. THE ASSESSEE HAS AVAILED LOAN FOR DOING BUSINESS. WHEN, HE COULD NOT ARRANGE THE LOAN FROM THE SCHEDULE BANK O R NEAR-OR-DEAR, HE TOOK HELP OF THE FINANCE COMPANY, THOUGH, WITH A LI TTLE HIGHER RATE OF INTEREST. THE AO HAS NOWHERE ESTABLISHED NEXUS BET WEEN THE LENDER VIS--VIS ASSESSEE. THEREFORE, HE WAS NOT JUSTIFIE D TO MAKE THE ITA NO.2156/AHD/2015 3 DISALLOWANCE OF INTEREST EXPENDITURE. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE DISALLOWANCE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 24 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 24/09/2015