M/s. Kamal Oil Industries, Mehsana V. The Jt.CIT, Patan Range, Patan

ITA 2158/AHD/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9377 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-09-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 24-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: D K PARIKH CA

Judgement Text

KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 1 , C IN THE INCOME TAX APPELLATE TRIBUNAL, CBENCH, AHMEDABAD BEFORE SHRI O. P MEENA, ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER . . /. I.T.A NO.2158/AHD/2014 / ASSESSMENT YEAR:2010-11 M/S. KAMAL OIL INDUSTRIES, BUDASAN KADI KALOL ROAD, KADI 382 715 DISTRICT- MEHSANA PAN: AABFK 8786 C VS. JOINT COMMISSIONER OF INCOME-TAX, RANGE PATAN, MEHSANA APPELLANT / RESPONDENT /ASSESSEE BY SHRI D. K. PARIKH , CA, A.R. /REVENUE BY SHRI L. P. JAIN, SR. D.R. / DATE OF HEARING: 18.09.2019 /PRONOUNCEMENT ON 1 9 . 09.2019 /O R D E R PER O. P. MEENA,AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- GANDHINAGAR;AHMEDABAD (IN SHORT THE CIT (A)) DATE D 28.05.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. GROUND NO.1 TO 4 RELATES TO CONFIRMATION OF ADDITIO N OF RS. 79,93,072 ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK BY TAKING RATE OF GUAR SEEDS @19.53 PER KG. AS AGAINST THE VA LUE TAKEN BY KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 2 THE ASSESSEE @ 9.49 PER KG. AS ON 31.03.2010. GROU ND NO. 5 IS WITHOUT PREJUDICE TO ABOVE GROUNDS THAT IF THE CLOS ING STOCK IS VALUED HIGHER THAN SHOWN BY THE ASSESSEE THEN LD. C IT (A) OUGHT TO HAVE GIVEN DIRECTION TO THE AO TO ADOPT OPENING STOCK OF SUBSEQUENT YEAR AT THE SAME FIGURE AS VALUED AS ON 31.03.2010 BY THE AO. 3. SINCE GROUND NO. 1 TO 5 ARE INTER CONNECTED, SAME A RE BEING CONSIDERED TOGETHER. BRIEFLY, STATED THE FACTS OF T HE CASE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS SHOWN OPENING ST OCK AT RS. 2,23,54,322 OF 11,67,323.75 KG OF GUAR SEED VALUED AT RS. 19.15 PER KG. THE ASSESSEE HAS MADE PURCHASES OF 17510 KG. ST OCK DURING YEAR @ 22.11 PER KG. THE ASSESSEE HAS SOLD 3,57,070 KG. STOCK DURING YEAR OF WHICH AVERAGE RATE COMES TO RS. 17.45 KG. THUS, THE CLOSING STOCK AS ON 31.03.2010 HAS REMAINED AT 8, 27,767.5KG. HOW EVER, THE ASSESSEE HAS VALUED THE SAID STOCK @ 9.49 PER KG. A S AGAINST VALUATION OF OPENING STOCK @ 19.15 PER KG. INCLUDING NEW PURC HASE MADE @ 22.11 PER KG. THIS VALUATION HAS RESULTED TRADING L OSS IN GUAR SEEDS STOCK, WHICH HAS BEEN SET OFF AGAINST PROFIT FOR OT HER BUSINESS. THE AO THEREFORE, ASKED TO EXPLAIN AS TO WHY IT WAS VAL UED AT LOW RATE. IT WAS EXPLAINED THAT THE GOODS WERE PURCHASE BEFORE 7 YEARS, WHICH KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 3 WERE GOT WET DURING MONSOON SEASON AND GOT BLACK AN D BECAME LOW QUALITY. THE ASSESSEE FOLLOWS VALUATION BASED ON MA RKET PRICE OR COST WHICHEVER IS LOWER THEREFORE, THE GOODS WERE VALUED @ 9.49 PER KG BEING MARKET VALUE. FURTHER, THE ASSESSEE HAS SHOW N SAID CLOSING STOCK AS OPENING STOCK FOR SUBSEQUENT ASSESSMENT YE AR, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. HOWEVER, THE AO HA S WAS OF THE VIEW THAT THE ASSESSEE HAS NOT ADHERED THE POLICY O F VALUATION OF CLOSING STOCK AS DECLARED IN COLUMN 12(A) OF AUDIT REPORT FILED ALONG WITH RETURN OF INCOME, AS THE STOCK IS NEITHER VALU ED AT MARKET VALUE NOR COST VALUE. THE AO ASCERTAINED MARKET VALUE AS ON 31.03.2010 FROM APMC, KADI THAT WERE AT RS. 21.60 PER KG. WHER EAS RATE AS PER NCDEX WERE AT RS. 22.80 PER KG., WHEREAS THE ASSESS EE HAS VALUED CLOSING STOCK @ 9.49 PER KG. WITH REGARD TO COST, T HE AO NOTED THAT THE RAINY SEASON HAS ENDED BY SEPTEMBER 2009, WHERE AS LAST RECORDED SALE BILL WAS ISSUED BY THE ASSESSEE @ 19. 50 PER KG. ON 15.12.2009. FURTHER, THE ASSESSEE HAS PURCHASED GUA R SEEDS @ 22.11 PER KG. THEREFORE, THE THEORY OF GOODS BECOME WET AND LOST QUALITY IS TOTALLY INCORRECT. FURTHER, GUAR SEEDS WERE SOLD IN APRIL 2011 @19.53 PER KG. IN THE LIGHT OF THESE FACTS, THE AO ADOPTED COST PRICE @19.15 PER KG. PRESUMING THAT GOODS PURCHASED ON 30 .07.2009 @ KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 4 22.11 PER KG. HAVE BEEN SOLD OUT AND GOODS OUT OF O PENING STOCK WERE REMAINED IN CLOSING STOCK. IN VIEW OF THESE FA CTS AND CIRCUMSTANCES, THE AO MADE ADDITION OF RS.79,93,072 BY TAKING COST PRICE @ 19.15 PER KG. OF CLOSING STOCK OF 8,27,767. 5 KG. THE AO STILL ALLOWED LOSS AT RS. 5,87,328 AS AGAINST CLAIM OF LO SS AT RS.85,80,400. 4. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT (A). HOWEVER, CIT (A) OBSERVED THAT NO CORRESPO NDENCE HAS BEEN SUBMITTED THAT ISSUE OF WATER SEEPING WAS TAKEN WIT H WAREHOUSE OWNER NOR ANY CLAIM OF INSURANCE WAS FILED. THE APP ELLANT IS SILENT ON THE REASON AS TO WHY HUGE STOCK WAS KEPT LYING IN G ODOWN FROM A.Y. 2005-06 TO A.Y. 2009-10 AND WHICH WAS NOT INSPECTED BY THE OWNER OF THE STOCK. THE PLEA OF THE APPELLANT THAT GOODS WERE PLEDGED WITH BANK AND THEREFORE, SEEDS CANNOT BE INSPECTED WAS N OT FOUND ACCEPTABLE AS GOODS WERE PERISHABLE NATURE AND COUL D BE INSPECTED AFTER OBTAINING KEYS FROM BANK AUTHORITIES. IN VIEW OF THIS MATTER, THE CIT (A) HELD THAT THE AO HAS RIGHTLY TAKEN VALU ATION @ 19.15 PER KG. THEREFORE, ACTION OF THE AO WAS CONFIRMED. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE REF ERRING TO AUDIT REPORT SUBMITTED THAT THE ASSESSEE HAS BEEN VALUING CLOSING STOCK AS KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 5 PER MARKET VALUE OR COST PRICE WHICHEVER IS LOWER. THE GOODS WERE BECOME WET DUE TO RAIN HENCE, THESE WERE BECOME LOW QUALITY HENCE, COST PRICE OF THE SAME WERE LOW. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT GOODS WERE VERY OLD WHICH W ERE KEPT FROM A.Y. 2005-06. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED BALANCE SHEET AS ON 31.03.2007 (PB-42) AND SUBMITTED SAME G OODS WERE LYING WITH THE ASSESSEE FOR A.Y. 2007-08. THE LEARNED COU NSEL FOR THE ASSESSEE CONTENDED THAT GOODS WERE SOLD DURING YEAR WERE OF 3,57,070 KILOGRAMS OF WHICH AVERAGE REALIZATION VAL UE WAS AT RS. 17.65 PER KG. WHICH WERE EVEN AFTER MIXING THE GOOD S PURCHASED @ 22.11 PER KG. DURING YEAR. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED APMC RATE AND NCDEX AS PER EXHIBIT B AND C RESPECTIVELY WHICH SHOWED THAT WHEN THE ASSESSEE HAS SOLD GOODS @ 19.53 PER KG. IN APRIL 2011, THESE RATES WERE RANGING BETWEEN 25. 50 PER KG. TO 28.20 PER KG. IN ADDITION, EVEN 30 TO 31.01 PER KG. THIS PROVES THAT GOODS SEEDS COULD ONLY BE REALIZED @ 19.53 PER KG. AS THEY WERE NOT OF GOOD QUALITY. THE LEARNED COUNSEL FOR THE ASSESS EE PLACED RELIANCE IN THE CASE OF DCIT V. LOIL HEALTH FOODS LTD. [2017 ] 82 TAXMANN.COM 324 (CHANDIGARH-TRIB) AND ALFA LAVAL INDIA LTD. V. DCIT [2003] 133 TAXMAN 740 (BOMBAY)/ 266 ITR 418 (BOMBAY) IN SUPPOR T OF HIS CLAIM. KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 6 6. AU CONTRAIRE , THE LD. SR. D.R. SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. THE LD. SR. D.R. SUBMITTED THAT THE AO HAS APPLIED LIFO METHOD OF VALUATION AND HAS ARRIVED AT CORRECT FIND ING. THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THAT GOODS WERE B ECOME WET OR LOWER QUALITY AS SAME GOODS WERE SOLD IN APRIL NEXT YEAR ON HIGHER RATE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT NO CORRESPONDENCE HAS BEEN ADDUCED IN SUPPORT OF WATER SEEPING OR ANY CLAIM OF INSURANCE TO SUPPORT THAT GOODS WERE DETERIORATED. HOWEVER, IT I S ALSO FACTS THAT GOODS WERE LYING IN GODOWN FROM A.Y. 2005-06 TO A.Y . 2009-10 AS SAME QUANTITY OF GOODS WERE SHOWN IN BALANCE SHEET AS ON 31.03.2007. THE AO ADOPTED COST PRICE @19.15 PER KG . PRESUMING THAT GOODS PURCHASED ON 30.07.2009 @ 22.11 PER KG. HAVE BEEN SOLD OUT AND GOODS OUT OF OPENING STOCK WERE REMAINED IN CLOSING STOCK. HOWEVER, IT MAY BE NOTED THAT AVERAGE PRICE YIELDED FROM SALE OF GOODS IS 17.65 PER KG. BECAUSE DUE TO MIXTURE OF PU RCHASED GOODS @ 22.11 PER KG. DURING YEAR UNDER CONSIDERATION WITH OPENING STOCK. WE ALSO NOTICED THAT SALE RATE IN APRIL 2011 IS AT RS. 19.53 PER KG. WHEREAS THE ASSESSEE HAS VALUED THE CLOSING STOCK @ 9.49 PER KG. AS KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 7 AGAINST VALUATION OF OPENING STOCK @ 19.15 PER KG. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED IN THE CASE OF DCIT V. LOIL HEALTH FOODS LTD. [2017] 82 TAXMANN.COM 324 (CHANDIGARH-TR IB) TO CONTEND THAT WHERE COTTON SEEDS OIL AND MUSTARD SEED OIL AR E PERISHABLE ITEMS IN NATURE AND THE ASSESSEE EXPLAINED PROPERLY THE REASON IN DECREASE IN CLOSING STOCK, NO ADDITION SHOULD BE MA DE IN CLOSING STOCK. SIMILARLY, IN THE CASE OF ALFA LAVAL INDIA L TD. V. DCIT [2003] 133 TAXMAN 740 (BOMBAY)/ 266 ITR 418 (BOMBAY) IT W AS HELD THAT THE OBSOLETE ITEMS WERE SOLD IN SUBSEQUENT YEAR AT A PRICE LESS THAN 10 PERCENT OF COST THE VALUATION MADE ARBITRARILY N OT JUSTIFIED. CONSIDERING THE TOTALITY OF FACTS AND CASE LAWS AND NATURE OF GOODS, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD BE REAS ONABLE AND JUSTIFIABLE IF AVERAGE RATE WERE APPLIED FOR VALUAT ION OF CLOSING STOCK. WE FIND THAT RATE OF OPENING STOCK WAS AT RS. 19.15 PER KG. WHEREAS CLOSING STOCK WAS AT RS. 9.49 PER KG. THE AVERAGE R EALIZATION VALUE IS AT RS. 17.75 PER KG. THEREFORE, IT WOULD MEET END O F JUSTICE IF AVERAGE OF 19.15+9.49+ 17.15= 46.14/3 = 15.83 PER K G. MAY BE ADOPTED FOR VALUATION OF CLOSING STOCK AS ON 31.03. 2010. ACCORDINGLY, THE AO IS DIRECTED TO RECALCULATE THE CLOSING STOCK BY TAKING RATE OF RS. 15.83 PER KG. THUS, THE GROUND NO. 1TO 4 ARE PA RTLY ALLOWED. SO KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 8 FAR, GROUND NO. 5 IS CONCERNED, SINCE THE CLOSING S TOCK IS OPENING STOCK FOR NEXT YEAR. THEREFORE, AS A COROLLARY TO I NCREASE IN CLOSING STOCK WOULD LEAD TO INCREASE IN OPENING STOCK OF NE XT YEAR, THEREFORE, THE AO WOULD TAKE OPENING STOCK AS ON 1 ST APRIL OF NEXT FINANCIAL YEAR AS WORKED OUT ON THE BASIS OF AVERAG E RATE AS PER OUR OBSERVATION GIVEN HEREIN ABOVE. ACCORDINGLY, THIS G ROUND IS ALLOWED. 8. GROUND NO. 6 IS AGAINST THE DISALLOWANCE OF SALARY PAYMENT IN RESPECT OF PERSON SPECIFIED UNDER SECTION 40A(2) (B) OF THE ACT. 9. THE AO NOTICED THAT THE ASSESSEE HAS NOT DEBITED AN Y EXPENDITURE ON WAGES PAYMENT IN LAST FINANCIAL YEAR WHEREAS IN THE CURRENT YEAR, IT HAS DEBITED A SUM OF RS. 17,80,200 WHICH INTER-ALIA INCLUDED PAYMENT OF RS.5.80 LAKH EACH TO SMT. SHILP ABEN KIRANBHAI PATEL, AND SMT. DARSHNABEN ALPESHBHAI PATEL (WIVES OF PARTNERS OF THE ASSESSEE FIRM). THE AO EXAMINED AND OBSERVED TH AT THE ASSESSEE HAS FAILED TO ADDUCE ANY EVIDENCE OF THE PERFORMANC E OF WORK DONE BY THEM. ACCORDINGLY, CONCLUDED THAT PAYMENTS MADE AT RS. 11,60,000 TO ABOVE TWO WOMEN IS EXCESSIVE. HOWEVER, CONSIDERING THE INCREASE IN TURNOVER BY 62% FROM LAST YEAR, THE SE WOMEN MIGHT HAVE BEEN RENDERED SOME HELP TO THE ASSESSEE FIRM I N RESPECT OF BUSINESS ACTIVITY. IN VIEW OF THIS MATTER, THE AO T REATED PAYMENT OF KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 9 RS. 10,000 PER MONTH AS REASONABLE TO ABOVE PERSON AND ACCORDINGLY, CONSIDERED PAYMENT AT RS. 2,40,000 AS REASONABLE AN D DISALLOWED BALANCE AMOUNT OF RS. 9,20,000 [ 11,60,000- 2,40,00 0] UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 10. BEING DISSATISFIED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT (A). HOWEVER, WITHOUT ANY SUCCESS. 11. BEING, DISSATISFIED THE ASSESSEE HAS FILED THIS APP EAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAS FURNISHED DETAIL OF QUALIFICATION AND NATURE OF SER VICE RENDERED BY THEM. THE AO HAS ALSO ACCEPTED THIS FACT AS HE ALLO WED PART REMUNERATION AS REASONABLE. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT BOTH THE LADY MEMBERS ARE ASSESSED TO M AXIMUM MARGINAL RATE ( COPY OF ACKNOWLEDGEMENT OF RETURN O F INCOME FOR A.Y. 2010-11, FILED SHOWING ASSESSED AT MAXIMUM MAR GINAL RATE BY BOTH LADIES) HENCE, IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT -2 V. GUJ ARAT FINANCIAL SERVICES LTD. [TAX APPEAL NO. 428 & 431 OF 2015 DAT ED 07.07.2015] IN WHICH IT WAS CONSIDERING THE CBDT DATED 06.07.1968 IT WAS HELD THAT WHERE THE PAYER AND RECIPIENT ARE ASSESSED AT MAXIM UM MARGINAL KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 10 RATE, AND PAYMENT MAY BE TREATED AS BONAFIDE, HENCE , NO DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT BE MADE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER PLACED REL IANCE ON THE DECISION OF CO-ORDINATE BENCH OF AHMEDABAD TRIBUNAL IN THE CASE OF H.C. SONS V. ACIT CIRCLE -12 AHMEDABAD [I.T.A. NO. 2713/AHD/2013/A.Y. 2009-10 DATED 25.01.2017] WHEREI N FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF PWS ENGINEERS LIMITED V. DCIT [TAX APPEAL NO. 209 O F 2015 DATED 06.06.2016] WHEREIN THEIR LORDSHIP HAVE INTER-ALIA HELD AS LONG AS THE AMOUNT PAID BY THE ASSESSEE TO SPECIFIC PERSONS ARE TAXED IN THE HANDS OF SPECIFIC PERSONS AT THE SAME RATE , DISAL LOWANCE UNDER SECTION 40A(2)(B) WILL BE MEANINGLESS INASMUCH AS PERMITTING THE REVENUE TO TAX THE SAME INCOME AGAIN AT THE SAME RA TE IN THE HAND OF PRINCIPAL PAYER WOULD AMOUNT TO DOUBLE TAXATION . THEREFORE, FOLLOWING SAME THE MATTER WAS REMITTED BACK TO THE AO TO VERIFY WHETHER PAYMENT HAS BEEN BROUGHT TO TAX IN THE HAND S OF RECIPIENT AT THE SAME RATE. IF THAT IS SO, DISALLOWANCE WILL STAND DELETED. 12. PER CONTRA , THE LD. SR. D.R. RELIED ON LOWER AUTHORITIES. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE RECIPIENT OF R EMUNERATION ARE KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 11 HAVE REQUISITE QUALIFICATION AND RENDERED SERVICE F OR HANDLING OF BANKING SERVICES, MOREOVER, AS THE AO HAS ACCEPTED PART PAYMENT REASONABLE, MEANING THEREBY THAT THEY HAVE RENDERED SOME SERVICES. IF THAT IS SO, THEN, NO DISALLOWANCE UNDER SECTION 40A (2) (B) COULD BE MADE AS THE RECIPIENT AND PAYER ARE ASSESSED TO TAX AT SAME RATE, HENCE, THERE IS NO EVASION OF TAX. THE COPY OF ACKN OWLEDGEMENT OF RETURN OF INCOME FILED SHOWED THAT BOTH THE PERSON SPECIFIED UNDER SECTION 40A (2) (B) OF THE ACT ARE ASSESSED AT MAXI MUM MARGINAL RATE. THEREFORE, THE ISSUE IS COVERED BY THE DECISI ON OF TRIBUNAL IN THE CASE OF H.C. SONS V. ACIT CIRCLE -12 AHMEDABAD [I.T.A. NO. 2713/AHD/2013/A.Y. 2009-10 DATED 25.01.2017] WHEREI N FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF PWS ENGINEERS LIMITED V. DCIT [TAX APPEAL NO. 209 O F 2015 DATED 06.06.2016] WHEREIN THEIR LORDSHIP HAVE INTER-ALIA HELD AS LONG AS THE AMOUNT PAID BY THE ASSESSEE TO SPECIFIC PERSONS ARE TAXED IN THE HANDS OF SPECIFIC PERSONS AT THE SAME RATE , DISAL LOWANCE UNDER SECTION 40A(2)(B) WILL BE MEANINGLESS INASMUCH AS PERMITTING THE REVENUE TO TAX THE SAME INCOME AGAIN AT THE SAME RA TE IN THE HAND OF PRINCIPAL PAYER WOULD AMOUNT TO DOUBLE TAXATION . SIMILARLY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT - 2 V. GUJARAT KAMAL OIL INDUSTRIES V. JCIT-RANGE-PATAN, MEHSANA / I.T.A.NO. 2158/AHD/2014/AY10-11 12 FINANCIAL SERVICES LTD. [TAX APPEAL NO. 428 & 431 O F 2015 DATED 07.07.2015] AFTER CONSIDERING THE CBDT CIRCULAR 06. 07.1968 HELD THAT WHERE THE PAYER AND RECIPIENT ARE ASSESSED AT MAXIM UM MARGINAL RATE, THEN THE PAYMENT MAY BE TREATED AS BONAFIDE, HENCE, NO DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT BE MADE. IN THE LIGHT OF ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE CON SIDERED OPINION THAT DISALLOWANCE MADE UNDER SECTION 40A(2)(B) OF T HE ACT ARE NOT JUSTIFIED. HENCE, SAME ARE DIRECTED TO BE DELETED. THIS GROUNDS OF APPEAL IS ACCORDINGLY, ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.09. 2019. SD/- SD/- (MADHUMITA ROY) (O.P. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY AHMEDABAD: DATED: 19TH SEPTEMBER, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A) / ITAT (DR)/GUARD FILE OF ITAT. BY ORDER ASSISTANT REGISTRAR, AHMEDABAD