Shri Anurag Goel, Ahmedabad V. The Income Tax Officer, Ward-11(1), ( Now Ward- 5(3)(1)), Ahmedabad

ITA 2906/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8668 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 16-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

I.T.A. NO. 2906 /AHD/201 5 ASSESSMENT Y EAR: 20 1 2 - 13 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD SMC BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM ] I.T.A. NO. 2 906 /AHD/201 5 ASSESSMENT Y EAR : 20 1 2 - 13 ANURAG GOEL , ....... ...........APPELLANT DELTA GLOBAL INC., 903, SAFFRO N TOWER, OPP. CENTRAL MAL L, PANCHVATI, AMBAVADI, AHMEDABAD 380 015 . [PAN : A CDPG 4081 G ] VS. INCOME T AX OFFICER , WARD - 5(3)(1), AHMEDABAD . ............................RESPONDENT APPEARANCES BY: NONE FOR THE APPELLANT KEYUR PATEL FOR THE RESPONDENT DATE OF C ONCLUDING THE HEARING : 17 . 08 .2017 DATE OF PRONOUNCING THE ORDER : 29 . 08 . 2017 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 31.08.2015, PASSED BY THE L EARNED CIT(A) , AHMEDABAD, I N THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 2 012 - 13. 2. GRIEVANCE S RAISED BY THE ASSESSEE APPELLANT ARE AS FOLLOWS : - 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.6,67,990/ - OUT OF TOTAL INTEREST EXPENSES ON UNSECURED LOANS OF RS.17,81,293/ - TREATING IT EXCESSIVE OR UNREASONABLE. 2. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF RS.6,67,990/ - MADE OUT OF INT EREST EXPENSES BE DELETED. I.T.A. NO. 2906 /AHD/201 5 ASSESSMENT Y EAR: 20 1 2 - 13 PAGE 2 OF 3 3 . NONE APPEARED ON BEHALF OF THE ASSESSEE BUT I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. 4 . TO ADJUDI CATE ON TH IS GRIEVANCE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS AN INDIVIDUAL, CARRYING ON THE BUSINESS IN A PROPRIETORSHIP FIRM . HE HAD TAKEN UNSECUR E D LOANS IN THE P ROPRIETORSHIP FIRM FROM HIS RELATIVE S AND PAID INTEREST @ 2 4% TOTALLING TO RS.17,81,293/ - . A DEDUCTION OF THE ABOVE EXPENDITURE WAS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME. THE ASSESSING O FFICER HAS RESTRICTED TH E RATE OF INTEREST PAYMENT TO 15% AND DISALLOWED AN AMOUNT OF RS.6,67,990/ - ON ACCOUNT OF EXC ESSIVE INTEREST PAYMENT UNDER SECTION 40A(2)(B) OF THE ACT. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. 5 . A BARE PERUSAL OF SECTION 40 A (2)(A) OF THE ACT WOULD CONTEMPLATE THAT IF AN ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO ANY PERSON REFERRED TO IN CLAUSE (B) OF THIS SUB - SECTION , AND THE ASSESSING OFFICER IS OF OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES AVAILED FROM THE PERSONS TO WHOM S UCH PAYMENT WAS MADE, THEN HE CAN DISALLOW THE EXCESS PAYMENT. I N OTHER WORDS , IF SINCE SOME SERVICE OR GOODS AVAIL ED AT A LEGITIMATE RATE FROM THE OPEN MARKET THEN DIFFERENCE BETWEEN THE RATE AT WHICH FACILITIES WOULD BE AVAILED VIS - A - VIS ACTUALLY AVAILED SHOULD BE DISALLOWED TO THE ASSESSEE. ACCORDING TO THE ASSESSING O FFICER THE LOAN WHICH HAVE BEEN AVAILED BY THE ASSESSEE FROM THE PERSONS FALLING IN CLAUSE (B) OF SECTION 40A(2) WOULD BE AVAILED AT THE R ATE OF 15% , HENCE THE INTEREST PAID OVER AND I.T.A. NO. 2906 /AHD/201 5 ASSESSMENT Y EAR: 20 1 2 - 13 PAGE 3 OF 3 ABOVE THE RATE OF 15% WAS CONSIDERED AS EXCESSIVE. ON DUE CONSIDERATION OF THIS REASON , I AM OF THE VIEW THAT THE ASSES SING O FFICER HAS FAILED TO BRING ANY EVIDENCE ON RECORD WHICH CAN SHOW THAT THE INTEREST PAID AT 25% BY THE ASSESSEE IS NOT IN CONSONANCE WITH THE MARKET RATE . THESE ARE UNSECURED LOANS FOR WHICH ASSESSEE WAS NOT REQUIRED TO PL EDGE ANYTHING OR GIVE ANY SECU RITY. HE WAS NOT REQUIRED TO FULFIL OTHER FORMALITIES WHICH IS TO BE FULFILLED IF LOANS WERE AVAILED FROM THE BANK S . THESE ASPECTS HAVE NOT BEEN LOOKED INTO BY THE ASSESSING O FFICER WHILE CONSIDERING MARKET RATE OF INTEREST PAYMENT ON THE LOANS AT 15%. THUS, I AM OF THE VIEW THAT INTEREST PAYMENT @ 24% ON UNSECURED LOANS IS NOT EXCESSIVE. I THUS ALLOW THIS APPEAL AND DELETE THE DISALLOWANCE. 6 . IN THE RESULT, THE APP E AL IS ALLOWED . PR O NOUNCED IN THE OPEN COURT TODAY ON THE 29 TH DAY OF AUGUST 201 7. SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: AHMEDABAD, THE 29 TH DAY OF AUGUST , 2017. PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT( A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD