MADHU ENTERTAINMENT & MEDIA LTD, MUMBAI V. ITO 16(1)(2), MUMBAI

ITA 3346/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8867 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMALATHA
• Assessee Lawyers: M L JETHVA
• Section: 12; 2

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO S . 3346 & 3348/MUM/2017 ( / ASSESSMENT YEAR S : 2011 - 12 & 2013 - 14 ) MADHU ENTERTAINMENT & MEDIA LTD. A/704, REMI BIZCOURT, PLOT NO. 9, SHAH INDUSTRIAL ESTATE, OFF VEERA DESAI ROAD, ANDHERI(W), MUMBAI - 400 053 / VS. ITO - 16(1)(2), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AAACM 3345 B ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI M. L. JETHVA / RESPONDENT BY : MS. HEMALATHA / DATE OF HEARING : 31.08.20 17 / DATE OF PRONOUNCEMENT : 01.11. 2017 / O R D E R PER SHAMIM YAHYA , A. M.: TH E S E A PPEAL S BY THE SAME ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE O RDER S BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 , MUMBAI (CIT(A) FOR SHORT ) AND PERTAIN TO THE ASSESSMENT YEAR (A.Y.) 2011 - 12 AND 2013 - 14. 2 ITA NO S . 3346 & 3348/M / 17 (A.Y S .11 - 12 & 13 - 14 ) MADHU ENTERTAINMENT & MEDIA LTD. VS. ITO 2. THE COMMON GROUND OF APPEAL RELATES TO DISALLOWANCE OF INTEREST ON UNSECURED LOAN AS UNDER: A.Y. 2011 - 12 - RS.4,45,558/ - A.Y. 2013 - 14 - RS.89,500/ - 3. IN THIS CASE, THE ASSESSEE HAS T AKEN UNSECURED LOAN FROM TWO DIRECTORS AND PAI D THEM INTEREST @ 18% AND 21% RESPECTIVELY. T HE ASSESSING OFFICER HAS HELD THAT THE AMOUNT OF INTEREST PAID IN EXCESS OF THE RATE OF 12% IS NOT REASONABLE. HENCE, HE DISALLOWED THE BALANCE PORTION OF INTEREST P AID AT THE RATE OF 18% AND 21% TO TWO PERSONS WHICH RESULTED IN THE ADDITION TO INCOME AT RS.4,45,558/ - AND RS.89,500/ - IN THE RESPECTIVE ASSESSMENT YEARS. THE LD. CIT(A) HAS CO NFIRMED T HE ASSESSMENT ORDER. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT TH IS EXACT ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE, IN ITA NO. 5537/MUM/2016 FOR A.Y. 2010 - 11 VIDE ORDER DATED 09.05.2017. THE TRIBUNAL HAD HELD AS UNDER: WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE AND CIRCUMST ANCES OF THE EASE, WE FIND THAT THE ASSESS EE HAS PAID THE INTEREST AT THE RATE OF 18% TO ONE MR. HIRACHAND DAND AND HE HAS ALSO PAID THE INT EREST AT RATE OF 21 % T O MR. PRATIK H SHAH. THE ASSESSEE HAS TAKEN THE CONTENTION THAT THE BORROWING FROM THE BANK MA Y COST AROUND 16% PLUS PROCESSING FEE AND BANK INSISTS ON SECURITIES AND LOAN FROM RELATED IS UNSECURED AND NO SECU RITIES NEED TO BE GIVEN AND FURTHER, LOAN FROM RELATED PARTY IS FO R TEMPORARY PERIOD. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE AHM E DABAD TRIBUNAL IN THE EASE OF VIPUL Y. MEHTA VS. AC'IT IN ITA NO.860/AHD/2010 U HEREIN THE TRIBUNAL HAS HELD THAT CONSIDERING THE FACTS OF THE CASE AND ARGUMENT OF BOTH THE SIDES, THE PAYMENT OF INTEREST AT THE RA T E OF 18% PER ANNUM ON LOAN TAKEN FROM A RELATED PERSON CANNOT BE SAID TO BE EXCESSIVE AND UNREASONABLE. MOREOVER, THE I D. A.R. ALSO RELIED UPON THE DECISION IN THE CASE OF OMKARMAL GAURISHANKER VS. IT O TTJ (AHD.) 223 WHEREIN THE TRIBUNAL HELD THA T INTEREST PAID TO RELATIVE AT THE RA T E OF 24% LO BE REA SONABLE. WE FIND THAT IN THE INSTANT C ASE, ASSESSEE HAS PAID INTEREST AT THE RA T E OF 18% T O MR. HIRACHAND DAND AND 21% T O MR. VALIK SHAH, BOTH ARE DIRECTORS OF THE COMPANY AND ASSESSEE HAS TAKEN THE LOAN FOR BUSINESS PURPOSES. THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING THE EXCESS RATE OF INTEREST THAN 12%. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE. 3 ITA NO S . 3346 & 3348/M / 17 (A.Y S .11 - 12 & 13 - 14 ) MADHU ENTERTAINMENT & MEDIA LTD. VS. ITO 4. SINCE IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN FAVOUR OF THE ASSESSEE, RESPECTFULLY FOLLOWING THE PRECEDENT, I SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. 5. IN THE RESULT, THE SE APPEALS FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.11.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED :01.11.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI