ACIT 6(3), MUMBAI V. METRO ISPAT PVT. LTD, MUMBAI

ITA 4069/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2590 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 06-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Assessee Lawyers: UTTAM CHAND BOTHRA
• Keywords: Business income; Revenue expenditure; Capital expenditure
• Section: 115JB; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D. MANMOHAN, HONBLE VICE PRESIDENT AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA. NO. 4069/MUM/2008 ASSESSMENT YEAR 2005-2006 ACIT, CIR. 6 (3) MUMBAI 020. VS. M/S. METRO ISPAT PVT. LTD. MUMBAI 010 (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI LALCHAND FOR RESPONDENT : SHRI UTTAM CHAND BOTHRA ORDER PER D. MANMOHAN, V.P. 1. THIS APPEAL, FILED AT THE INSTANCE OF REVENUE, IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, MUMBAI AND IT P ERTAINS TO THE ASSESSMENT YEAR 2005-2006. 2. TWO ISSUES WERE URGED BEFORE US. FACTS CONCERNI NG THE ISSUES ON HAND ARE STATED IN BRIEF. THE ASSESSEE-CO MPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF ROUND BARS. ACCOR DING TO THE LEARNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE , THE END PRODUCT IS KNOWN AS TMT BARS. FOR THE YEAR UNDER CONSIDE RATION, IT DECLARED BUSINESS INCOME OF RS.51,54,180/- AFTER SETTING-OFF CARRIED FORWARD LOSS AND HENCE, PROFIT DECLARED BEING LESS THAN THE INCOME CHARGEABLE UNDER SECTION 115JB OF THE ACT, THE ASSESSEE-COMPAN Y DECLARED BOOK PROFIT OF RS.2.05 CRORES. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED A SUM OF RS.58,05,278/- AS DEDUCTION REFERABLE TO THE REPLAC EMENT OF CHILLED ROLLS, FIRE BRICKS, PEDESTAL FANS, EXHAUST FANS, AI R-FILTER UNITS AND CABLE 2 LINES. THEY WERE SHOWN AS REPAIRS TO PLANT AND MACH INERY AND REPAIRS TO ELECTRICAL MAINTENANCE. THE ASSESSING OFFICER OB SERVED THAT ASSESSEE INCURRED CAPITAL EXPENDITURE UNDER THE AFO REMENTIONED HEADS AND THE EXPENDITURE GIVES ASSESSEE AN ENDURIN G BENEFIT IN WHICH EVENT IT CANNOT BE TREATED AS CURRENT REPAIR S. HE ACCORDINGLY DISALLOWED THE CLAIM OF DEDUCTION BUT ALLOWED DEPRE CIATION ON THE AFOREMENTIONED ITEMS. 4. AGGRIEVED, ASSESSEE-COMPANY PREFERRED AN APPEAL BEFORE THE CIT(A) CONTENDING, INTER ALIA, THAT THE IMPUGNED EXPENDITURE IS REVENUE IN NATURE AND HENCE, OUGHT TO HAVE ALLOWED DEDUCTION. AS COULD BE NOTICED FROM THE STATEMENT OF FACTS AND GR OUNDS OF APPEAL FILED BEFORE THE CIT(A), THE CASE OF THE ASSESSEE W AS THAT CHILLED ROLLS ARE MAINLY USED IN PRODUCING A PARTICULAR SIZE OF R OUND BARS. DURING THE COURSE OF PRODUCTION, THE CHILLED ROLLS GET DAM AGED AND IT HAS TO BE REPLACED BY NEW CHILLED ROLLS AND IN SOME CASES WIT H MINOR REPAIRS THE SAME CAN BE RE-USED. THE ASSESSEE FOLLOWED THE PRAC TICE OF TREATING THEM AS STORES AND THE VALUE OF ROLLS, WHICH ARE ALTHOUGH USED BUT ARE IN GOOD CONDITION, ARE SHOWN AS CLOSING STOCK W HICH HAS BECOME OPENING STOCK FOR THE NEXT YEAR AND SO ON. IN OTHER WORDS, ITEMS WHICH WERE TO BE REPLACED, ARE REDUCED FROM THE CLOSING S TOCK. SIMILARLY ASSESSEE REPLACED FIRE BRICKS IN FURNACE AT FREQUEN T INTERVALS. IN THE CASE OF ROLLING MILLS, FURNACE IS INSTALLED WITH TH E HELP OF FIRE BRICKS WHICH HELP IN TOLERATING HIGH DEGREE OF TEMPERATURE . DURING THE COURSE OF TIME, THESE BRICKS ARE SOME TIMES BROKEN OR DAMA GED AND THEREFORE, THE SAME HAVE TO BE REPLACED BY WAY OF REPAIRS. FOR REPAIRING THE FURNACE, BRICKS ARE PURCHASED AND USED TO REPAIR TH E FURNACE. THUS THE EXPENDITURE IS PURELY OF REVENUE NATURE. SIMILA RLY THE ASSESSEE INCURRED EXPENDITURE ON REPAIR/REPLACEMENT OF CABLE LINE WORK, AIR- FILTER UNITS, PEDESTAL FAN AND EXHAUST FANS WHICH A RE ALSO OF REVENUE NATURE SINCE EXPENDITURE IS INCURRED AT FREQUENT IN TERVALS. 3 5. IT COULD THUS BE SEEN THAT THE ASSESSEE CLAIMED DEDUCTION OF EXPENDITURE UNDER SECTION 37 OF THE ACT (REVENUE EXPENDITURE) BUT NOT AS CURRENT REPAIRS. LEARNED CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE BY OBSERVING AS UNDER : 3.3. I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A.R. AND I FIND THAT THE A.O. HAS TREATED THE EXPENDITUR E ON REPAIRS TO PLANT AND MACHINERY AS CAPITAL IN NATURE WITHOUT BRINGING ANYTHING ON RECORD TO SHOW THAT THESE EXPENDITURE HAS BEEN INCURRED FOR BRINGING ANY ASSET INTO EXISTENCE. I FIND THAT THES E ARE MERE REPLACEMENTS OF PART OF PLANT AND MACHINERY AND CANNOT BE TREATED AS CAPITAL IN NATURE. SIMILARLY, THE ELECTRICAL REPAIRS IS ALSO P ART OF CURRENT REPAIRS AND HENCE CANNOT BE TREATED AS CAPITAL. THE A.O. IS DIRECTED TO DELETE THIS ADDITI ON. THESE GROUNDS OF APPEAL ARE ALLOWED. 6. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US CONTE NDING, INTER ALIA , THAT THE IMPUGNED EXPENDITURE CANNOT BE TREATED A S REVENUE EXPENDITURE IN THE LIGHT OF DECISION OF THE APEX COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS P. LTD. (20 07) 293 ITR 201. LEARNED D.R. ADVERTED OUR ATTENTION TO THE ORDER OF THE ASSESSING OFFICER TO HIGHLIGHT THAT EACH CHILLED ROLL IS A SE PARATE ITEM IN ITSELF WHICH GIVES THE ASSESSEE AN ENDURING BENEFIT. SIMIL ARLY EXPENDITURE ON PEDESTAL FANS ETC., ARE ALSO CAPITAL IN NATURE. SINCE THE ITEMS REPLACED/PURCHASED GIVES THE ASSESSEE AN ENDURING B ENEFIT, IN THE LIGHT OF DECISION OF THE APEX COURT IN THE CASE OF SARAVANA SPINNING MILLS LTD. (SUPRA), ANY EXPENDITURE INCURRED FOR RE PLACING OF AN INDEPENDENT AND SEPARATE MACHINE WITHIN THE FACTORY PREMISES SHOULD NOT BE TREATED AS CURRENT REPAIRS AND HAS TO BE T REATED AS CAPITAL EXPENDITURE. 4 7. ON THE OTHER HAND, LEARNED COUNSEL SUBMITTED TH AT CHILLED ROLLS AND FIRE BRICKS CANNOT BE TREATED AS AN INDEPENDENT MACHINERY OR PLANT IN THE FACTORY PREMISES AND THUS IT CANNOT BE CONSIDERED AS A REPLACEMENT OF AN INDEPENDENT MACHI NE. ADVERTING OUR ATTENTION TO PAGE 72 OF THE PAPER BOOK LEARNED COUNSEL SUBMITTED THAT THE PROCESS OF MANUFACTURE OF TMT BARS IS SUCH THAT AN INDEPENDENT ITEM OF CHILLED ROLL/FORGED ROLL/FIRE B RICK/AIR-FILTER ETC., CANNOT BE TREATED AS A SEPARATE MACHINE. WHILE EXPL AINING THE NATURE OF PROCESS, VIDE LETTER DATED 20 TH AUGUST, 2007 THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER AS UNDER : THE MANUFACTURING PROCESS OF TMT BARS IS VERY SIMP LE. THE RAW MATERIAL LIKE INGOTS, BILLETS, BLOOMS, SHIP - BREAKING PLATS ARE REQUIRED IN TMT PROCESS. THE SAI D MATERIAL IS FEEDED IN FURNACE WITH PUSHER TYPE ARRANGEMENT. THEY ARE HEATED THERE AT 1200C TEMPERATURE. THE INGOTS, BILLETS ARE SLOWLY FORWARD ED AND THEN TAKEN OUT FROM OTHER END OF THE FURNACE IN A R ED HOT CONDITION. THEN THEY ARE PASSED THROUGH DIFFERENT R OLLING MILL STANDS WHERE THEIR SHAPE CHANGES. THE INGOTS G ET CONVERTED INTO BARS AND THEIR LENGTH INCREASE. LESS THE DIAMETER MORE THE LENGTH. AFTER LEAVING THE LAST RO LLING MILL STAND (FINISHING STAND) THE BAR IS PASSED THROUGH S PECIAL COOLING PIPE SYSTEM WHERE IT IS RAPIDLY QUENCHED FO R A SHORT-TIME DEPENDING ON THE SIZE OF BARS AND THE RO LLING SPEED. THE ROLLING STAND, WHICH IS CUT TO COOLING B ED LENGTH, IS FED TO THE COOLING BED AND FINISHING THE FINAL TOUCH TO THE BARS. IN THIS PROCESS, THE ROUND BARS GET DIFFERENT HIGH STRENGTH FROM NEARLY THE SAME STEEL GRADES. AFTER THIS PROCESS, THE FINISHED PRODUCT IS CALLED TMT BARS. 5 8. HE SUBMITTED THAT THE RAW MATERIAL SUCH AS INGO TS, BILLETS, ETC., ONCE FED IN FURNACE CANNOT BE KEPT ASIDE EVEN FOR A SHORTER DURATION TILL THE FINISHED PRODUCT IS TAKEN OUT FRO M THE OTHER END SINCE ANY GAP BETWEEN THE INITIAL PROCESS AND THE FINAL P ROCESS WOULD RESULT IN REDUCTION OF TEMPERATURE WHICH INTURN REDUCES TH E HEAT OF THE INGOTS AND THUS BECOMES UNFIT FOR CONVERTING THEM I NTO THE DESIRED SHAPE. IT COULD THUS BE SEEN THAT UNLIKE THE CASE O F SARAVANA SPINNING MILLS LTD. (SUPRA) THE SO-CALLED INDEPENDE NT MACHINERY WHICH WAS REPLACED BY THE ASSESSEE CANNOT BE TREATE D AS INDEPENDENT IN ITS WORKING SINCE THEY ARE PART OF THE WHOLE PRO CESS APART FROM THE FACT THAT THEY DO NOT GIVE ANY ENDURING BENEFIT TO THE ASSESSEE AND BEARING IN MIND THE NEED TO REPLACE AT FREQUENT INT ERVALS THE ASSESSEE TREATED THEM AS STOCKS. IN THIS REGARD, HE ADVER TED OUR ATTENTION TO PAGE NOS. 7, 56, 57 OF THE PAPER BOOK WHEREIN IT IS SHOWN THAT THE EXPENDITURE IS INCURRED ON THESE ITEMS AT FREQUENT INTERVALS. PAGE 58 IS WITH REGARD TO ELECTRICAL MAINTENANCE WHICH IS I N THE NATURE OF ROUTINE MAINTENANCE EXPENDITURE. HE THUS SUBMITTED THAT THERE IS NO EVIDENCE TO SHOW THAT THE REPLACED ITEMS HAVE GIVEN THE ASSESSEE AN ENDURING ADVANTAGE, ON THE CONTRARY SOME ROLLS ARE REPLACED EVERY TWO MONTHS. HE ALSO ADVERTED OUR ATTENTION TO PAGE 13 O F THE PAPER BOOK TO SUBMIT THAT UNDER IDENTICAL CIRCUMSTANCES EXPEND ITURE INCURRED BY THE ASSESSEE WAS ALLOWED AS REVENUE EXPENDITURE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEARS. HE ALSO REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EAG LE THEATRES (1987) 165 ITR 93 (DEL.) WHEREIN THE COURT OBSERVED THAT E XPENDITURE INCURRED ON REPLACING OLD ELECTRICAL WIRING WITH NE W ELECTRICAL WIRING WOULD NOT GIVE RAISE TO THE ASSESSEE AN ENDURING BE NEFIT AND HENCE SUCH EXPENDITURE HAS TO BE TREATED AS REVENUE IN NA TURE. SIMILARLY IN THE CASE OF CIT VS. ATHERTON WEST & CO. LTD. (1971) 82 ITR 352 EXPENDITURE INCURRED ON REPLACEMENT OF COTTON BOWLS IN TEXTILE MILLS, BECOMING UNSERVICEABLE DUE TO WEAR AND TEAR, WAS CO NSIDERED AS 6 REVENUE IN NATURE. LEARNED COUNSEL HAS ALSO REFERRE D TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAMRAJU SURGICAL COTTON MILLS & ORS. (2007) 294 ITR 328 TO SUBMIT TH AT THE DECISION IN THE CASE OF SARAVANA SPINNING MILLS (P) LTD. (SUPRA ) WAS RENDERED IN THE CONTEXT OF SECTION 31 OF THE ACT WHEREIN THE CO URT HAS NOT PROPERLY EXAMINED THE TESTS TO BE APPLIED IN RESPEC T OF A CLAIM UNDER SECTION 37 OF THE ACT AND IN THE SAID CONTEXT THE C OURT OBSERVED THAT IN THE EVENT OF REPLACING AN OLD WORN-OUT ITEM OF M ACHINERY OR EVEN A NEW MACHINERY, THE SAME CAN BE ALLOWED AS REVENUE E XPENDITURE PROVIDED THERE IS NO INCREASE IN THE PRODUCTION CAP ACITY BY VIRTUE OF SUCH REPLACEMENT. IN OTHER WORDS, THE APEX COURT I NDICATED THAT MERELY BECAUSE AN EXPENDITURE GIVES THE ASSESSEE AN ENDURING ADVANTAGE, IT CANNOT BE TREATED AS CAPITAL EXPENDIT URE IF SUCH EXPENDITURE WAS INCURRED ONLY IN THE FORM OF REPLAC EMENT OF MACHINERY WITHOUT ANY INCREASE IN THE PRODUCTION CA PACITY. LEARNED COUNSEL SUBMITTED THAT IN THE INSTANT CASE THERE IS NO INCREASE IN THE PRODUCTION CAPACITY AND THE COMPLEX NATURE OF THE M ANUFACTURING PROCESS NECESSITATES THE ASSESSEE TO REPLACE CHILLE D ROLLS, FIRE BRICKS ETC., AT REGULAR INTERVALS AND SINCE THE REPLACED P ARTS ARE MERELY PART OF THE WHOLE MACHINERY WHICH IS NECESSARY FOR CONTI NUOUS PROCESS OF BRINGING OUT THE END PRODUCT, FROM THE STAGE OF FEE DING OF RAW MATERIAL IN THE FORM OF INGOTS, BILLETS ETC., EXPENDITURE IN CURRED THEREON HAS TO BE TREATED AS REVENUE IN NATURE. SIMILARLY EXPENDIT URE ON CABLE LINE WORK ETC., AND REPLACEMENT OF MINOR ITEMS SUCH AS E XHAUST FAN ETC., CANNOT BE TREATED AS CAPITAL EXPENDITURE IN THE CIR CUMSTANCES OF THE CASE. HE THUS STRONGLY SUPPORTED THE ORDER OF THE L EARNED CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE RECORD. AS COULD BE NOTICED FROM THE MA TERIAL PAPERS THE ASSESSEE CONSIDERED CHILLED ROLLS AS INVENTORY AND IT IS NOT CLEAR AS TO WHETHER IT WAS CLAIMED AS CURRENT REPAIRS OR REVENU E EXPENDITURE. 7 PAGE 13 OF THE PAPER BOOK HOWEVER SHOWS THAT IT WAS SHOWN UNDER THE HEAD MACHINERY MAINTENANCE. THE ASSESSING OFFIC ER WAS UNDER THE IMPRESSION THAT IT WAS CLAIMED AS CURRENT REPAIRS , BEARING IN MIND THE FACT THAT CHILLED ROLLS/FIRE BRICKS ETC., WERE REPLACED. THEREFORE, THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E AND CONSIDERED IT AS CAPITAL EXPENDITURE, PRESUMABLY BEARING IN MIND THE DECISION OF THE APEX COURT IN THE CASE OF SARAVANA SPINNING MILLS P VT. LTD. (SUPRA). HOWEVER, THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT IT WAS A REVENUE EXPENDITURE. IT WAS ALSO SHOWN BEFORE US TH AT IT WAS A CONTINUOUS PROCESS RIGHT FROM THE STAGE OF FEEDING THE RAW MATERIAL TO THE MANUFACTURE OF TMT BARS AS END PRODUCT. IT IS N OT IN DISPUTE THAT IN THE IMMEDIATELY PRECEDING YEARS, THE ASSESSING O FFICER ACCEPTED IT AS REVENUE EXPENDITURE AND ALLOWED THE CLAIM OF DED UCTION. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE EX PENDITURE INCURRED ON REPLACEMENT OF CHILLED ROLL/FIRE BRICKS/FORGED R OLLS CANNOT BE TREATED AS CAPITAL EXPENDITURE THOUGH IT MAY NOT FA LL WITHIN THE DESCRIPTION OF CURRENT REPAIRS. IN OTHER WORDS, THE LEARNED CIT(A) WAS JUSTIFIED IN CONSIDERING THE CLAIM OF DEDUCTION UNDER SECTION 37 OF THE ACT. SIMILARLY EXPENDITURE INCURRED ON REPLACEM ENT OF PEDESTAL FAN, EXHAUST FAN AND CABLE LINE ETC., CANNOT BE TRE ATED AS BRINGING INTO EXISTENCE OF ANY NEW ASSET OF ENDURING ADVANTAGE SI NCE BY REPLACING OF SUCH ITEMS THE PRODUCTION CAPACITY HAS NOT ENHANCED . BEARING IN MIND THE NATURE OF EXPENDITURE WE ARE OF THE VIEW T HAT THE LEARNED CIT(A) WAS JUSTIFIED IN TREATING THE EXPENDITURE AS REVENUE IN NATURE. WE THEREFORE, DISMISS GROUND NO.1 OF THE REVENUE. 10. THIS LEAVES US WITH GROUND NO. 2 WHICH READS A S UNDER : 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISAL LOWANCE OF INTEREST OF RS.6,22,902/- MADE BY THE A.O. U/S. 40( A) (2) OF I.T. ACT AS PER DETAILS GIVEN IN THE BODY OF THE AS SESSMENT ORDER. 8 11. ADMITTEDLY THE ASSESSEE BORROWED SUMS FROM REL ATIVES AND OUTSIDERS AND PAID INTEREST @ 18% P.A. AS AGAIN ST 12% CHARGED BY BANKS. THEREFORE, BY INVOKING THE PROVISIONS OF SEC TION 40A(2) OF THE ACT, THE ASSESSING OFFICER CONSIDERED THE INTEREST PAYMENT @ 12% P.A. AS REASONABLE AND THE BALANCE OF 6% TREATED AS EXCE SSIVE AND UNREASONABLE. HE ACCORDINGLY DISALLOWED A SUM OF RS .6,22,902/-. 12. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE LEARN ED CIT(A) THAT CERTAIN PARTIES, TO WHOM THE INTEREST WAS PAID AT 18%, WERE NOT RELATIVES WITHIN THE MEANING OF SECTION 40A (2) OF THE ACT THOUGH THE AUDITORS REPORT MISTAKENLY MENTIONS SO. IT WAS FUR THER CONTENDED THAT BANKS GIVE LOANS UPON OBTAINING ADEQUATE SECUR ITY WHEREAS OTHER CREDITORS AND RELATIVES HAVE GIVEN LOANS TO THE ASS ESSEE WITHOUT ANY SECURITY AND THUS, THE DIFFERENCE IN INTEREST RATE BETWEEN THE BANKS AND UNSECURED CREDITORS IS REASONABLE. RELIANCE WAS PLACED UPON SEVERAL CASE LAW TO SUBMIT THAT PAYMENT OF INTEREST UP TO 24% ON UNSECURED LOANS CAN BE CONSIDERED AS REASONABLE SIN CE, UNSECURED LOANS CANNOT BE TREATED ON PAR WITH BANK LOANS. HAV ING REGARD TO THE SUBMISSIONS OF THE ASSESSEE, LEARNED CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 4.3. . THE BANK RATES ARE NOT COMPARABLE TO THE RATES APPLICABLE IN THE OPEN MARKET. THE AR HAS BEEN ABLE TO SHOW THAT THEY ARE PAYING INTEREST TO OTHERS ALSO @ 18%. SO IT IS NOT A CASE OF DISCRIMINATION BETWEEN RELATIVES AND OTHERS. HENCE, THE PROVISIONS OF SECTION 40A(2)(B) ARE NOT APPLICA BLE TO THE FACTS OF THE CASE. IN THE CASE OF ITO VS. K. S. BHASIN, 17 TTJ (GAU) 134, IT WAS HELD THAT BANK RAT E CAN NOT BE TAKEN AS A GUIDE SINCE BANK REQUIRE PLEDGE OF PROPERTY. ACCORDINGLY, I DIRECT THE AO TO DELETE THIS ADDITION. 9 13. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. LEA RNED D.R. ADVERTED OUR ATTENTION TO PAGE 4 OF THE ASSESSMENT ORDER TO HIGHLIGHT THAT SUBSTANTIAL AMOUNT WAS BORROWED FROM DIRECTORS AND RELATIVES WHEREAS LEARNED CIT(A) WAS WRONGLY OF THE OPINION T HAT DIRECTORS WERE NOT RELATIVES. HE THUS SUBMITTED THAT THE LEARNED CIT(A) HAS NOT APPRECIATED THE FACTS IN THE CORRECT PERSPECTIVE. 14. ON THE OTHER HAND, LEARNED COUNSEL APPEARING O N BEHALF OF THE ASSESSEE ADVERTED OUR ATTENTION TO PAGES 70, 75 TO 78 OF THE PAPER BOOK TO SUBMIT THAT THE ASSESSEE OBTAINED UNS ECURED LOANS FROM OUTSIDERS ALSO, WHO WERE WRONGLY SPECIFIED AS RELATIVES, AND INTEREST WAS PAID TO THEM AT 18%. SIMILARLY UNSECU RED LOANS WERE OBTAINED FROM THE DIRECTORS AND OTHER RELATIVES @ 1 8% P.A. INTEREST PAID @ 18% CANNOT BE HELD TO BE EXCESSIVE MERELY BE CAUSE BANK CHARGES LESSER RATE OF INTEREST ; DISALLOWANCE IS N OT CALLED FOR MERELY BY COMPARING IT WITH THE BANK LOANS WHICH FOLLOW STRIC T NORMS IN GRANTING LOANS. HE THUS STRONGLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE A SSESSEE PAID INTEREST ON UNSECURED LOANS (OBTAINED FROM OUTSIDERS) AND IN TEREST PAID THEREON, VARYING FROM 12% TO 18% TO OUTSIDERS, WAS CLAIMED AS DEDUCTION AND ACCEPTED BY THE ASSESSING OFFICER. SU CH BEING THE CASE, MERELY BECAUSE FEW LOANS WERE TAKEN FROM THE RELA TIVES, INTEREST PAID @ 18% CANNOT BE HELD TO BE EXCESSIVE AND UNREA SONABLE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). ACCOR DINGLY, GROUND NO.2 IS REJECTED. OTHER GROUNDS URGED BEFORE US ARE GENE RAL IN NATURE AND THEREFORE, DO NOT REQUIRE INDEPENDENT CONSIDERATION . 16. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. 10 ITA. NO. 4069/MUM/2008 ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 1 7 TH DAY OF DECEMBER, 209. SD/- SD/- (R.K. PANDA) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 17 TH DECEMBER, 2009. VBP/- COPY TO 1. ACIT, CIRCLE 6 (3), ROOM NO. 522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. 2. M/S. METRO ISPAT PVT. LTD. 3 RD FLOOR, POTIA INDUSTRIAL ESTATE, REAY ROAD, DAROKHANA, MUMBAI 400 010 PAN AAABCM-8021-H 4. CIT(A)-VI, MUMBAI 5. CIT, CITY-VI, MUMBAI 6. D.R. A BENCH, MUMBAI. 7. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI. SNO DATE INITIALS 1 DRAFT DICTATED ON 15-12-2009 SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR 16-12-2009 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER