SHYAM CHEMICALS P.LTD, MUMBAI V. DCIT (OSD) 2(3), MUMBAI

ITA 4210/MUM/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9189 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 12-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Search and seizure; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NOS. 7477/MUM/2010 & 4210/MUM/2012 ( / ASSESSMENT YEARS: 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. JASH CHAMBERS, 5 TH FLOOR, SIR P. M. ROAD, FORT, MUMBAI-400 001 / VS. ASST. CIT(OSD)-2(3) AAYKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 ./! ./PAN/GIR NO. AADCS 0883 K ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) ' % & / APPELLANT BY : SHRI NISHIT GANDHI #$ ' % & / RESPONDENT BY : SHRI NEIL PHILIP ' ()* % +, / DATE OF HEARING : 14.01.2015 -./ % +, / DATE OF PRONOUNCEMENT : 25.03.2015 0 / O R D E R PER SANJAY ARORA, A. M.: THESE ARE TWO APPEALS BY THE ASSESSEE I.E., FOR ASS ESSMENT YEARS (A.YS.) 2007- 08 AND 2008-09, DIRECTED AGAINST THE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI (CIT(A) FOR SHORT) DATED 27.0 7.2010 AND 03.05.2012 FOR THE TWO CONSECUTIVE YEARS RESPECTIVELY. THE ISSUES ARISING BEING COMMON, THE SAME WOULD HEARD TOGETHER, AND ARE ACCORDINGLY DISPOSED VIDE A COMMO N CONSOLIDATED ORDER. 2. THE FIRST ISSUE FOR A.Y. 2007-08, RAISED PER GRO UND #1, IS IN RESPECT OF UNDER- STATEMENT OF STOCK OF COPPER UNDER PROCESS; THE ASS ESSEE BEING A MANUFACTURER, TRADER AND PROCESSOR OF COPPER BASED CHEMICALS. COMPARING THE CLOSING STOCK AS AT THE YEAR-END, I.E., AS DISCLOSED BY THE ASSESSEE PER ITS BALANCE-SHEET, WITH THAT FURNISHED TO ITS BANKER QUA THE CREDIT FACILITIES AVAILED THERE-AGAINST, A DISCREPA NCY WAS FOUND IN THE QUANTITY OF COPPER- 2 ITA NOS. 7477/M/10 & 4210/M/12 (A.YS. 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. VS. ASST. CIT UNDER-PROCESS. WHILE BOOK FIGURE OF THE COPPER SCRA P AS ON 31.03.2007 WAS AT 3.0 METRIC TONS (MT), THAT FURNISHED TO THE BANK AS ON THAT DA TE WAS AT 5.7 MT. ON BEING INQUIRED IN THE MATTER, IT WAS EXPLAINED BY THE ASSESSEE THAT T HE FIGURE AS SUPPLIED TO THE BANK WAS TENTATIVE AND PROVISIONAL. THE SAME WAS SOUGHT TO B E SUPPORTED BY THE FACT THAT WHILE THE VALUATION OF COPPER AS MADE IN THE INVENTORY SUBMIT TED TO THE BANK WAS AT RS.276.74 PER KG., ITS ACTUAL COST WAS RS.319/- PER KG., WHICH WA S ACCORDINGLY APPLIED FOR VALUING THE CLOSING STOCK OF COPPER WHILE FINALIZING THE BALANC E SHEET. NO COGNIZANCE, ACCORDINGLY, IT WAS PRAYED, BE TAKEN OF THE SAID DISCREPANCY. THE S AME WAS NOT ACCEPTED BY THE ASSESSING OFFICER (AO) AS THE ASSESSEE WAS MAINTAIN ING DAY-TO-DAY STOCK REGISTER FOR THE PURPOSE OF EXCISE DUTY. THERE WAS ACCORDINGLY NO BASIS FOR IT TO SAY THAT T HE STOCK STATEMENT FURNISHED TO THE BANK, WHICH WAS ON 17.04 .2007, I.E., OVER TWO WEEKS AFTER THE CLOSING DATE, WAS AT A PROVISIONAL FIGURE . LENDING CREDENCE TO THE SAID EXPLANATION WOULD, RATHER, IMPLY THAT THE STOCK REGISTER AND/OR RECORD MAINTAINED BY THE ASSESSEE IS NOT RELIABLE, SO THAT ITS BOOK RESULTS ARE TO BE R EJECTED. THE SAME FOUND ACCEPTANCE WITH THE LD. CIT(A) IN APPEAL FOR ESSENTIALLY THE SAME R EASONS. THE ASSESSEE HAD NEITHER BEFORE THE AO NOR BEFORE HIM, I.E., DURING THE APPELLATE P ROCEEDINGS, PRODUCED THE EXCISE RECORDS, WHICH WAS THE PRINCIPAL AND THE PRIMARY MA TERIAL ON WHICH ITS CASE WAS BASED. THE ADDITION FOR THE EXCESS STOCK OF 2.7 MT OF COPP ER, VALUED AT ITS COST OF RS.319 PER KG., I.E., AT RS.8,61,300/-, BEING CONFIRMED THUS, THE ASSESSEE IS IN SECOND APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 WE WERE DURING THE COURSE OF THE HEARING TAKEN THROUGH THE DETAILS OF THE STOCK FURNISHED TO THE BANK (PB PG. 48); THE DETAILS OF T HE STOCK AS PER THE BALANCE-SHEET AS ON 31.03.2007 (PB PGS. 33-34); THE COMPARATIVE STATEME NT BETWEEN THE TWO (PB PG. 50); THE MONTHLY PLANT REPORTS FOR THE MONTHS OF FEBRUARY, M ARCH AND APRIL, 2007 (PB PGS. 52- 54); AND THE AUDIT CONFIRMATION UNDER EXCISE LICENS E (PB PG. 72). THE ASSESSEES EXPLANATION BEFORE THE REVENUE AUTHORITIES, I.E., T HE A.O. AND THE LD. CIT(A) (AT PB PGS. 49, 73-83), HAS ALSO BEEN PERUSED BY US. THE ASSESS EE CASE IS THAT THE SUBMISSION OF THE STOCK STATEMENT (TO THE BANK) CANNOT FORM THE BASIS FOR INFERRING EXCESS STOCK WITH IT AS ON 3 ITA NOS. 7477/M/10 & 4210/M/12 (A.YS. 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. VS. ASST. CIT THE RELEVANT DATE. THE SAME IS CONSIDERED AS A FORM ALITY FOR THE PURPOSE OF OBTAINING THE BANK FINANCE, SO THAT THE FIGURES FURNISHED ARE ON A PROVISIONAL BASIS, LIABLE TO CORRECTION, I.E., WITH REFERENCE TO ITS BOOKS OF ACCOUNT, AND T OWARD WHICH IT ALSO CITES THE RATE APPLIED TO COPPER AND COPPER-UNDER-PROCESS IN THE BANK STAT EMENT (AT RS.256.73 PER KG.), AS AGAINST THE CORRECT RATE OF RS.319 PER KG., AT WHIC H THE SAID GOODS ARE FINALLY VALUED FOR BALANCE-SHEET PURPOSES. THE SAME MAY WELL BE TRUE, SO THAT THE QUANTITY AND, THUS, THE VALUE OF THE STOCK TO THE BANK IS ENHANCED (I.E., W ITH REFERENCE TO THAT REFLECTED PER ITS BOOKS), SO AS TO EXHIBIT ELIGIBILITY TO A HIGHER DR AWING POWER (OR CREDIT). IN WHICH CASE, THEREFORE, THE ASSESSEES BOOKS FORM THE BASIS, AND NOT THE FIGURE/S TO THE BANK, WHICH IS THE ASSESSEES CASE IN SUBSTANCE. BUT THEN, THAT ON LY IMPLIES THAT THE ASSESSEE RELIES ON ITS BOOKS OF ACCOUNT, WHICH IT IS ENTITLED TO, AND THER EFORE ALL THAT IT WAS REQUIRED TO DO WAS TO FURNISH ITS STOCK REGISTER/S, WHICH IT MAINTAINS, B EING EVEN OTHERWISE MANDATORY FOR IT TO UNDER THE EXCISE LAW. THE ASSESSEE, HOWEVER, OMITS OR FAILS TO DO SO, AND THROUGHOUT. THIS, RATHER, IS THE REVENUES CASE, WITH THE A.O. STATING THAT NOT SO DOING, I.E., ADOPTING THE QUANTITY AS FURNISHED TO THE BANK, WOULD IMPLY NOT RELYING UPON AND, CONSEQUENTLY, REJECTION OF THE ASSESSEES BOOKS OF ACCOUNT (ALSO REFER PARA 2 ABOVE, AS WELL AS PARAS 3.2 AND 4.3 OF THE ASSESSMENT AND THE IMPUGNED ORDER RE SPECTIVELY). THAT IS, THE ASSESSEE, BY NOT FURNISHING ITS STOCK RECORDS, WHICH IT CONTEND S TO FORM THE BASIS OF ITS FINAL ACCOUNTS, ACTS CONTRARY TO ITS OWN EXPLANATION (I.E., FOR THE PURPORTED EXCESS STOCK), DEFEATING ITS CASE . EVEN THE AUDIT CONFIRMATION UNDER EXCISE LAW, AS PRODUCED (PB PG. 72), IS A BLANK PAGE, AND THEREFORE TO NO AVAIL, EVEN AS WAS OBSERV ED BY THE BENCH DURING THE COURSE OF HEARING, WONDERING AS TO WHY IN THAT CASE THE SAME STANDS ADDUCED, TO NO REPLY OR ANSWER BY THE LD. AR. 3.2 THE ASSESSEES PLEA AS TO THE BANK STOCK BEING PROVISIONAL, IS, AGAIN, INFIRM, FOR THE SAME REASON/S. FIRSTLY, IF THAT IS SO, HOW IS IT, THEN, THAT THE S TOCK QUANTITY OF ALL OTHER ITEMS MATCHES WITH THE BOOK STOCK (REFER PB PGS.33-34 AND 48)? TWO, A PROVISIONAL FIGURE, BY DEFINITION, ONLY IMPLIES A FIGURE WHICH IS YET NOT ATTAIN FINALITY, BEING SUBJECT TO DUE VERIFICATION/VALIDATION. THE QUESTION, FIRSTLY, THEREFORE, IS: WHAT IS THE BASIS OF THIS 4 ITA NOS. 7477/M/10 & 4210/M/12 (A.YS. 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. VS. ASST. CIT PROVISIONAL FIGURE? THE PHYSICAL VERIFICATION, IF T HAT IS IN MIND, WOULD ONLY BE CARRIED ON 31.03.2007 ITSELF, I.E., MUCH EARLIER TO THE SUBMIS SION OF THE INVENTORY STATEMENT TO THE BANK. FURTHER, THE VERIFICATION COULD ONLY BE WITH REFERENCE TO THE ASSESSEES INTERNAL RECORDS, AND WHICH BRINGS US BACK TO THE ASSESSEES ACCOUNTS AND STOCK RECORDS. IT IS ONLY FOR THE ASSESSEE TO SPECIFY THE SAID VERIFICATION A ND/OR VALIDATION PROCESSES. IT WAS THUS OPEN AND, IN FACT, INCUMBENT ON THE ASSESSEE TO SHO W, WITH REFERENCE TO ITS ACCOUNTS, THAT THOUGH INITIALLY REFLECTING A BALANCE OF 5.7 MT, TH E SAME, UPON CORRECTION SHOWING ITS BASIS, WAS FINALLY DETERMINED AT 3 MT, WHILE THE AS SESSEE IN THE PRESENT CASE HAS THROUGHOUT OMITTED TO DISCLOSE ITS EXCISE RECORD, W HICH IN FACT WOULD BE AUDITED BY BOTH ITS EXCISE AUDITORS AS WELL AS THE STATUTORY AUDIT ORS, AS IT INDEED CLAIMS AND PURPORTS TO EXHIBIT. TRUE, ITS AUDITORS STATE THAT THE BALANCE -SHEET IS IN AGREEMENT WITH THE BOOKS OF ACCOUNT (REFER ANNUAL ACCOUNTS AT PB PGS. 3-32), BU T THEN THE MOOT QUESTION IS: ARE THEY IN AGREEMENT WITH THE EXCISE RECORDS, WHICH WE UNDERST AND TO BE THE ONLY STOCK RECORD MAINTAINED BY THE ASSESSEE ? WHY, IF SO, THE ASSESSEE HAS NOT PRODUCED THE EXC ISE RECORDS BEFORE THE REVENUE AUTHORITIES, OR EVEN BEFORE US? THIS IS PUZZLING INDEED; MORE SO, WHEN THE SAME IS DEBILITATING OF ITS CASE, BEING T HE SUBJECT MATTER OF A CATEGORICAL FINDING BY THE REVENUE. THE MONTHLY PLANT REPORTS (PB PGS. 52-54), ON WHICH THE ASSESSEE RELIES, AGAIN, CANNOT BE TAKEN AS CONCLUSIVE. FIRSTLY, IT ONLY SHO WS THAT THE ASSESSEE MAINTAINS DAY-TO- DAY STOCK RECORD, EVEN AS POINTED OUT BY THE A.O., WHICH IS THUS THE PRIMARY SOURCE OF DATA, WHICH IS COLLATED AND AGGREGATED TO YIELD THE SAID MONTHLY REPORT. ALL THAT THEREFORE THE ASSESSEE WAS REQUIRED TO DO, WAS TO SHOW THAT T HE FIGURES AS DISCLOSED THEREIN ARE DRAWN FROM AND IN AGREEMENT THEREWITH, I.E., THE AS SESSEES RECORDS, WHICH IT OMITS OR FAILS TO, CONTENDING THE SAME TO BE, ON THE CONTRAR Y, PROVISIONAL . 3.3 THE ASSESSEES SECOND PLEA OF REFLECTING A HIG HER STOCK TO THE BANK FOR THE PURPOSE OF AVAILING A HIGHER BANK CREDIT AS ON 31.0 3.2007 IS ALSO, FACTUALLY, COMPLETELY AMISS. THE BANK STATEMENTS FOR THE PERIOD 01.03.200 7 TO 30.04.2007 (PB PGS. 35-46), REVEALS IN FACT A CREDIT BALANCE OF RS.95,67,128/- AS ON 31.03.2007 (PB PG. 38), SO THAT THE 5 ITA NOS. 7477/M/10 & 4210/M/12 (A.YS. 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. VS. ASST. CIT ASSESSEE, INSTEAD OF A BORROWING, HAS, ON THE CONTR ARY, A POSITIVE BALANCE, WITH THE BANK (WHICH ALONE IS RELEVANT) AS ON THAT DATE. WITHOUT PREJUDICE , EVEN THE BOOK FIGURE, I.E., AS PER THE ASSESSEES ACCOUNTS, REFLECTS A BORROWING O F RS.503.37 LACS IN THE CASH CREDIT ACCOUNT WITH THE BANK, I.E., AGAINST HYPOTHECATION OF STOCK AND BOOK DEBTS, WHICH ARE AT RS.57.93 LACS AND RS.763.99 LACS RESPECTIVELY AS ON 31.03.2007 (REFER THE RELEVANT SCHEDULES TO THE BALANCE-SHEET, AT PB PGS. 16,18 & 19), SO THAT THE ASSESSEE HAS ADEQUATE MARGIN, AND DID NOT REQUIRE TO MANIPULATE ITS STOCK FIGURE TO THE BANK SO AS TO ENABLE AVAILMENT OF A HIGHER CREDIT. IN FACT, AS STATED BY IT; THERE BEING ALSO A DIFFERENCE IN VALUATION (WHICH THOUGH HAS BEEN AND RIGHTLY SO IGNORED BY THE REVENUE), THE NET DIFFERENCE BETWEEN THE VALUE OF THE STOCK AS PER TH E BALANCE-SHEET AND THAT FURNISHED TO THE BANK, IS ONLY TO THE TUNE OF RS.1 LAC, I.E., RS .1,00,475/- TO BE PRECISE (PB PG. 49). FURTHER, EVEN CONSIDERING THE IMPACT OF THE IMPUGNE D DIFFERENCE OF 2.7 MT, THE SAME WOULD WORK TO RS.6.93 LACS ONLY (I.E., 2.7 MT @ RS. 256.73 PER KG.) AND, THUS, INCONSEQUENTIAL IN THE SCHEME OF THINGS. IN FACT, E VEN THIS NOMINAL DIFFERENCE WOULD DISSOLVE IF THE OUTSTANDING DUES TO THE CREDITORS, IN-AS-MUCH AS THE BANK FINANCE IS ONLY EXIGIBLE ON THE PAID-UP STOCK, IS TAKEN INTO ACCOUN T. IN SUM , TRUE, IT IS OPEN FOR THE ASSESSEE TO SHOW THAT THE STOCK FURNISHED BY IT TO THE BANK IS NOT A CORRECT STATEMENT. BUT THEN, IT IS EQUALLY INCUMBENT ON IT TO ILLUSTRATE T HE PURPOSE FOR WHICH THE SAID WRONG STATEMENT IS GIVEN, WHICH WE HAVE FOUND AS MISSING. FURTHER, IT IS EQUALLY INCUMBENT ON IT TO, THEN, STATE THE BASIS OF ITS CORRECT STOCK. 3.4 THE ASSESSEE HAS ALSO RELIED ON CASE LAW. THE M ATTER, AS WOULD BE APPARENT FROM THE FOREGOING, IS PURELY FACTUAL, ADJUDICATED BY US BY CONSIDERING THE ASSESSEES EXPLANATION WITH REFERENCE TO THE MATERIAL ON RECOR D. IN A GIVEN CASE, AN ASSESSEE MAY SATISFACTORILY EXPLAIN THE DIFFERENCE IN THE STOCK FIGURE/S FURNISHED TO THE BANK AND THAT DISCLOSED BY ITS FINAL ACCOUNTS, IN WHICH CASE NO C ASE FOR ADDITION WOULD ARISE. WHY, IN THE INSTANT CASE THE ASSESSEE HAS EVEN FAILED TO SH OW THAT THE SAME, I.E., THE STOCK AS DISCLOSED, ACTUALLY MATCHES WITH THAT REFLECTED BY ITS BOOKS . RELIANCE ON CASE LAW WOULD THUS BE OF LITTLE MOMENT; OUR DECISION BEING BASED ON FIRM FINDINGS OF FACT, BASED ON THE 6 ITA NOS. 7477/M/10 & 4210/M/12 (A.YS. 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. VS. ASST. CIT MATERIAL ON RECORD, AS IT OUGHT TO BE. IT WOULD, TH EREFORE, ALL DEPEND ON THE FACTS OF THE CASE THE QUESTION TO BE DECIDED IS WHETHER THE EX CESS STOCK IS INFERABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND, TWO, IF THE ASSESSEE HAS BEEN ABLE TO SATISFACTORILY EXPLAIN THE SAME, I.E., IN CASE OF A DIFFERENCE, THE ANSWER S TO WHICH IN THE PRESENT CASE ARE YES AND NO RESPECTIVELY. WE DECIDE ACCORDINGLY, AND T HE ASSESSEE FAILS. 4. THE SECOND ISSUE, COMMON FOR BOTH THE YEARS, ARI SING IN THE INSTANT APPEALS, IS THE DISALLOWANCE OF INTEREST U/S.40A(2)(A). THE ASSESSE E WAS OBSERVED TO HAVE PAID INTEREST ON UNSECURED LOANS TO PERSONS COVERED U/S. 40A(2)(B ) AT 21% P.A. (18% P.A. TO ONE PARTY), AND WHICH WAS CONSIDERED AS FAR IN EXCESS OF THE OB TAINING FAIR MARKET RATE OF 12% P.A. ACCORDINGLY, THE EXCESSIVE INTEREST, WORKED OUT AT THE BALANCE 9% P.A. OR, AS THE CASE MAY BE, 6% P.A., WAS DISALLOWED, AND CONFIRMED BY THE F IRST APPELLATE AUTHORITY FOR THE SAME REASON/S. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES CASE BEFORE US AS WELL AS BEFORE THE AUTHORITIES BELOW HAS BEEN THAT THE LOANS UNDER REFERENCE HAD BEEN TAKEN IN THE PAS T. THE ASSESSEE HAD CONSISTENTLY IN THE PAST PAID INTEREST AT THE RATE OF 21% P.A., WHICH H AD NOT BEEN DISTURBED OR UNACCEPTED BY THE DEPARTMENT. WE ARE UNABLE TO, WE ARE AFRAID, AP PRECIATE THE ASSESSEES CASE. FIRSTLY, THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE REV ENUE HAD AT ANY TIME ACCEPTED THE SAME. TRUE, THERE HAS BEEN NO SUCH ADJUSTMENT IN IT S ASSESSMENT FOR A.Y. 2005-06 (PB PGS. 61-62), BUT THEN THE ASSESSEE HAS NOT EXHIBITE D THAT IT WAS ENQUIRED IN THE MATTER DURING ASSESSMENT PROCEEDINGS, SO AS TO INFER ACCEP TANCE OF THE ASSESSEES CASE BY THE REVENUE, EVEN IF THE SAME DOES NOT FIND MENTION IN THE ASSESSMENT ORDER, WHICH IS THE CASE. AGAIN, FOR A.Y. 2004-05, THE REVENUE HAS RAIS ED THIS ISSUE, MAKING A DISALLOWANCE, ONLY TO BE DELETED BY THE FIRST APPELLATE AUTHORITY (PB PGS. 55-58). IT IS NOT CLEAR IF THE REVENUE HAS APPEALED AGAINST THE SAME, AND WHICH MA Y, ASSUMING SO, WELL BE FOR THE REASON OF LOW TAX EFFECT; THE AMOUNT INVOLVED FOR T HAT YEAR BEING ONLY RS.3,53,392/-. THERE IS, IN ANY CASE, NO ESTOPPEL AGAINST LAW, AND EACH YEAR IS AN INDEPENDENT UNIT OF 7 ITA NOS. 7477/M/10 & 4210/M/12 (A.YS. 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. VS. ASST. CIT ASSESSMENT, AND THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO THE PROCEEDINGS UNDER THE ACT. COMING TO THE ASSESSEES CASE ON MERITS, THE ASSESS EES CONTENTION OF THE LOANS BEING RAISED OVER A DECADE AGO ON THE SAME TERMS IS DE HORS ANY MATERIAL ON RECORD. RATHER, IT GETS REFUTED ON THE BASIS THAT THERE IS A WIDE VARIATION IN THE INTEREST (ALLOWED AT THE SAME RATE) FROM YEAR TO YEAR, SO THAT THERE IS THUS NO CONSTANCY AS TO THE PRINCIPAL AMOUNT BORROWED, ONLY WITH REFERENCE TO WHICH COULD THERE BE AN AGREEMENT. RATHER, THE BORROWINGS, ON A LONG TERM BASIS TEND TO DEPRESS TH E INTEREST RATE AS THE BORROWER COMMITS HIMSELF OVER AN EXTENDED PERIOD, EVEN AS FUTURE IN INHERENTLY UNCERTAIN, BEARING THUS A HIGHER RISK, WHILE AT THE SAME TIME ENSURING A STEA DY INCOME TO THE CREDITOR. FURTHER ON, THE PLEA HAS NO LEGS TO STAND IN-AS-MUCH AS INTERES T RATES VARY OVER TIME, SO THAT WHAT IS RELEVANT IS THE PREVAILING RATE; THE RECENT YEARS W ITNESSING A SHARP DECLINE IN THE INTEREST RATES, SO THAT THE INTEREST RATES ACROSS TIME ARE H ARDLY COMPARABLE; MORE SO, THAT OBTAINING A DECADE BACK, ON THE BASIS OF WHICH ARGUMENT THE F IRST APPELLATE AUTHORITY ALLOWED RELIEF TO THE ASSESSEE FOR A.Y. 2004-05. THE ASSESSEE CONT ENDING THAT THE REVENUE HAS NOT SHOWN THAT ANY EXCESSIVE PAYMENT TO OR THAT ANY BEN EFIT STANDS DERIVED BY THE PAYEES, BEING RELATED PARTIES, WHICH IS THE SINE QUA NON FOR THE APPLICATION OF S. 40A(2)(A), IS MIS- CONCEIVED. WHAT ELSE, THEN, ONE MAY ASK, IS THE EXC ESS PAYMENT FOR, IF NOT, A PAYMENT OR A BENEFIT, I.E., ASSUMING THE MARKET RATE OF INTEREST BEING LOWER THAN 21% P.A. (OR 18% P.A.) THE TWO RATES ITSELF EXHIBITING A MARGIN OF 3% P. A., I.E., ARE AT A DIFFERENCE OF 16%. BE THAT AS IT MAY, NEITHER PARTY HAS BROUGHT ANY MA TERIAL ON RECORD, EVEN AS THE ASSESSEE IS, SIMULTANEOUSLY, PAYING INTEREST TO BAN K, SO THAT THE SAID RATE COULD ONLY BE A FAIR INDICATOR AS TO THE PREVALENT INTEREST RATE. T HE MATTER, ON QUANTUM, THUS, CANNOT BE SAID TO BE DETERMINATE. THE BANK RATE IS NOT STRICT LY COMPARABLE, AND SOME LEVERAGE WOULD HAVE TO BE ALLOWED BETWEEN THE INTEREST RATE TO THE BANK AND THAT TO THE PRIVATE PARTIES, WHICH IS ON AN UNSECURED BASIS, EVEN THOUGH IN THE INSTANT CASE THE SAME STANDS GIVEN BY RELATED PARTIES TO THEIR OWN CONCERNS, SO THAT IT S ERVES A COMMON PURPOSE OR MUTUAL INTEREST. THAT IS, THE SAID RATE YET CANNOT FORM A SUITABLE BASIS TO ARRIVE AT THE FAIR MARKET 8 ITA NOS. 7477/M/10 & 4210/M/12 (A.YS. 2007-08 & 2008-09) SHYAM CHEMICALS P. LTD. VS. ASST. CIT VALUE OF THE INTEREST RATE FOR UNSECURED LOANS. IN OUR VIEW, ON THE BALANCE, A PREMIUM OF 25% (ON THE BANK RATE) WOULD BE MORE THAN ADEQUATE. ACCORDINGLY, THE EXCESS INTEREST RATE BE WORKED OUT BY APPLYING A FACTOR OF 1.25 TO THE AVERAGE BANK INTEREST RATE, I.E., FOR TERM FINANCE, AS OBTAINING FOR THE RELEVANT YEARS. A BANK RATE OF 12% P.A. (SAY) WOULD ACCORDINGLY YIELD AN EXCESS INTEREST RATE OF 6% P.A . (21 12 X 1.25). WE DECIDE ACCORDINGLY, AND THE ASSESSEE GETS PART RELIEF. 6. IN THE RESULT, THE ASSESSEES APPEALS FOR BOTH T HE YEARS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 25, 201 5 SD/- SD/- (JOGINDER SINGH) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' 1* MUMBAI; 2( DATED : 25.03.2015 ).(. ./ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. ' 3+ ( ) / THE CIT(A) 4. ' 3+ / CIT - CONCERNED 5. 6)7 #+(8 , , 8/ , ' 1* / DR, ITAT, MUMBAI 6. :; <* / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ' 1* / ITAT, MUMBAI