New Hind Silk House Pvt. Ltd., , Kolkata V. ITO, Ward - 8(2), Kolkata , Kolkata

ITA 516/KOL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5925 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYAJIT MONDAL
• Assessee Lawyers: MANISH TIWARI

Judgement Text

ITA NO.516/KOL/2018 NEW HIND SILK HOUSE PVT. LTD. A .Y.2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC K OLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM] ITA NO.516/KOL/2018 ASSESSMENT YEAR : 2011-12 NEW HIND SILK HOUSE PVT. LTD. -VERSUS- I.T. O., WARD-8(2), KOLKATA KOLKATA (PAN: AACCN 9912 H) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI MANISH TIWARI, FCA FOR THE RESPONDENT: SHRI SATYAJIT MONDAL, ADDL. CIT DATE OF HEARING : 17.07.2018. DATE OF PRONOUNCEMENT : 25.07.2018. ORDER PER J.SUDHAKAR REDDY, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-(A)-2, KOLKATA DATED 05 .02.2018 FOR A.Y. 2011-12 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (ACT). 2. THE ASSESSEE IS A COMPANY AND IS IN THE BUSINES S OF TRADING IN TEXTILE GOODS. THE ISSUE THAT ARISES FOR ADJUDICATION IS, THE DISA LLOWANCE MADE OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. THE AO DISALLOWED THE AMOU NT FOR THE REASON THAT, THE ASSESSEE HAD PAID INTEREST ON THE LOANS AT A MUCH H IGHER RATE THAN THE INTEREST CHARGED ON LOANS/ADVANCED BY IT TO VARIOUS ENTITIES. THE AS SESSING OFFICER MADE PROPORTIONATE DISALLOWANCE OF THE INTEREST AND CALLED IT BOGUS EX PENDITURE CLAIMED BY THE ASSESEE. ON APPEAL THE FIRST APPELLATE AUTHORITY UPHELD THE SAME. AGGRIEVED THE ASSESSEE IS BEFORE US. 3. I HAVE HEARD MR.MANISH TIWARI, LD. COUNSEL FOR THE ASSESSEE AND MR.S.MONDAL, LD. DEPARTMENTAL REPRESENTATIVE ON BEHALF OF THE RE VENUE. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, A PERUS AL OF THE PAPERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED I HOLD AS FOLLOWS : THE ASSESSEE COMPANY HAD TAKEN A LOAN OF RS.25 LAC FROM M/S. SURPRISE MERCANTILE PVT. LTD AT INTEREST RATE OF 9.08%. ON THE SAME DAY IT HAD TAKEN ANOTHER ITA NO.516/KOL/2018 NEW HIND SILK HOUSE PVT. LTD. A .Y.2011-12 2 LOAN OF RS.25 LAKHS FROM M/S PAHARIMATA INDUSTRIAL DEVELOPMENT LTD AT INTEREST RATE OF 12.23%. A THIRD LOAN OF RS.50 LAKHS WAS TAKEN FR OM M/S SALARPURIA INVESTMENT PVT. LTD AT INTEREST RATE OF 17.16%. THE ASSESSEE COMPA NY HAD ADVANCED LOANS AT INTEREST RATE OF 9 %. THE AO CALCULATED THE DIFFERENTIAL IN TEREST AND DISALLOWED THE SAME BY REFERRING TO SECTION 36(1)(III) OF THE ACT. 4. SECTION 36(1)(III) OF THE ACT MANDATES ALLOWANCE OF EXPENDITURE OF AN AMOUNT PAID AS INTEREST IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION. NOWHERE IN THE ORDER OF AO, IT IS STATE D THAT THE BORROWINGS BY THE ASSESSEE ARE NOT FOR THE PURPOSE OF BUSINESS. IT IS ALSO NOT THE CASE OF THE AO THAT INTEREST IN QUESTION, AT THESE DIFFERENT RATES, HAS NOT BEEN PAID BY THE ASSESSEE OR THAT, THE TRANSACTION IS NOT GENUINE. WHEN THE GENUINENES S OF THE LOAN AND THE GENUINENESS OF THE INTEREST PAID THEREON IS NOT DOUBTED AND WHE N THE BORROWINGS ARE FOR THE PURPOSE OF BUSINESS, NO DISALLOWANCE CAN BE MADE BY THE AO, ON THE GROUND THAT, IT WAS NOT PRUDENT FOR THE ASSESSEE TO BORROW MONEYS A T A HIGHER RATE OF INTEREST AND THEREAFTER LEND MONEY AT A LOWER RATE OF INTEREST. IT IS WELL SETTLED THAT THE AO CANNOT SIT IN THE ARM CHAIR OF THE BUSINESSMAN AND MAKE DE CISION AS TO, AT WHICH RATE AN AMOUNT HAS TO BE ADVANCED BY THE COMPANY OR AT WHIC H RATE THE ASSESSE SHOULD BORROW FUNDS. THE BUSINESS COMPULSIONS OF THE ASSESSEE CAN NOT BE BRUSHED ASIDE. THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE TH AT NO PRUDENT BUSINESS MAN WOULD INCUR LOSS AND THAT THERE IS NO PROOF THAT THE ASSE SSEE HAS APPROACHED OTHER LENDERS FOR BORROWING MONEY AT A LOWER RATE ETC, ARE NOT CONTEN TIONS OF ANY CONSEQUENCE. I REJECT THE SAME. IN VIEW OF THE ABOVE DISCUSSION I ALLOW T HIS APPEAL OF THE ASSESSEE. I DELETE THE DISALLOWANCE OF INTEREST. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE COURT ON 25.07.2018. SD/- [ J.SUDHAKAR REDDY ] ACCOUNTANT MEMBER DATED : 25.07.2018. [RG SR.PS] ITA NO.516/KOL/2018 NEW HIND SILK HOUSE PVT. LTD. A .Y.2011-12 3 COPY OF THE ORDER FORWARDED TO: 1.NEW HIND SILK HOUSE PVT. LTD., 111A, PARK STREET, KOLKATA-700016. 2. I.T.O., WARD-8 (2), KOLKATA. 3. C.I.T.(A)- 2, KOLKATA 4. C.I.T-2, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES