M/s. Shree Jee Crockery House, New Delhi V. ITO, New Delhi

ITA 540/DEL/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0232 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 16-07-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 28-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KR CHOPRA
• Assessee Lawyers: KAILASH MITTAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-2, NEW DELHI) BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER I.T.A. NO.540 /DEL/2015 ASSESSMENT YEAR : 2011-12 SHREE JEE CROCKERY HOUSE, VS. ITO, WARD 39(3), 9/26, GALI NO.2, SHALIMAR INDUSTRIAL AREA, NEW DEL HI NEW DELHI GIR / PAN:AABFS1784Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KAILASH MITTAL, ADV. RESPONDENT BY : SHRI MANOJ KR. CHOPRA, SR. DR DATE OF HEARING : 16.07.2015 DATE OF PRONOUNCEMENT : 21 .07.2015 ORDER THIS IS AN APPEAL FILED BY ASSESSEE DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) XX, NEW DELHI, DATED 24.11.2014 FOR THE ASSE SSMENT YEAR 2011-12. 2. THE ISSUE IN DISPUTE IS DISALLOWANCE U/S 40A(2)( A) OF THE ACT. THE DISALLOWANCE WAS MADE ON THE GROUND THAT HE ASSESSE E HAS MADE EXCESSIVE INTEREST PAYMENT TO RELATED PARTIES. THE ASSESSEE HAS PAID INTEREST @ 18% P.A. TO RELATED PARTIES. THE FIRST APPELLATE AUTHO RITY GAVE A FINDING THAT A PERUSAL OF STATEMENT OF DETAILS OF LOAN ADVANCED AN D DEPOSITS FOR THE YEAR SHOW THAT THE NORMAL RATE OF INTEREST PAID BY THE A SSESSEE VARIES FROM 15% TO 18% IN MOST OF THE CASES. HE ALSO OBSERVED THAT IN MOST OF THE CASES OF RELATED PARTIES, THE ASSESSEE HAS PAID INTEREST @ 1 8% P.A. HE DIRECTED THE A.O. TO ADOPT 15% AS THE MARKET RATE AND DISALLOW I NTEREST PAYMENTS ABOVE 15% MADE TO RELATED PARTIES. 3. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT INTEREST PAID TO BANK IS @ 18.25% P.A.. HE ALSO PRODUCED A COPY OF SANCTION LETTER ITA NO.540/DEL/2015 2 REGARDING LOAN TAKEN BY THE ASSESSEE FROM ANDHRA BA NK. HE ALSO POINTED OUT THAT INTEREST @ 18%HAS BEEN PAID TO UNRELATED P ARTIES. 4. ON CONSIDERATION OF FACTS AND CIRCUMSTANCES OF T HE CASE, I AM OF THE CONSIDERED OPINION THAT THE PAYMENT OF INTEREST @ 1 8% ON LOAN BORROWED CAN BE CONSIDERED AS THE MARKET RATE. DISALLOWANCE U/S 40A(2)(B) IS UNCALLED FOR WHEN THE BANK CHARGES INTEREST @ 18.25 %. THE FIRST APPELLATE AUTHORITY WAS WRONG IN COMING TO THE CONCLUSION THA T THE MARKET RATE OF BORROWING SHOULD BE TAKEN @ 15% AND INTEREST PAYMEN T ABOVE SUCH RATE SHOULD BE DISALLOWED. THE JUDGEMENT OF HONBLE KER ALA HIGH CURT IN THE CASE OF ANANDJI SHAH VS ACIT, 181 ITR 171 RELIED UP ON BY LD. A.O. IS DISTINGUISHABLE ON FACTS AS IN THAT CASE, THE INTER EST PAID TO THE SON AND WIFE OF THE PARTNERS WAS @ 24% WHEREAS INTEREST PAID TO NON RELATED PARTIES WAS ONLY 12% - 15% BUT IN THIS CASE, THERE IS NO SUCH V ARIATION. IN VIEW OF ABOVE, APPEAL FILED BY ASSESSEE IS ALLOWED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JULY, 2015. (J. S. REDDY) ACCOUNTANT MEMBER DATE:21 ST JULY, 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.540/DEL/2015 3 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 17/7 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 20,21 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 21/7/15 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 21/7 SR. PS/PS 7 FILE SENT TO BENCH CLERK 21/7 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER