Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 6373 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-03-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
SMC 1
Next Hearing Date
05-01-2016
Assessment Year
2012-2013
Appeal Filed On
20-10-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH . A. T. VARKEY , JM ITA NO. 5787/DEL/2015 : ASSTT. YEAR : 2012 - 13 GUPTA FOOD CORPORATION, 4062, NAY A BAZAR, DELHI - 110006 VS INCOME TAX OFFICER, WARD - 47(1 ), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA JFG0699J ITA NO. 5788/DEL/2015 : ASSTT. YEAR : 2012 - 13 KUMAR TRADERS, 1053, LAL KUAN, DELHI - 110006 VS INCOME TAX OFFICER, WARD - 47(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAKFK8568J ASSESSEE BY : SH. VIKAS GOYAL, CA REVENUE BY : SMT. ANIMA BARNWAL , SR. DR DATE OF HEARING : 05.01 .201 6 DATE OF PRONOUNCE MENT : 15 . 0 3 .201 6 ORDER PER N. K. SAINI, AM : THESE APPEALS BY THE ASSESSEE S ARE DIRECTED AGAINST THE SEPARATE ORDERS EACH DATED 21.08.2015 OF LD. CIT(A) - 16, NEW DELHI. 2. FIRST WE WILL DEAL WITH THE APPEAL IN ITA NO. 5787/DEL/2015, F OLLOW ING GROUNDS HAVE BEEN RAISED IN THIS APPEAL : ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 2 1. THE ORDER OF THE LEARNED CIT(A) IN RESTRICTING INTEREST AT THE RATE OF 13% AGAINST 15/18% CLAIMED BY THE ASSESSEE WHICH HAS BEEN ACTUALLY PAID IS TOTALLY WRONG, BAD IN LAW AND NEEDS TO BE QUASHED. THE AO HA S FAILED TO BRING ANY EVIDENCE ON RECORD THAT THE ASSESSEE HAS NOT PAID THE INTEREST CLAIMED BY HIM. THE CIT(A) HAS ALSO FAILED TO APPRECIATE THAT BANK GIVES MONEY AGAINST SECURITY AND INTEREST I S ALWAYS PAYABLE TO THE BANK OF DAY TO DAY BASIS WHEREAS ASSE SSEE HAS BEEN PAYING INTEREST ON YEARLY BASIS. 2. THAT THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING SUM OF RS.53,558/ - OUT OF EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF VARIOUS EXPENSES SUCH AS CAR INSURANCE, CAR DEPRECIATION, TELEPHONE EXPENSES, VEH ICLE MAINTENANCE AND INTEREST ON CAR LOAN IS TOTALLY WRONG, BAD IN LAW AND NEEDS TO BE QUASHED. 3. THAT THE ASSESSEE PRAYS PERMISSION TO ADD, DELETE OR AMEND ONE OR MORE GROUNDS OF APPEAL. 3. THE GRIEVANCE OF THE ASSESSEE VIDE GROUND NO . 1 RELATES TO RE STRICTING THE INTEREST @ 13% AS AGAINST 15/18% CLAIMED BY THE ASSESSEE. 4 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 28.09.2012 DECLARING AN INCOME OF RS.4,62,880/ - WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD PAID INTEREST OF RS.12,85,507/ - ON THE UNSECURED LOANS. HE ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 3 ASKED THE ASSESSEE TO EXP LAIN AS TO WHY INTEREST PAID TO THE PERSONS SPECIFIED U/S 40A(2)(B) OF THE ACT COULD NOT BE RESTRICTED TO 12%. THE ASSESSEE VIDE LETTER DATED 12.01.2015 SUBMITTED AS UNDER: THAT THE ASSESSEE FIRM HAS PAID INTEREST OF RS.15,46,788/ - DURING THE FINANCIAL Y EAR 2011 - 12 AND RECEIVED INTEREST OF RS.2,66,281/ - ON LATE PAYMENT RECEIVED FROM CUSTOMERS. LE DGER COPY OF INTEREST ACCOUNT IS ENCLOSED. NET INTEREST OF RS.12,80,507/ - IS DEBITED TO P&L A/C. THAT THE ASSESSEE FIRM HAS PAID INTEREST OF RS.14,18,444/ - ON UN SECURED LOANS OF RS.1,28,38,686/ - . THE INTEREST IS PAID ALMOST @ 15% P.A. AS PER DETAIL FILED IN PRE V IOUS HEARING. THE RATE OF INTEREST OF AROUND 15% P.A. TO SMALL TRADERS RECEIVING LOANS WITHOUT GIVING ANY SECURITY IS VERY REASONABLE. EVEN ALMOST ALL BAN KS MONEY LENDING RATE IS MORE THAN 13% P.A. BY TAKING APPR OPRIATE SECURITY AND LOAN PROCESS ING AND OD CHARGES. THE ASSESSEE FIRM HAS ARRANGE LOAN FROM OUTSIDER PARTIES OTHER THAN BANKS TO PROMOTE THE MORE SALES AND ARHAT INCOME AND TO GET BETTER PROFITS. ASSESSEE FIRM HAS NOT SO MUCH GOODWILL TO GET THE CHEAPER LOANS BELOW 15% P.A. THAT THE ASSESSEE FIRM IS EARNING MUCH MORE THAN INTEREST PAID. THE ASSESSEE FIRM DECLARE NET INCOME OF RS.4,60,085/ - AFTER ALLOWING REMUNERATION OF RS.9,15,000/ - AND INTEREST OF RS.1,20,038/ - TO PARTNERS AS COMPARE TO LAST YEAR NET INCOME OF RS.3,02,541/ - AFTER ALLOWING REMUNERATION OF RS.6,77,500/ - AND INTEREST OF RS.1,18,695/ - TO PARTNERS. ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 4 THAT INTEREST IS NOT THE BURDEN ON THE FIRM. FIRM IS EARNING MORE EVEN AFTER PAYING THE INTEREST. ALL INTEREST PAYMENT ARE MADE BY ACCOUNT PAYEE CHEQUES ONLY. IN VIEW OF STATED ABOVE THE INTEREST OF RS.12,80,507/ - CLAIMED IN P&L A/C MAY PLEASE BE ALLOWED FULL. AS THE INTEREST PAID IS AT QUIET REASONABLE RATE. 5. THE AO DID NOT FIND MERIT IN THE SUBMISSION OF THE ASSESSEE , RESTRICTED THE INTEREST TO 12% AND MADE THE ADDITION OF RS.2,8 4,674/ - . 6 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS ARE REPRODUCED VERBATIM AS UNDER: 2. ADDITION OF RS.2,84,6 74/ - OUT OF INTEREST: - THE AO DISALLOWED SOME PORTION OF INTEREST AS IN HIS OPINION INTEREST AT THE HIGHER RATE HAS BEEN PAID TO THE PERSONS U/S 40A(2)(B). IN HIS OPINION THE INTEREST RATE SHOULDN T BE MORE THAN 12%. SIR IT IS WELL SETTLED TH AT INTEREST RA TE ON UNSECURED LOAN IS ALWAYS HIGHER THAN SECURED LOAN FROM BANK, ASSESSEE HAS TO GIVE COLLATERAL SECURITY, HAD TO SPENT ON SEARCH REPORT, CHARGES FOR VALUATION PROPERTY AND PAYMENT OF INTEREST IS MONTHLY AND EVEN INTEREST IS NOT LESS THAN 14% - 15% AND IF THERE IS PAYMENT OF INTEREST/PRINCIPLE FOR 3 MONTH ACCOUNT IS TO NPA BUT THERE IS NO SUCH CONDITION IN CASE OF LOAN IVES ETC. ASSESSEE HAS PAID REASONABLE RATE OF INTEREST. COURT IN THE CASE OF UPPER INDIA PUBLICITY HOUSE PVT. LTD. FR 573 HELD THAT PAYMENT OF 15% ON UNSECURED LOAN IS ITAT AHMADABAD IN CASE OF OMKAMAL GAURISHANKAR 92 IIJ (AHD) 223 HAS HELD THAT EVEN INTEREST TO RELATIVES AT THE RATE AS REASONABLE, ALTHOUGH ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 5 THE CASE BEFORE THEM IS THAT AID INTEREST AT THE RATE 18%. THIS DECISION HAS BEEN MADE VIEW THE DECISION OF SH. G.D. AGGARWAL, VP OF ITAT LD. IN THE CASE OF VIPUL Y. MEHTA. FURTHER PLEASE NOTE THAT AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD REGARDING THE REASONABLENESS OF INTEREST @ 12%. WE YOU WILL AGREE AND APPRECIATE THAT THE ASSESSEE HA SN T PAID EXCESS INTEREST AT ALL AND THEREFORE THE ADDITION MADE BY THE AO HAS NO MERIT AND MUST BE DELETED. 7 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE CONTENTION OF THE ASSESSEE WAS PARTIALLY CORRECT. HE FURTHE R OBSERVED THAT THE ASSESSEE AGREED THAT EVEN IN THE BANKS MONEY LENDING RATE IS ABOUT 13%. THE LD. CIT(A) RESTRICTED THE PAYMENT OF INTEREST TO THE LENDERS @ 13%. 8. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIO NS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE INTEREST WAS PAID TO THE LENDERS FOR THE BUSINESS EXIGENCY . IT WAS STATED THAT THE ASSESSEE DID NOT OFFER ANY SECURITY AGAINST THE LOANS RAISED FROM FRIENDS & RELATIVES WHILE IN THE LOAN F ROM BANKS , THE SECURITIES WA S ALSO REQUIRED. HE FURTHER SUBMITTED THAT NEITHER THE AO NOR THE LD. CIT(A) HAS GIVEN ANY BASIS FOR ALLOWING THE RATE OF INTEREST AT 12% AND 13% RESPECTIVELY. HE REQUESTED TO ALLOW THE CLAIM OF THE ASSESSEE. ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 6 9. IN HER RIVAL SUB MISSIONS THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 10 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT NEITHER THE AO NOR THE LD. CIT(A) HAS GIVEN ANY BASIS FOR RESTRICTING THE INTEREST CLAIMED BY THE ASSESSEE ON THE LOANS RAISED FOR THE BUSINESS PURPOSES. IN THE INSTANT CASE, NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE LOANS RAISED BY THE ASSESSEE WERE NOT UTIL IZED FOR THE BUSINESS PURPOSES OR WERE DIVERTED FOR ANY OTHER PURPOSES . IT IS ALSO NOTICED THAT NEITHER THE AO NOR THE LD. CIT(A) BROUGHT ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT THE RATE OF INTEREST PAID BY THE ASSESSEE WAS EXCESSIVE. WE, THEREFORE, DE LETE THE ADDITION SUSTAINED BY THE LD. CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSEE. 11 . THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE CONFIRMATION OF DISALLOWANCE OF RS.53,558/ - OUT OF VARIOUS EXPENSES . THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD INCURRED THE FOLLOWING EXPENSES: I) CAR INSURANCE RS. 15,232/ - II) CAR DEPRECIATION RS. 1,19,574/ - ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 7 III) TELEPHONE EXPENSES RS. 1,07,983/ - IV) VEHI CLE RUNNING & MAINTENANCE RS. 1,21,200/ - V) INTEREST ON CAR LOAN RS. 25,001/ - TOTAL RS. 3,88,990/ - THE ASSESSEE SUO MOTU DISALLOWED 1/5 TH OF THE VEHICLE RUNNING AND MAINTENANCE EXPENSES ON ACCOUNT OF PERSONAL USE OF PARTNERS AND THUS, DISA LLOWED A SUM OF RS.24,240/ - . HOWEVER, T HE AO DISALLOWED RS.77,798/ - BEING 1/5 TH OF ALL THE EXPENSES AND AFTER REDUCING THE DISALLOWANCE MADE BY THE ASSESSEE ITSELF AMOUNTING TO RS.24,240/ - , A FURTHER DISALLOWANCE OF RS.53,558/ - WAS MADE. 12 . BEING AGGRIEV ED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO SUSTAINED THE DISALLOWANCE MADE BY THE AO. HE DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE THAT CAR INSURANCE, CAR DEPRECIATION AND INTEREST ON CAR LOANS WERE FIXED EXPENDITURE , BY OBSERVING THAT J UST BECAUSE THERE WAS A FIXED STATUTORY ALLOWANCE THAT DID NOT GIVE THE RIGHT TO THE ASSESSEE TO PUT THE ASSET TO PERSONAL USE. 13. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELO W AND FURTHER SUBMITTED THAT THE EXPENSES WERE INCURRED FOR THE BUSINESS PURPOSES AND THE ASSESSEE ITSELF SUO MOTU DISALLOWED THE VEHICLE RUNNING AND ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 8 MAINTENANCE EXPENSES CONSIDERING THE INVOLVEMENT OF PERSONAL NATURE . 14. IN HER RIVAL SUBMISSIONS THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARITIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE SUO MOTU DISALLOWED RS.24, 200/ - BEING 1/5 TH OF VEHICLE RUNNING AND MAINTENANCE EXPENSES AMOUNTING TO RS.1,21,200/ - . HOWEVER, THE AO DISALLOWED 1/5 TH OF CAR INSURANCE, CAR DEPRECIATION, TELEPHONE EXPENSES, INTEREST ON CAR LOAN ALSO. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT CAR INSURANCE, CAR DEPRECIATION AND INTEREST ON CAR LOAN WAS TO BE BORNE BY THE ASSESSEE EVEN WHEN THE VEHICLES WERE NOT USED FOR THE PERSONAL PURPOSES OR REMAINED IDLE. IN THE PRESENT CASE , NOTHING IS BROUGHT ON RECORD THAT THOSE VEHICLES WERE NOT USED FOR T HE BUSINESS PURPOSES AND WERE NOT THE ASSET OF THE ASSESSEE. THEREFORE, DISALLOWANCE OF CAR INSURANCE, CAR DEPRECIATION AND INTEREST ON CAR LOAN WA S NOT JUSTIFIED. AT THE SAME TIME , THE PERSONAL USE OF TELEPHONE CANNOT BE RULED OUT IN SUCH TYPE OF CASES BU T T HE DISALLOWANCE OF 1/5 TH OF THE TELEPHONE EXPENSES APPEARS TO BE EXCESSIVE. WE, THEREFORE, ITA NOS. 5787 & 5788 /DE L/201 5 GUPTA FOOD CORPORATION & KUMAR TRADERS 9 RESTRICT THE DISALLOWANCE TO 10% OF THE TELEPHONE EXPENSES AND THE DISALLOWANCE OUT OF VEHICLE RUNNING AND MA INTENANCE EXPENSES IS SUSTAINED BECAUSE THE ASSESSEE ITSELF SUO MOTU DISALLOWED THE SAME . IN VIEW OF THE ABOVE AND BY KEEPING IN VIEW THE PECULIAR FACTS OF THIS CASE THE DISALLOWANCE OUT OF CAR INSURANCE, DEPRECIATION AND INTEREST ON CAR LOAN IS DELETED. 16. IN ITA NO. 5788/DEL/2013, THE ISSUES RAISED BY TH E ASSESSEE ARE IDENTICAL TO THE ISSUES INVOLVED IN ITA NO. 5787/DEL/2013, THE ONLY DIFFERENCE IS IN THE AMOUNT OF DISALLOWANCE. THEREFORE, OUR FINDINGS GIVEN IN FORMER PART OF THIS ORDER SHALL APPLY MUTATIS MUTANDIS FOR THIS APPEAL ALSO. 17 . IN THE RESULT , BOTH THE APPEAL S ARE PARTLY ALLOWED. ( ORDER PRON OUNCED IN THE COURT ON 15 /03 / 2016 ) SD/ - SD/ - ( A. T. VARKEY ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 /03 /2016 *SUBODH* COP Y FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR
