S.P. INVESTMENTS, MUMBAI V. DCIT CIR 15(2), MUMBAI

ITA 6681/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92838 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 10-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N V NADKARNI
• Assessee Lawyers: BHUMIKA VORA
• Section: 143(3)

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM AND SHRI D. KARUNAKAR A RAO, AM ./ I.T.A. NO.6681 /MUM/2011 ( / ASSESSMENT YEAR : 2006-07 M/S S.P. INVESTMENT, 501, SHREENATH APT., PODDARLANE, SANTACRUZ (W), MUMBAI -400 054. / VS. DY. CIT, CIR. 15(2), MUMBAI. ./ PAN : AAWFS1471M ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY MS. BHUMIKA VORA RESPONDENT BY S MT. N.V. NADKARNI / DATE OF HEARING : 13-05-2015 / DATE OF PRONOUNCEMENT : 10-06-2015 [ !' / O R D E R PER VIJAY PAL RAO, J.M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13-07-2011 OF LD. CIT(A)- 26, MUMBAI PERTAINING TO A.Y. 2006-07. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (A) -26 , MUMBAI ERRED IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS 120381/- OUT OF INTE REST PAYMENT OF RS 601904/- MADE TO RELATIVES OF THE PARTNERS BY APPLYING PROVISION OF SECTION 40A(2)(B) OF THE INCOME TAX AC T, 1961. 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE LEARNER CIT (A) -26, ERRED IN UPHOLDING TH E DISALLOWANCE OF RS 120381/- OUT OF INTEREST PAYMENT OF RS 601904 /- PAID TO THE RELATIVES OF THE PARTNER AT 15% PER ANNUM BY OB SERVING THAT THE INTEREST PAID IN EXCESS OF 12% IS DISALLOWABLE U/S 40A(2(B) BY ITA 6681/M/11 2 OVERLOOKING THE FACT THAT YOU APPELLANT HAS PAID IN TEREST @15% PER ANNUM TO OUTSIDER ALSO. 3. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX APPEAL -26 M UMBAI ERRED IN UPHOLDING THE DISALLOWANCE OF RS 120381/- U/S 40A (2)(B) WITHOUT APPRECIATING THE FACT THAT INTEREST PAYMENT @15 .A. WAS ALLOWED TO YOUR APPELLANT IN FULL FOR IMMED IATELY PRECEDING YEAR AND IN A.Y. 2007-0.8, WHICH WAS THE ASSESSMENT FRAMED U/S 143(3) AND ALSO WITHOUT APPRECIATING THE LAW POSITION THAT WHILE ALLOWING A PARTICULAR EXPENDITURE, THE R EVENUE CANNOT ACT AS A BUSINESS MEN. 3. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE A.O. NOTED THAT THE ASSESSEE HAS PAID INTEREST @15% TO THE RELATIVES OF THE PARTNERS OF THE ASSESSEE FIRM IN COMPARISON TO THE INTEREST PAID @ 12% TO OTHER PARTIERS. ACCORDINGLY, THE A.O. PROPOSED TO DISALLOW THE EXCE SS INTEREST PAID TO THE RELATIVES OF THE PARTNERS OF THE FIRM BY INVOKING T HE PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME TAX ACT, 1961. THE ASSESSE E OBJECTED TO THE ADDITION PROPOSED BY THE A.O. AND FILED THE DETAILS TO JUSTI FY THE INTEREST PAID @ 15% TO SOME OF THE PARTIES. THE A.O. DID NOT ACCEPT THE CO NTENTION OF THE ASSESSEE AND MADE THE ADDITION ON ACCOUNT OF EXCESS PAYMENT OF INTEREST OVER AND ABOVE 12% U/S 40A(2)(B) OF THE ACT. THE ASSESSEE CA RRIED THE MATTER BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAD PAID INTEREST @ 15% TO SOME OF THE DEP OSITORS OTHER THAN RELATIVES OF THE PARTNERS OF THE FIRM. THE INTEREST PAID BY THE ASSEESSEE VARIES FROM 12 TO 15% DEPENDING UPON THE EXIGENCIES OF THE BUSINESS AND THEREFORE THE INTEREST IS PAID AS PER THE FUNDING REQUIREMENT OF THE ASSESSEE FIRM CARRYING OUT THE BUSINESS OF BILL DISCOUNTING. THUS THE LD. COUNSEL HAS SUBMITTED THAT THE A.O. HAS SELECTED THE CASES WHER E THE ASSESSEE HAD PAID 12% TO COMPARE WITH THE INTEREST PAID TO THE RELATI VES OF THE PARTNERS BUT IGNORED THE INTEREST PAID BY THE ASSESSEE AT 15% TO NON-RELATIVE PARTIES. HE HAS RELIED UPON THE FOLLOWING CASES:- ITA 6681/M/11 3 1. ITA NO. 2055 & 2056/AHD/2008 FOR A.Y. 2002-03 & 2005-06 ORDER DATED 7-1-2011 IN THE CASE OF ACIT VS. M/S BUDHALAL & CO. 2. ITA NO. 29/IND/2014 FOR A.Y. 2008-09 ORDER DATED 13-06-2014 IN THE CASE OF M/S SHIVRAM COTTON CORPORATION VS. ADDL. CI T. THE LD. COUNSEL HAS ALSO FILED A STATEMENT OF INTER EST PAID TO THE PERSONS OTHER THAN THE RELATIVES OF THE PARTNERS TO SHOW TH AT THE ASSESSEE HAD PAID THE INTEREST @ 15% IN A NUMBER OF CASES OTHER THAN THE RELATED PARTIES. 5. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE A.O. HAS BROUGHT OUT S PECIFIC INSTANCES WHERE THE ASSESSEE HAD PAID 12% TO THE PERSONS OTHER THAN THE RELATED PARTIES AND THE INTEREST PAID @ 15% TO THE RELATED PARTIES, THE REFORE, THE DISALLOWANCE MADE BY THE A.O. U/S 40A(2)(B) OF THE ACT IS JUSTIF IED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THE A.O. HAS P ICKED UP CERTAIN INSTANCES OF PAYMENT OF INTEREST BY THE ASSESSEE @ 12% TO THE UN-RELATED PARTIES WHICH HAS BEEN COMPARED WITH THE INTEREST PAID BY THE ASS ESSEE @ 15% TO THE RELATED PARTIES. ACCORDINGLY, HE HAS MADE A DISALLO WANCE BEING THE EXCESS OF INTEREST @ 3% PAID TO THE RELATED PARTIES. IT IS PE RTINENT TO NOTE THAT THE A.O. HAS PICKED UP 10 CASES OF THE NON-RELATIVE PARTIES WHERE THE ASSESSEE HAS PAID 12% AND NINE CASES OF RELATED PARTIES WHERE TH E ASSESSEE HAS PAID INTEREST @ 15%. THE ASSESSEE HAS FILED THE DETAILS OF INTEREST PAID TO THE UN- RELATIVE PARTIES @ 15% WHICH CONTAINED ABOUT 30 UN- RELATED PARTIES WHERE THE ASSESSEE HAS PAID INTEREST @ 15%. IT APPEARS THAT T HE A.O. HAS PICK AND CHOSE ONLY THOSE CASES WHEN THE INTEREST HAS BEEN P AID BY THE ASSESSEE @ 12% AND IGNORED THE NUMBER OF OTHER CASES WHERE THE ASSESSEE HAS PAID INTEREST @ 15% TO THE UN-RELATED PARTIES. IF THE FA CTS BROUGHT OUT BY THE ASSESSEE BEFORE US BY FILING THE STATEMENT OF INTER EST PAID TO THE UN-RELATED PARTIES ARE CORRECT, THEN, NO DISALLOWANCE IS CALLE D FOR U/S 40A(2)(B) OF THE ACT BECAUSE THE ASSESSEE HAS PAID THE INTEREST @ 15% TO AS MANY AS 30 PARTIES ITA 6681/M/11 4 OTHER THAN THE RELATIVE PARTIES. IN VIEW OF THE AB OVE FACTS AND CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AN D DIRECT THE A.O. TO VERIFY THE CORRECTNESS OF THE LIST FILED BY THE ASSESSEE B EFORE US IN RESPECT OF THE INTEREST PAID TO THE UN-RELATED PARTIES @ 15% AND T HEN DECIDE THE CLAIM OF THE ASSESSEE IN TERMS OF THE ABOVE OBSERVATIONS. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED IN TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JUNE, 2015. !' # $% &! ' 10-06-2015. ( ) SD/- SD/- (D. KARUNAKARA RAO) (VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER $ 4 MUMBAI ; &! DATED 10-06-2015 [ .5../ R.K R.KR.K R.K. , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 6 () / THE CIT(A) 26, MUMBAI 4. 6 / CIT- -15, MUMBAI 5. 9:( 55;< , ;< , $ 4 / DR, ITAT, MUMBAI E BENCH 6. (>? @ / GUARD FILE. ' / BY ORDER, 9 5 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 4 / ITAT, MUMBAI