UTTAM POLYRUBS INDIA P LTD., Alwar V. ACIT, Jaipur

ITA 760/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5122 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVIR SINGH DAGUR CIT DHK

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 760/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. M/S. UTTAM POLYRUBS INDIA PVT. LTD. G-1060, PHASE III, RIICO INDUSTRIAL AREA, BHIWADI, ALWAR. CUKE VS. THE ACIT, CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAACU 4543 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAGHUVIR SINGH DAGUR (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27.07.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 28/07/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, J.M. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (A), ALWAR DATED 18.09.2015 PERTAINING TO ASSESSMENT YEAR 2011 -12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE DISALLOWANCE OF RS. 6,92,942/- ON ACCOUNT OF INTERE ST ON UNSECURED LOANS PAID IN EXCESS OF 18% TO THE PERSONS SPECIFIED U/S 40A(2)(B) OF THE IT ACT. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CO NFIRMING THE DISALLOWANCE OF RS. 93,668/- ON ACCOUNT OF INTEREST PAID ON DELAYED PAYMENT OF INCOME TAX. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY ANY OF THE GROUNDS OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2 ITA NO. 760/JP/2015 UTTAM POLYRUBS INDIA PVT. LTD. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS GROUND NO. 2 OF THE APPEAL. ACCOR DINGLY, GROUND NO. 2 IS DISMISSED A NOT PRESSED. 3. GROUND NO. 3 IS GENERAL IN NATURE, NEEDS NO SEPA RATE ADJUDICATION. 4. GROUND NO. 4, NO ARGUMENTS ARE ADDRESSED, THEREF ORE, THE SAME IS REJECTED. 5. THE ONLY GROUND REMAINS TO BE ADJUDICATED IS GRO UND NO. 1, CONFIRMING THE DISALLOWANCE OF RS. 6,92,942/- ON ACCOUNT OF IN TEREST ON UNSECURED LOANS PAID IN EXCESS OF 18% TO THE PERSONS SPECIFIED U/S 40A(2)(B ) OF THE IT ACT. 6. BRIEFLY STATED THE FACTS RELATED TO THIS GROUND ARE THAT THE AO WHILE FRAMING THE ASSESSMENT, MADE DISALLOWANCE OUT OF INTEREST P AID TO THE PERSONS SPECIFIED U/S 40A(2)(B) OF THE IT ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) HOLDING THAT THE SAME IS EXCESSIVE AND MADE ADDITION OF RS. 6,92,942 /-. THE ASSESSEE AGGRIEVED BY THIS ORDER OF THE AO, PREFERRED APPEAL BEFORE LD. C IT (A), WHO AFTER CONSIDERING THE SUBMISSIONS, CONFIRMED THE ADDITION. 7. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 7.1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T IN THE ASSESSEES OWN CASE PERTAINING TO A.Y. 1010-11 UNDER THE IDENTICAL FACT S, THE COORDINATE BENCH OF THIS TRIBUNAL WAS PLEASED TO DELETE THE DISALLOWANCE. HE SUBMITTED THAT THE AO HAS NOT GIVEN ANY FINDING WITH REGARD TO THE FACT HOW THE I NTEREST PAID IS REASONABLE AND EXCESSIVE TO THE FAIR MARKET RATE. 7.2. ON THE CONTRARY, THE LD. D/R OPPOSED THAT THE NORMAL LENDING RATE OF THE BANK IS 14% AND IN THE EVENT OF NON-FURNISHING OF SECURI TY, 18% WOULD BE REASONABLE. 3 ITA NO. 760/JP/2015 UTTAM POLYRUBS INDIA PVT. LTD. 7.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. THE AO IS EMPOWERED TO MAKE DISALLOWANCE BY INVOKING THE P ROVISIONS OF SECTION 40A(2)( B). IT WOULD BE APPROPRIATE TO REPRODUCE THE PROVISIONS HEREIN BELOW FOR BETTER APPRECIATION :- 56 [ EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRC UMSTANCES. 57 40A. 58 (2)( B ) THE PERSONS REFERRED TO IN CLAUSE ( A ) ARE THE FOLLOWING, NAMELY : ( I ) WHERE THE ASSESSEE IS AN INDIVIDUAL ANY RELATIVE OF THE ASSESSEE; ( II ) WHERE THE ASSESSEE IS A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HINDU UN-DIVIDED FAMILY ANY DIRECTOR OF THE COMPANY, PARTNER OF THE FIRM, O R MEMBER OF THE ASSOCIATION OR FAMILY, OR ANY RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER; ( III ) ANY INDIVIDUAL WHO HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE, OR ANY RELATIVE OF SUCH INDIVIDUAL; ( IV ) A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HINDU UNDIVIDED FAMILY HAVING A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSES SEE OR ANY DIRECTOR, PARTNER OR MEMBER OF SUCH COMPANY, FIRM, ASSOCIATION OR FAMILY, OR AN Y RELATIVE OF SUCH DIRECTOR, PARTNER OR MEMBER; ( V ) A COMPANY, FIRM, ASSOCIATION OF PERSONS OR HINDU UNDIVIDED FAMILY OF WHICH A DIRECTOR, PARTNER OR MEMBER, AS THE CASE MAY BE, HAS A SUBSTA NTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THE ASSESSEE; OR ANY DIRECTOR, PARTNE R OR MEMBER OF SUCH COMPANY, FIRM, ASSOCIATION OR FAMILY OR ANY RELATIVE OF SUCH DIREC TOR, PARTNER OR MEMBER; ( VI ) ANY PERSON WHO CARRIES ON A BUSINESS OR PROFESSIO N, ( A ) WHERE THE ASSESSEE BEING AN INDIVIDUAL, OR ANY RE LATIVE OF SUCH ASSESSEE, HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THAT PERSON; OR ( B ) WHERE THE ASSESSEE BEING A COMPANY, FIRM, ASSOCIA TION OF PERSONS OR HINDU UNDIVIDED FAMILY, OR ANY DIRECTOR OF SUCH COMPANY, PARTNER OF SUCH FIRM OR MEMBER OF THE ASSOCIATION OR FAMILY, OR ANY RELATIVE OF SUCH DIRE CTOR, PARTNER OR MEMBER, HAS A SUBSTANTIAL INTEREST IN THE BUSINESS OR PROFESSION OF THAT PERSON. EXPLANATION. FOR THE PURPOSES OF THIS SUB-SECTION, A PERSON SHA LL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A BUSINESS OR PROFESSION, I F, ( A ) IN A CASE WHERE THE BUSINESS OR PROFESSION IS CAR RIED ON BY A COMPANY, SUCH PERSON IS, AT ANY TIME DURING THE PREVIOUS YEAR, THE BENEFICIAL O WNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER; AND ( B ) IN ANY OTHER CASE, SUCH PERSON IS, AT ANY TIME DU RING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE PR OFITS OF SUCH BUSINESS OR PROFESSION. 4 ITA NO. 760/JP/2015 UTTAM POLYRUBS INDIA PVT. LTD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E AMOUNT WAS BORROWED FOR THE PURPOSE OF BUSINESS AND THE ASSESSEE HAS CLAIMED PA YMENT OF INTEREST @ 24% PER ANNUM. HOWEVER, THE AO CONSIDERING THE SAME AS UNRE ASONABLE AND EXCESSIVE, RESTRICTED @ 18%. THE REVENUE HAS NOT PLACED ANY M ATERIAL UNDER THE IDENTICAL FACTS AND CIRCUMSTANCES THAT THE FAIR MARKET RATE O F INTEREST IS LOWER THAN WHAT THE ASSESSEE HAS CLAIMED. AS PER SECTION 40A(2)(B), TH E AO HAS TO GIVE A FINDING HAVING REGARD TO THE FAIR MARKET RATE. IN THE PRESENT CASE , NO SUCH FINDING IS GIVEN. THE ASSESSEE HAS PLACED RELIANCE ON THE TWO DECISIONS O F THE COORDINATE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF RAM AVTAR GARG VS. ITO IN ITA NO. 58/JP/2010 PERTAINING TO A.Y. 2005-06 AND IN ASSESSEES OWN CA SE IN ITA NO. 570/JP/2015 PERTAINING TO A.Y. 2010-11 WHEREIN THE COORDINATE B ENCHES HAVE ALLOWED THE INTEREST @ 24% BEING FAIR MARKET RATE. THE FACTS O F THE PRESENT CASE ARE IDENTICAL. THE REVENUE HAS NOT BROUGHT ANY CONTRARY MATERIAL O N RECORD SUGGESTING THAT THE RATE SO CLAIMED BY THE ASSESSEE IS EXCESSIVE OF THE FAIR MARKET RATE AS PREVALENT DURING THE YEAR UNDER APPEAL. THEREFORE, WE HEREBY DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS. 6,92,942/- MADE ON ACCOUNT OF I NTEREST ON FAIR MARKET RATE PAID IN EXCESS OF 18% TO THE PERSONS SPECIFIED UNDER SEC TION 40A(2)( B) OF THE ACT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 28/ 07/2016. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 28/07/2016. DAS/ 5 ITA NO. 760/JP/2015 UTTAM POLYRUBS INDIA PVT. LTD. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. UTTAM POLYRUBS INDIA PVT. L TD., ALWAR. 2. THE RESPONDENT- THE ACIT CIRCLE-2, ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 760/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR