Sant Singh Ram Lal, Delhi V. ITO, Ward-47(1), New Delhi

ITA 7831/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4727 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 07-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Depreciation

Judgement Text

1 ITA NO. 7831/DEL/2018 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R.K PANDA, ACCOUNTANT MEMBER ITA NO.7831/DEL/2018 ASSESSMENT YEAR: 2013-14 SANT SINGH RAM LAL 3963-B, NAYA BAZAR, DELHI. PIN: 110006 PAN: AASFS4026J VS ITO WARD-47(1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY WRITTEN SUBMISSION RESPONDENT BY SH. S. L. ANURAGI, SR. DR DATE OF HEARING: 06/05/2019 DATE OF PRONOUNCEMENT: 2 0 /05/2019 ORDER PER R.K. PANDA, AM: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 30 TH OCTOBER, 2018 OF THE CIT(A)-16, NEW DELHI FOR A. Y 2015-16. 2. THE ASSESSEE IN THE VARIOUS GROUNDS OF APPEAL H AS CHALLENGED THE ORDER IN OF THE CIT(A) IN RESTRICTIN G THE ALLOWANCE OF INTEREST ON UNSECURED LOAN AND DEPRECIATION. 2 ITA NO. 7831/DEL/2018 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN COSMETICS, SHAMPOOS AND ALLIED ITEMS. IT FILED ITS RETURN OF INCOME ON 22 ND AUGUST, 2013 DECLARING TOTAL INCOME OF RS. 14,23,370/-. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE A.O NOTED THAT THE ASSESSEE HAS PAID INTEREST OF RS . 30,72,317/- TO THE FOLLOWING PERSONS COVERED U/S 40A(2)(B) OF THE INCOME TAX ACT, FROM WHOM THE ASSESSEE HAS TAKEN UNSECURED LO AN:- 1. SRI LALIT KUMAR SINGHAL 12,53,863/- 2. SRI DHRUV SINGAL 3,13,197/- 3. M/S R. K. TRUST 9,23,446/- 4. MS. DIKSHA SINGHA 5,81,811/- TOTAL AMOUNT 30,72,232/- 4. IN ABSENCE OF ANY SATISFACTORY EXPLANATION GI VEN BY THE ASSESSEE TO JUSTIFY AS TO WHY THE ASSESSEE HAS PAID INTEREST @ 18% TO THE SPECIFIED PERSONS WHEREAS IT HAS PAID INTERE ST @ 12% TO OTHERS., THE A.O FOLLOWING THE ORDER OF HIS PREDECE SSOR FOR THE PRECEDING ASSESSMENT YEAR AND KEEPING IN MIND THE P REVAILING MARKET RATE OF INTEREST, MADE DISALLOWANCE OF RS. 4 ,00,000/-. SIMILARLY, THE A.O DISALLOWED AN AMOUNT OF RS. 1043 13/- OUT OF TELEPHONE, CONVEYANCE, MOTOR CAR EXPENSES AND DEPRE CIATION ON MOTOR CAR BEING PROBABLE PERSONAL USE. WHILE DOING SO, HE HAS OBSERVED THAT IN THE PRECEDING YEAR ALSO SIMILAR DI SALLOWANCE WAS MADE. 3 ITA NO. 7831/DEL/2018 5. IN APPEAL, THE LD.CIT (A) DIRECTED THE A.O TO AL LOW INTEREST @ 13.75% I.E. AN INTEREST RATE OF 2% ABOVE THE BASE R ATE OFFERED BY THE BANK WHICH WAS 11/75%. THE REMAINING PAYMENT O F INTEREST TO SPECIFIED PERSONS WAS TREATED BY HIM AS EXCESSIV E AND HE SUSTAINED TO THE SAME TO THAT EFFECT. SO FAR AS TH E AMOUNT OF DEPRECIATION ON MOTOR CAR IS CONCERNED, HE ALSO UPH ELD THE ACTION OF THE A.O IN ABSENCE OF ANY LOG BOOK MAINTAINED BY THE ASSESSEE SO AS TO JUSTIFY THAT THE VEHICLE IS USED EXCLUSIVE LY FOR THE PURPOSE OF BUSINESS AND NOT FOR PERSONAL USES. THE ASSESSE E IS NOT IN APPEAL FOR OTHER EXPENSES SUSTAINED BY THE CIT(A), THEREFORE, WE ARE NOT CONCERNED WITH THE SAME. 6. AGGRIEVED OF SUCH ORDER OF THE CIT (A), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVE R, WRITTEN SYNOPSIS WAS FILED. I HAVE GONE THROUGH THE SAME A ND AFTER HEARING THE LD. DR. I PROCEED TO DECIDE THE APPEAL . IT IS THE SUBMISSION OF THE ASSESSEE IN THE WRITTEN SYNOPSIS THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF DISTRIBUTOR SHIP OF HINDUSTAN UNILEVER LTD (HUF FOR SHORT). WHILE HU L TAKES PAYMENT BEFORE OR AT THE TIME WHEN GOODS ARE SENT, HOWEVER, THE ASSESSEE HAS TO OFFER CREDIT TO HIS CUSTOMERS AS PE R PRACTICE. THEREFORE, THE ASSESSEE REQUIRES HUGE WORKING CAPIT AL. THE ASSESSEE, THEREFORE, BORROWED FUNDS FROM THE RELATI VES OF PARTNERS. IT HAS BEEN MENTIONED IN THE WRITTEN SYNOPSIS THAT WHILE TAKING LOAN FROM BANKS, THE ASSESSEE HAS TO OFFER COLLATER AL SECURITY TO THE 4 ITA NO. 7831/DEL/2018 BANKS WHERE AS NO SUCH COLLATERAL SECURITY IS REQUI RED, WHEN LOANS ARE TAKEN FROM FRIENDS AND RELATIVES. FURTHE R RATE OF INTEREST CHARGED BY THE BANKS DEPEND ON THE FINANCIAL POSITI ON OF THE LOAN TAKER, AVAILABILITY OF FUNDS ETC. THE RATE OF INT EREST CHARGED BY THE BANK FOR THE PERIOD 1/4/2012 TO 31/3/2013 IS AROUND 14.50%, WHEREAS THE ASSESSEE IN THE INSTANT CASE HAS GIVEN INTEREST @ 15% IN TWO CASES AND IN THE REMAINING TWO CASES, THE R ATE OF INTEREST WAS 12%. IT HAS FURTHER BEEN MENTIONED IN THE SYNO PSIS THAT THE TWO PERSONS TO WHOM INTEREST @ 15% HAS BEEN GIVEN A RE COMING IN THE 30% TAX RATE AND THE ASSESSEE IS ALSO PAYING TAX @ 30%. THEREFORE, THERE IS NO LOSS TO THE REVENUE. SO FAR AS THE DISALLOWANCE OF DEPRECIATION IS CONCERNED, THERE IS NO ARGUMENT BY THE ASSESSEE IN THE WRITTEN SYNOPSIS. 8. THE LD. DR ON THE OTHER HAND SUBMITTED THAT SINC E THE ASSESSEE HAS PAID INTEREST @ 15% TO CERTAIN SPECIFI ED PERSONS WHERE AS INTEREST PAID TO OTHERS IS 12%, THEREFORE, THE CIT(A) HAS VERY REASONABLY GRANTED PART RELIEF TO THE ASSESSEE AND, THEREFORE, THE ASSESSEE SHOULD NOT HAVE FURTHER GRIEVANCE. 9. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE B Y BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. IT IS THE SUBMISSION OF THE ASSESSEE IN THE WRITTEN SYNOPSIS THAT IT HAS PAID INTEREST @ 15% ONLY TO MS. DIKSHA SINGHAL AND R. K. TRUST WHERE AS IN THE OTHER TWO CASES SUCH INTEREST HAS BEEN PA ID @ 12%. IT IS ALSO THE SUBMISSION OF THE ASSESSEE IN THE WRITTEN SYNOPSIS THAT 5 ITA NO. 7831/DEL/2018 RATE OF INTEREST CHARGED BY THE BANK FOR THE PERIOD FROM 1/4/2012 TO 31/3/2013 WAS AROUND 14.50%. 10. I FIND FROM THE ASSESSMENT ORDER THAT T HE A.O HAS OBSERVED THAT THE ASSESSEE HAS PAID INTEREST @ 18% FOR WHICH HE DISALLOWED AN AMOUNT OF RS. 4 LACS BEING THE EXCES S PAYMENT OF INTEREST MADE TO THE SPECIFIED PERSON U/S 40A(2)(B) . I FIND SOME FORCE IN THE SUBMISSION OF THE ASSESSEE IN THE WRIT TEN SYNOPSIS THAT FOR OBTAINING LOAN FROM BANK, THE ASSESSEE HAS TO OFFER SOME COLLATERAL SECURITY WHERE AS FOR OBTAINING LOANS F ROM FRIENDS AND RELATIVES, NO SUCH SECURITY IS REQUIRED. SINCE TH E ASSESSEE HAS PAID INTEREST @ 12% TO TWO SPECIFIED PERSONS AND IN TEREST @ 15% TO THE OTHER TWO SPECIFIED PERSONS WHERE AS THE BAN K RATE OF INTEREST DURING THE PERIOD FROM 1/4/2011 TO 31/3/20 13 IS AROUND 14.5%, THEREFORE NO DISALLOWANCE IS CALLED FOR. HO WEVER, THE ABOVE FACTS NEED VERIFICATION AT THE LEVEL OF THE A.O I, THEREFORE, DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE A.O WITH THE DIRECTIONS TO VERIFY THAT THE ASSESSEE HAS PAID INTEREST @ 12 % TO TWO SPECIFIED PERSONS AND @ 15% TO THE OTHER TWO SPECI FIED PERSONS. HE HAS TO VERIFY AS TO WHETHER THE RATE OF INTEREST CHARGED BY THE BANK FOR THE PERIOD FROM 1/4/2012 TO 31/3/2013 WAS AROUND 14.5%. IF THE ABOVE SUBMISSION MADE BY THE ASSESS EE IN THE WRITTEN SYNOPSIS HAS FOUND TO BE CORRECT THEN NO DI SALLOWANCE IS CALLED FOR. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 6 ITA NO. 7831/DEL/2018 11. SO FAR AS, THE DISALLOWANCE OF DEPRECIATION I S CONCERNED, THERE WAS NO ARGUMENT IN THE WRITTEN SYNOPSIS FOR W HICH THE ORDER OF THE CIT (A) ON THIS ISSUE IS UPHELD. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT AT T HE TIME OF HEARING ITSELF I.E., ON 20.05.2019. SD/- (R.K PANDA) ACCOUNTANT MEMBER R.N* DATE:- 20 .05.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 08.05.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 08.05.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 20.05.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 20.05.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 1 . 0 5 . 2 0 1 9 7 ITA NO. 7831/DEL/2018 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER