Mahesh Kumar Narula, Kolkata V. ITO, Ward - 35(4), Kolkata , Kolkata

ITA 800/KOL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5916 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 25-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYAJIT MANDAL CIT DR REVE
• Assessee Lawyers: M P AGARWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA SMC BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER) ITA NO. 800/KOL/2018 ASSESSMENT YEAR: 2014-15 MAHESH KUMAR NARULA.........APPELLANT 1 ST FLOOR 3, AMRATOLLA STREET KOLKATA 700 001 [PAN : ABOPN 8174 H] INCOME TAX OFFICER, WARD-35(4), KOLKATA...........RESPONDENT APPEARANCES BY: SHRI M.P. AGARWAL, ADVOCATE, APPEARED ON BEHALF OF THE ASSESSEE. SHRI SATYAJIT MANDAL, ADDL. CIT, D/R. APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JULY 17 TH , 2018 DATE OF PRONOUNCING THE ORDER : JULY 25 TH , 2018 ORDER PER J. SUDHAKAR REDDY, AM :- THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA, (HEREINAFTER THE LD. CIT(A)), DT. 10/01/2018, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), RELATING TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS A TEA MERCHANT AS WELL AS A COMMISSION AGENT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE TOOK UNSECURED LOANS OF RS.2,74,55,805/-. THE INTEREST PAID ON THE LOANS VARIED BETWEEN 12% TO 15%. THE ASSESSEE RUNS A PROPRIETARY CONCERN UNDER THE NAME AND STYLE OF M/S. MAHESH TRADING COMPANY. THE ASSESSEE HAD ADVANCED LOANS TO THE TUNE OF RS.2,16,61,849/-, TO M/S. RAMDURLABHPUR TEA CO. LTD., A SISTER CONCERN OF THE ASSESSEE COMPANY, ON 16/04/2013. THE BOARD OF DIRECTORS OF M/S. RAMDURLABHPUR TEA CO. LTD. MET AND IN VIEW OF THE BAD FINANCIAL POSITION OF THE COMPANY AND ALSO DUE TO THE FACT THAT, THE MANAGEMENT COULD NOT ENTER THE TEA ESTATES WITHOUT POLICE PROTECTION DUE TO UNREST IN TRIPURA THE INTERESTS ON THE LOANS WAS DECIDED TO BE SERVICED @ 6% ONLY, INSTEAD OF THE EARLIER RATE OF INTEREST AGREED TO. THE COPY OF THE BOARD RESOLUTION HAS BEEN PLACED ON RECORD. THE CHANGE IN THE CIRCUMSTANCES WERE EXPLAINED. 2 ITA NO. 800/KOL/2018 ASSESSMENT YEAR: 2014-15 MAHESH KUMAR NARULA 3. THE ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE FROM INTEREST ON LOAN GIVEN TO M/S. RAMDURLABHPUR TEA CO. LTD. @12% INTEREST OF 6% AND MADE THE ADDITION. THE LD. CIT(A) CONFIRMED THE SAME. 4. AGGRIEVED THE ASSESSEE IS BEFORE US IN APPEAL. 5. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- 5.1. WE FIND THAT THE COMPANY M/S. RAMDURLABHPUR TEA CO. LTD. HAS CLAIMED INTEREST EXPENDITURE ON THE LOANS BORROWED @6% PER ANNUM. THE ASSESSEE HAS ALSO ACCOUNTED FOR INCOME FROM INTEREST @6% OF THE PRINCIPAL AMOUNT, PER ANNUM. WHILE SO, THE ASSESSING OFFICER HAS TAKEN A NOTIONAL FIGURE OF 12% INTEREST AND MADE THE ADDITION. THIS CANNOT BE SUSTAINED UNDER THE REAL INCOME THEORY. THE RATE OF INTEREST IS A CONTRACT BETWEEN TWO PERSONS. THE TERMS OF THE CONTRACT SHOULD BE THE BASIS OF DETERMINATION OF INCOME. WHEN THE REVENUE DOES NOT HAVE ANY EVIDENCE TO COME TO THE CONCLUSION THAT INTEREST PAID OR THAT WHICH WAS PAYABLE WAS AT A HIGHER RATE THAN 6% BY M/S. RAMDURLABHPUR TEA CO. LTD., THE QUESTION OF ASSESSING @12%, DOES NOT ARISE WHEN TWO PARTIES AGREE TO A RATE OF INTEREST, THE ASSESSING OFFICER CANNOT INTERFERE IN THE SAME WITHOUT EVIDENCE. ACCORDINGLY, WE DELETE THE ADDITION. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. KOLKATA, THE 25 TH DAY OF JULY, 2018. SD/- [ J. SUDHAKAR REDDY ] ACCOUNTANT MEMBER DATED : 25.07.2018 {SC SPS} 3 ITA NO. 800/KOL/2018 ASSESSMENT YEAR: 2014-15 MAHESH KUMAR NARULA COPY OF THE ORDER FORWARDED TO: 1. MAHESH KUMAR NARULA 1 ST FLOOR 3, AMRATOLLA STREET KOLKATA 700 001 2. INCOME TAX OFFICER, WARD-35(4), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES