Shri Vipul Y.Mehta, Ahmedabad V. The ACIT.,Circle-10, Ahmedabad

ITA 869/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5668 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-07-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 23-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL SHRAWAT, JUDICIAL MEMBER) ITA.NO.869/AHD/2010 ASSTT.YEAR : 2007-2008 VIPUL Y. MEHTA 1, ANAND SHOPPING CENTRE C.G. ROAD, NAVRANGPURA AHMEDABAD. VS. ACIT, CIR.10 AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL REVENUE BY : SHRI SAMIR TEKRIWAL O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT(A)-XVI, AHMEDABAD DATE D 18.01.2010 FOR A.Y.2007-2008 ARISING OUT OF THE ORDER OF THE ASSES SING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UN DER: 1. LD.CIT(A) ERRED IN LAW AND ON FACTS TO UPHOLD T HE DISALLOWANCE OF INTEREST PAID TO PERSONS SPECIFIED U/S.40A(2)(B) OF THE IT ACT IN EXCESS OF 16%. THE LD.CIT(A) FURTHER ERRED IN CONSIDERING ALL THE PAYEES OF INTEREST AS PERSONS SPECIFIED U/S.40A(2)(B) OF THE ACT. 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE PAID INTEREST TO THE RELATIVES AT THE RATE OF 18%. THE AO WAS OF THE VI EW THAT REASONABLE RATE OF INTEREST IS 12%, HE THEREFORE DISALLOWED 6% UNDER S ECTION 40A(2)(B) OF THE ACT. ON APPEAL, THE CIT(A) WAS OF THE OPINION THA T THE BANKS ARE CHARGING INTEREST AT THE RATE OF 16% AND THEREFORE HE DIRECT ED THE AO TO ALLOW INTEREST AT THE RATE OF 16%. IT IS SUBMITTED BY THE LEARNED CO UNSEL THAT THE LOAN TAKEN FROM THE RELATIVES CANNOT BE COMPARED WITH THE BANK LOAN BECAUSE THE LOAN FROM THE ITA.NO.869/AHD/2010 -2- RELATIVES ARE WITHOUT SECURITY WHILE THE LOAN FROM THE BANK IS SECURED. HE ALSO POINTED OUT THAT IN THE CASE OF OMKARMAL GAURISHANK ER VS. ITO, 92 TTJ (AHD) 223 THE TRIBUNAL HELD THAT THE INTEREST PAID TO THE RELATIVES AT THE RATE OF 24% IS BE REASONABLE. HE ALSO SUBMITTED THAT DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE HIMSELF HAS CHARGED INTEREST FROM OTHERS A T THE RATE OF 18%. IN VIEW OF THIS, IT IS SUBMITTED BY THE LEARNED COUNSEL THAT T HE PAYMENT OF INTEREST AT THE RATE OF 18% WAS REASONABLE AND NOT EXCESSIVE. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AUTHORITIES BELOW: 5. WE HAVE HEARD BOTH THE SIDES AND ALSO PERUSED TH E MATERIAL PLACED BEFORE US. CONSIDERING THE FACTS OF THE CASE AND T HE ARGUMENTS OF BOTH THE SIDES, IN OUR OPINION, THE PAYMENT OF INTEREST AT T HE RATE OF 18% PER ANNUM TO THE RELATIVES ON UNSECURED LOAN CANNOT BE SAID TO B E EXCESSIVE OR UNREASONABLE. WE, THEREFORE, DELETE THE DISALLOWANCE MADE UNDER S ECTION 40A(2)(B) OF THE ACT. ACCORDINGLY, GROUND NO.1 OF THE ASSESSEES AP PEAL IS ALLOWED. 6. THE GROUND NO.2 READS AS UNDER: 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS TO REST RICT AND UPHOLD THE DISALLOWANCE OF RS.50,000/- OUT OF TRAVELLING EXPEN SES AS PERSONAL EXPENSES. THE LD.CIT(A) OUGHT TO HAVE DELETED ENTI RE ADDITION ON THIS GROUND. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THAT DURING THE YEAR UNDER CONSIDERATI ON, THE ASSESSEE CLAIMED TRAVELLING EXPENSES AMOUNTING TO RS.4,29,011/-. TH E AO DISALLOWED 50% OF THE CLAIM BECAUSE THE EXPENSES INCLUDED THE EXPENSE S OF ASSESSEES WIFE ALSO. THE CIT(A) REDUCED THE DISALLOWANCE TO RS.50,000/-. THE REVENUE IS NOT IN APPEAL AGAINST THE RELIEF ALLOWED BY THE CIT(A). A T THE TIME OF HEARING BEFORE US, LEANED COUNSEL FOR THE ASSESSEE HAS NOT DENIED THAT THE EXPENSES INCURRED BY ASSESSEES WIFE WAS CLAIMED AS BUSINESS EXPENSES. THE CIT(A) HAS ALREADY ITA.NO.869/AHD/2010 -3- REDUCED THE DISALLOWANCE SUBSTANTIALLY. CONSIDERIN G THE FACTS OF THE CASE, IN OUR OPINION, THE DISALLOWANCE OF RS.50,000/- SUSTAI NED BY THE CIT(A) CANNOT BE SAID TO BE UNREASONABLE OR EXCESSIVE. WE THEREFORE UPHOLD THE SAME AND REJECT THE GROUND NO.2 OF THE ASSESSEES APPEAL. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON 9 TH JULY, 2010. SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 09-07-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER AR, ITAT, AHMEDABAD