Smt. Padma Kalani, Indore V. ITO-1(3), Indore, Indore

ITA 87/Ind/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4757 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 10-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANJIT SANCHDEVA
• Keywords: Business expenditure; Question of law; Commercial expediency
• Section: 143(3); 260A; 143(2); 44AB; 13; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE MANISH BORAD, ACCOUNTANT MEMBER AND HONBLE MADHUMITA ROY, JUDICIAL MEMBER ITA NOS.87 /IND/2020 & 956/IND/2019 ASSESSMENT YEARS 2013-14 & 2014-15 SMT. PADMA KALANI, : APPELLANT TREASURE ISLAND, 6 TH FLOOR, INDORE PAN : AFXOK1177L V/S INCOME TAX OFFICER-3(1) INDORE : RESPONDENT REVENUE BY SHRI HARSHIT BARI, SR.DR ASSESSEE BY SHRI MANJIT SANCHDEVA, ADV DATE OF HEARING 12 .04 .2021 DATE OF PRONOUNCEMENT 30 . 0 4 . 202 1 O R D E R PER MANISH BORAD, A.M THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCE OF THE ASSESSEE FOR ASSESSMENT YEAR 2014-15 AND 2013-14 ARE DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TA X(APPEALS)-I (IN SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 2 SHORT LD. CIT], INDORE DATED 24.9.2019 & 13.11.201 9 WHICH ARE ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 27.12.2016 16.02.2016 FRAMED BY ITO-1(3), INDORE. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ASSESSMENT YEAR 2013-14 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) ERRED IN CONFIRMING DISALLOWANCE MADE BY THE ASSESSING OFFIC ER AT RS.9,22,643/- ON ACCOUNT OF INTEREST EXPENSE. 2.THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) FAILED TO APPRECIATE THE SUBMISSION MADE BY THE APPELLANT. 3. THAT THE DISALLOWANCE MADE IS NOT BASED ON THE FA CTS OF THE CASE AND NEEDS TO BE DELETED. 4. THAT, THE APPELLANT, CARVES LEAVE TO ADD ALTER A ND/OR DELETE ANY OF THE GROUNDS OF APPEAL. ASSESSMENT YEAR 2014-15 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) ERRED IN CONFIRMING DISALLOWANCE MADE BY THE ASSESSING OFFIC ER AT RS.1120776/- ON ACCOUNT OF INTEREST EXPENSE. 2.THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) FAILED TO APPRECIATE THE SUBMISSION MADE BY THE APPELLANT. SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 3 3. THAT THE DISALLOWANCE MADE IS NOT BASED ON THE FA CTS OF THE CASE AND NEEDS TO BE DELETED. 4. THAT, THE APPELLANT, CARVES LEAVE TO ADD ALTER A ND/OR DELETE ANY OF THE GROUNDS OF APPEAL. 3. AS ACCEPTED BY BOTH THE PARTIES SINCE THE FACTS INVOLVED AND ISSUES RAISED IN THESE APPEALS ARE COMMON AND P ERTAINING TO SAME ASSESSEE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE AND BREVITY. 4. ON PERUSAL OF THE GROUNDS WE FIND THAT THE COMMO N GRIEVANCE IS AGAINST THE FINDING OF LD. CIT(A) CONF IRMING THE DISALLOWANCE OF INTERESTS EXPENSES MADE BY THE LD. A.O ALLEGING THAT THE ASSESSEE HAS CHARGED INTEREST AT LOWER RATE BUT PAYING INTEREST ON HIGHER RATE. 5. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN MONEY LENDING BUSINESS. ASSESSEE TAKES LOANS FROM BANKS AND OTHER PARTIES ON INTEREST AND ALSO GIVES LOANS AND ADVANCES AND MOST LY CHARGE INTEREST. THE RATE OF INTEREST ARE VARYING BOTH WH ILE PAYING AND SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 4 RECEIVING THE INTEREST. LD. A.O WHILE EXAMINING TH E RECORDS OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S SELECTED FOR SCRUTINY AFTER SERVING NOTICE U/S 143(2) OF THE ACT , OBSERVED THAT ASSESSEE IS PAYING INTEREST OF LOAN @12% TO 15% PER ANNUM BUT HAS CHARGED INTEREST @6% ON THE LOAN ADVANCED TO MR. P. S. KALANI AND HAS NOT CHARGED ANY INTEREST ON THE LOAN ADVANCED T O B.N. KALANI HUF AND SAURABH KALANI. ON OBSERVING SO AND AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE LD. A.O WAS OF THE VIEW THAT INTEREST EXPENDITURE OF RS.9,22,643/- AND INTEREST OF RS.11,20,776/- DESERVES TO BE DISALLOWED FOR ASSESS MENT YEARS 2013-14 AND 2014-15 RESPECTIVELY. THIS ISSUE WAS CH ALLENGED BEFORE LD. CIT(A) BUT ASSESSEE FAILED TO SUCCEED AS LD. CI T(A) CONFIRMED THE ACTION OF LD. A.O OBSERVING THAT THE ASSESSEE H AS FAILED TO CORROBORATE AS TO HOW THE LOAN HAS BEEN GIVEN ON L OWER RATE OF INTEREST WHILE AT THE SAME TIME DEBITING IN PROFIT & LOSS ACCOUNT WITH INTEREST EXPENDITURE PAYING HIGHER RATE OF INT EREST. 6. NOW THE ASSESSEE IN APPEAL BEFORE THE TRIBUNAL. SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 5 7. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED R EFERRING TO THE FOLLOWING WRITTEN SUBMISSION AND ALSO RELIED ON VARIOUS DECISIONS MENTIONED IN THE WRITTEN SUBMISSION WHICH ARE REPRODUCED BELOW:- WITH REFERENCE TO THE ABOVE IT IS SUBMITTED THAT TH E ASSESSMENT ORDER FOR ASSESSMENT YEARS 2013-14 & 2014-15 WAS PASSED ON 16.02.2016 AND 27.12.2016 RESPECTIVELY. THAT THE ASSESSEE IS CARRY ING ON THE BUSINESS OF MONEY LANDING. THAT NO PRUDENT BUSINESS PERSON WOUL D RUN A BUSINESS TO INCUR A LOSS IS THE PRIME QUESTION TO BE CONSIDE RED. THAT THE AO DISALLOWED EXPENSES RELATING TO INTERES T PAYMENTS ON THE GROUND THAT WHERE AS THE ASSESSEE HAD RECEIVED LOAN S @ 12% TO 16% BUT HAD CHARGED LESS INTEREST FROM P.S. KALANI I.E. @6% ONLY AND THEREFORE THE DIFFERENCE IS DISALLOWED. THAT THE ASSESSEE HAD PAID HIGHER RATE OF INTEREST ON THE OVERDRAFT TAKEN FROM THE BANK WAS I GNORED. THAT THE AO HAS POINTEDLY MENTIONED ON PAGE 2 OF TH E ASSESSMENT ORDER THAT INTEREST @ 18% TO BE RECEIVED FORM KALANI INDU STRIES AND @ 12% FROM M/S PADMA HOMES PVT. LTD. THAT THE AO CALCULATED THE DI SALLOWANCE CONSIDERING THE RATE OF INTEREST PAID TO BANK @ 16% INTEND OF 12% IN MOST OF THE CASES. THAT AS STATED ABOVE THE ASSESSEE WAS CARRYING ON T HE BUSINESS OF MONEY LENDING FOR THE PAST MAY YEARS. TOO SUBSTANTIATE TH E ABOVE CLAIM A COPY OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2006-07 IS ENCLOSED FOR READY PERUSAL. THAT THE COMPLETE CHART IN RESPECT O F THE AMOUNT OF INTEREST PAID IS ENCLOSED. COPY OF ASSESSMENT ORDER WITH DETAILS FOR ASSESSMENT YEAR 2012-13 IS ALSO ENCLOSED. WITH THIS SYNOPSIS, A PERUSAL SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 6 OF THE SAME WILL SHOW THAT RATE OF INTEREST PAID IS BETWEEN 12% TO 15% AND AROUND 16% ON OVERDRAFT FROM BANK. THAT THEREFO RE THE AO SHOULD NOT HAVE CALCULATED THE DISALLOWANCE CONSIDERING TH E AMOUNT OF INTEREST PAID TO THE BANK. SECONDLY THE POINT TO BE CONSIDER ED IS THAT INTEREST @18% WAS CHARGED FROM THE AMOUNT ADVANCED TO KALANI INDUSTRIES. IT THEREFORE IS BEYOND DOUBT THAT THE ASSESSEE WAS PRU DENTLY CARRYING ON HER BUSINESS. THAT THE LEARNED AO IGNORED THE FACT THAT THE AMOUNT ADVANCE TO P.S. KALANI SHOULD HAVE BEEN CONSIDERED AS A RELATED CONCERN OUT OF COMMERCIAL EXPEDIENCY WHICH IS ALLOWABLE UND ER THE INCOME TAX RETURN AND ANY EXPENSES CLAIMED IN RESPECT OF SUCH ADVANCE CAN BE CLAIMED AS AN EXPENDITURE. ATTENTION IS DRAWN TO THE ORDER OF THE HON BLE JAI PUR BENCH IN THE CASE OF KAILASH CHAND SONI VS. ACIT CIRCLE-O5 (ORDER ENC LOSED AT PAGE 66 TO 84 OF THE PAPER BOOK) WHERE IN IT HAS BEEN HELD: ( PARA 21) 'IN THE PRESENT CASE ALSO THE ASSESSEE HAD PROVIDED TO THE ASSESSING OFFICER WITH THE BANK STATEMENTS IN WHICH IT IS CLE ARLY VISIBLE THAT THE /4 FUNDS RAISED FROM THE UNSECURED LOAN TAKEN FROM VAR IOUS PARTIES IS UTILIZED FOR ITA NO. 960/JP/2019 SHRI KAILASH CHAND SONI, JAIPUR VS. ACIT, JAIPUR LENDING MONEY TO VARIOUS PARTIES. IT M EANS THAT THE INTEREST PAID ON UNSECURED LOANS IS EXPENDED WHOLLY AND EXCL USIVELY FOR EARNING THE INTEREST INCOME FROM LOANS AND ADVANCES. HOWEVER THE A.O. HAD NOT CONSIDERED SECTION 57(III) OF THE INCOME TAX ACT AND TERM COMMERCIAL EXPEDIENCY TOGETHER AND HAD CON TENDED THAT THE EXPENDITURE IS NOT RELATED WHOLLY AND EXCLUSIVELY F OR EARNING INCOME OF RS. 4,21,667/- ONLY BECAUSE THE ASSESSEE HAS ADVANC ED LOAN TO ONE PARTY AT NIL RATE OF INTEREST OUT OF COMMERCIAL EXPEDIENC Y .. IN ACTUAL SUCH LOANS AND ADVANCES WHICH ARE PROVIDED AT LOW OR NIL RATE OF INTEREST OUT SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 7 OF COMMERCIAL EXPEDIENCY DOES NOT AFFECT THE NATURE OF TRANSACTION.' WE FURTHER DRAWN YOUR HONOURS ATTENTION TO THE FOLL OWING DECISIONS: (I) COMMISSIONER OF INCOME-TAX VS. SHRIRAM INVESTMENTS (2020) 422 ITR 528 (MADRAS HIGH COURT) WHEREIN IT HAS BEEN HELD TH AT :- HELD, THAT THE TRIBUNAL RIGHTLY HELD THAT WHEN THE CASH SYSTEM OF ACCOUNTING WAS ADOPTED BY THE ASSESSEE, AN INVESTME NT COMPANY, WHOSE BUSINESS WAS ONLY TO BORROW AND LEND OR INVES T, THAT COULD NOT BE SAID TO BE NOT IN THE BUSINESS INTEREST OR C OMMERCIALLY EXPEDIENT FOR THE PURPOSE OF BUSINESS AND THE CONCE PT OF MATCHING PRINCIPLES WHICH HAD BEEN APPLIED BY THE ASSESSING AUTHORITY AND THE COMMISSIONER (APPEALS) IN THE PRESENT CASE, WAS NOT REALLY APPLICABLE. IT IS NOT FOR THE REVENUE AUTHORITIES T O SUBSTITUTE THEIR OWN WISDOM OR NOTION ABOUT THE RATE OF INTEREST AGR EED TO BETWEEN THE PARTIES, INCLUDING GROUP COMPANIES AND AS SUCH, THE FINDING OF FACT ABOUT COMMERCIAL EXPEDIENCY OR ABSENCE THEREOF IS A FINDING OF FACT, OUT OF WHICH NO SUBSTANTIAL QUESTION OF LAW C AN BE SAID TO ARISE, REQUIRING CONSIDERATION UNDER SECTION 260A OF THE A CT. MOREOVER, SINCE IN THE CASE OF THE ASSESSEE ITSELF, THE COURT HAD DECIDED ON SIMILAR FACTS EARLIER AND DISMISSED THE REVENUE'S A PPEAL, THERE WAS NO REASON TO TAKE A DIFFERENT VIEW OF THE MATTER FO R THE ASSESSMENT YEAR 2013-14. WE MAY SUBMIT HERE THE QUESTION BEFORE THE HIGH COU RT WAS THAT WHEN THE ASSESSEE HAD NOT ADVANCED INTEREST BEARING FUND WITHOUT CHARGING ANY INTEREST. THE HON'BLE HIGH COURT REFERRED TO TH E FOLLOWING CASES: (I) COMMISSIONER OF INCOME TAX VS. LOKHANDWALA CONSTRUC TION INDS. LTD (BOMBAY HIGH COURT) 260 ITR 579 SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 8 'WHERE AN ASSESSEE CLAIMS DEDUCTION OF INTEREST PAI D ON CAPITAL BORROWED, ALL THAT THE ASSESSEE HAS TO SHOW IS THAT THE CAPITAL WHICH WAS BORROWED WAS USED FOR BUSINESS PURPOSE IN THE RELEVANT YEAR OF ACCOUNT AND IT DOES NOT MATER WHETHER THE C APITAL WAS BORROWED IN ORDER TO ACQUIRE A REVENUE ASSET OR A C APITAL ASSET.' (II) S. A. BUILDERS LTD. VS. COMMISSIONER OF INCOME TAX (APPEALS) AND ANOTHER (SUPREME COURT OF INDIA) 'INTEREST ON BORROWED CAPITAL - INTEREST ON MONEY B ORROWED FROM BANK AND LENT TO SISTER CONCERN WITHOUT CHARGING IN TEREST - WHEN ALLOWABLE - TEST SAME AS THAT FOR ALLOWANCE OF BUSI NESS EXPENDITURE, VIZ., 'FOR THE PURPOSE OF THE BUSINESS' - ALLOWABLE IF MADE AS A MEASURE OF COMMERCIAL EXPEDIENCY - INCOME TAX ACT, 1961, SS36(1)(III),37. WORDS AND PHRASES - 'FOR THE PURPOSE OF BUSINESS' ' COMMERCIAL EXPEDIENCY', MEANING OF. IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORROW ED BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G., A SUBSIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION UNDER SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961, ONE HAS TO ENQUIRE WHETHER THE LOAN WAS GIVEN BY THE ASSESSEE AS A MEA SURE OF COMMERCIAL EXPEDIENCY. THE EXPRESSION 'COMMERCIAL E XPEDIENCY' IS ONE OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURES FOR THE PURPOSE OF BUSINESS. TH E EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATI ON, BUY YET IT IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRE D ON GROUNDS OF COMMERCIAL EXPEDIENCY. SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 9 DECISIONS RELATING TO SECTION 37 WILL ALSO BE APPLI CABLE TO SECTION 36(1)(III) BECAUSE IN SECTION 37 ALSO THE EXPRESSIO N USED IS 'FOR THE PURPOSE OF THE BUSINESS'. 'FOR THE PURPOSE OF BUSIN ESS' INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXP EDIENCY, AND IT IS IMMATERIAL IF A THIRD PARTY ALSO BENEFITS THEREBY. THE EXPRESSION 'FOR THE PURPOSE OF BUSINESS' IS WID ER IN SCOPE THAN THE EXPRESSION 'FOR THE PURPOSE OF EARNING PROFITS' . TO CONSIDER WHETHER ONE SHOULD ALLOW DEDUCTION UNDE R SECTION 36(1)(III) OF INTEREST PAID BY THE ASSESSEE ON AMOU NTS BORROWED BY IT FOR ADVANCING TO A SISTER CONCERN, THE AUTHORITIES AND THE COURTS SHOULD EXAMINE THE PURPOSE FOR WHICH THE ASSESSEE A DVANCED THE MONEY AND WHAT THE SISTER CONCERN DID WITH THE MONE Y. THAT THE BORROWED AMOUNT IS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCERN IS NOT RELEVANT. WHAT IS RELEVANT IS WHETHER THE AMOUN T WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PR OFITS. ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSA RILY BE THE BUSINESS OF THE ASSESSEE ITSELF) THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN O R IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECID E HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMS TANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE H IS PROFITS. 8. PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED SUPPORTING THE ORDERS OF BOTH THE LOWER AUTH ORITIES. SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 10 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE SUB MISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS FIND ING OF BOTH THE LOWER AUTHORITIES. THE INSTANT APPEAL PERTAINS TO ASSESSMENT YEARS 2013-14 AND 2014-15. THOUGH VARIOUS GROUNDS ARE RA ISED BUT THE SOLE GRIEVANCE IS COMMONLY RAISED AGAINST THE DISAL LOWANCE OF INTEREST EXPENDITURE OF RS. 9,22,643/- AND RS.11,20 ,776/- FOR ASSESSMENT YEARS 2013-14 AND 2014-15 RESPECTIVELY. 10. WE OBSERVE THAT THE ASSESSEE IS INTO MONEY LEND ING BUSINESS AND HOLDS REGISTRATION CERTIFICATE FOR RUNNING THIS BUSINESS GIVEN BY THE LOCAL AUTHORITY. BOOKS OF ACCOUNTS ARE REGULAR LY MAINTAINED AND AUDITED U/S 44AB OF THE ACT. ASSESSEE IS REGULA RLY ACCEPTING BOTH SECURED AND UNSECURED LOANS ON INTEREST AND GI VING LOANS AND ADVANCES FOR EARNING INCOME. DETAILS FOR PARTY WIS E INTEREST RECEIVED AND INTEREST PAID HAVE BEEN FILED BEFORE U S. FOR ASSESSMENT YEAR 2013-14, WE FIND THAT THE ASSESSEE HAS CHARGED THE INTEREST IN THE RANGE OF 6% TO 18% MORE SPECIFI CALLY INTEREST @18% PER ANNUM HAS BEEN CHARGED FROM KALANI INDUSTR IES PVT LTD, 6% PER ANNUM HAS BEEN CHARGED FROM P.S. KALANI. IN THE DETAILS OF SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 11 INTEREST PAID WE OBSERVE THAT ON THE UNSECURED LOAN S THE RATE OF INTEREST PAID IS RANGING FROM 9% TO 15%. INTEREST RANGING FROM 12% TO 15% HAS BEEN PAID TO THE BANK. REVENUE HAS NOT D OUBTED THE GENUINENESS OF ALL OTHER INTEREST EXPENSES AND INT EREST RECEIPTS DURING THE YEAR EXCEPT THOSE DISPUTED. NO ADVERSIT Y HAVE BEEN FOUND IN THE BOOKS OF ACCOUNTS REGULARLY MAINTAINED BY THE ASSESSEE. ASSESSEE ALSO ENJOYS OVER DRAFT FACILITY FROM BANK OF BARODA AND ALSO ON 31.3.2014 THE OUTSTANDING BALANC E OF OVER DRAFT OF BANK OF BARODA WAS RS.2,02,07,718/-. 11. THE ABOVE STATED FACTS CLEARLY DEMONSTRATES THA T ASSESSEE IS REGULARLY CARRYING OUT THE BUSINESS OF MONEY LENDIN G AND FOR BUSINESS AND COMMERCIAL EXPEDIENCY RATE OF INTERES T PAID AND RECEIVED VARIES FROM CASE TO CASE. THE ASSESSEE IS VERY MUCH INDEPENDENT TO CARRY OUT ITS BUSINESS ACTIVITY IN T HE BEST OF HER INTEREST. CHARGING OF INTEREST AT HIGH RATE AND LO W RATE DEPENDS ON VARIOUS CIRCUMSTANCES. IF THE FUNDS ARE IDLE AND D UE TO PRE COMMITMENTS THE INTEREST ON UNSECURED LOANS ARE TO BE PAID CONSISTENTLY THEN EVEN IF INTEREST RATE IS LOW AND IF THE PERSON FINDS THAT THE INVESTMENT IS SAFE, ONE CAN VERY WELL GO F OR RECEIVING LOWER SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 12 INTEREST RATE. IT IS A WELL KNOWN FACT THAT IN BAN KING INDUSTRIES ALSO PER ANNUM RATES OF INTEREST ON FIXED DEPOSIT NORMAL LY RANGE BETWEEN 5% TO 7% WHEREAS FOR THE CASH CREDIT LOANS AND OTHER BUSINESS LOANS THE BANKS ARE CHARGING MUCH HIGHER I NTEREST. THERE CANNOT BE A STRAIGHT JACKET FORMULA THAT IF UNSECUR ED LOAN IS TAKEN @12% PER ANNUM ONE WILL HAVE TO CHARGE INTEREST MOR E THAN 12% ON LOAN GIVEN. THE SAME MAY OR MAY NOT HAPPEN. IT IS UP TO THE BUSINESSMEN TO TAKE A WISE DECISION AT THE GIVEN PO INT OF TIME AND THE RISK INVOLVED IN GIVING LOAN ON INTEREST. IN F INANCE BUSINESS, ONE IS CONCERNED TO EARN PROFITS BUT MAJOR CONCERN IS O F RECEIVING THE PRINCIPLE AMOUNT BACK AS AND WHEN DUE TO BE RECEIVE D. 12. IN THE INSTANT CASE THE TRANSACTIONS OF TAKING MONEY ON LOAN AND GIVING THEM AS ADVANCE OR LOAN FOR INTEREST IS BEING CARRIED OUT REGULARLY ROUND THE YEAR. IT SHOWS THAT INTEREST P AID ON SECURED AND UNSECURED LOAN IS WHOLLY AND EXCLUSIVELY FOR TH E BUSINESS PURPOSE OF EARNING INCOME FROM LOANS AND ADVANCES. 13. THE ALLOWABILITY OF INTEREST PAID ON BORROWED C APITAL WHERE INTEREST BEARING FUNDS HAVE BEEN ADVANCED INTEREST FREE TO THE SISTER CONCERN WAS DELIBERATED UPON BY THE HONBLE SUPREME COURT IN S.A. SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 13 BUILDERS (SUPRA) 288 ITR 1 (SC). THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IS AS UNDER:- IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORRO WED BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G., A SUB SIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION UNDER SE CTION 36(1)(III) OF THE INCOME TAX ACT, 1961, ONE HAS TO ENQUIRE WHETHER TH E LOAN WAS GIVEN BY THE ASSESSEE AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE EXPRESSION COMMERCIAL EXPEDIENCY IS ONE OF WIDE IMPORT AND I NCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURES FOR TH E PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRE D UNDER ANY LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS BUSINESS EXP ENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY. 14. EXAMINING THE INSTANT CASE AND ON THE FACTS OF ABOVE JUDGMENT WE ARE OF THE VIEW THAT FIRSTLY THERE IS A CLEAR NEXUS OF INTEREST PAID AGAINST THE INCOME RECEIVED DURING TH E YEAR, THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE ARE FOR TH E COMMERCIAL EXPEDIENCY AND FOR THIS PURPOSE THE RATE OF INTERE ST PAID AND RECEIVED BY THE ASSESSEE ARE VARYING FROM CASE TO C ASE WHICH IS DULY EVIDENT FROM THE RECORDS PLACED BEFORE US AND THE A UDITED FINANCIAL STATEMENTS. UNDER GIVEN FACTS AND CIRCUMSTANCES OF THE CASE THE ACTION OF LD. A.O WAS NOT JUSTIFIED IN TAKING UP FE W OUT OF MANY SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 14 ADVANCES GIVEN BY THE ASSESSEE TO ARBITRARILY LEVY INTEREST RATE ON LOAN GIVEN AT AN AGREED RATE OF INTEREST WHICH MAY BE LOWER THAN THE INTEREST RATE CHARGED FROM OTHER PERSONS OR NO INTE REST IS CHARGED FOR COMMERCIAL EXPEDIENCY PURPOSES. WE THUS SET AS IDE THE FINDING OF LD. CIA(A) AND DELETE THE DISALLOWANCE OF INTERE ST AT RS.9,22,643/- AND RS.11,20,776/- MADE FOR ASSESSMEN T YEARS 2013-14 & 2014-15 RESPECTIVELY. THE COMMON ISSUE RA ISED BEFORE US IS DECIDED IN FAVOUR OF THE ASSESSEE. EFFECTIVE GROUNDS RAISED IN THESE TWO APPEALS ARE ALLOWED. 15. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. THE ORDER PRONOUNCED AS PER RULE 34 OF ITAT RULES, 1963 ON 30.04.2021. SD/- SD/- (MADHUMITA ROY) (MA NISH BORAD) JUDICIAL MEMBER ACCOUNTAN T MEMBER / DATED : 30 TH APRIL, 2021 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE SMT.PADMA KALANI ITA NO. 87/IND/2020 & 956/IND/2019 15