Shri Amit Pravinchandra Maniar, Ahmedabad V. The Income tax Officer,Ward-9(2), Ahmedabad

ITA 901/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5787 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: PF JAIN
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA, JUDICIAL MEMBER) ITA.NO.901/AHD/2010 ASSTT.YEAR : 2006-2007 SHRI AMIT PRAVINCHANDRA MANIAR PROP. OF M/S.MANIAR ASSOCIATES PROP. OF M/S.DHARNIDHAR CORPORATION 1/MANIR HOUSE, 3-RUSHABH SOCIETY SHANTIVAN, AHMEDABAD. PAN : ABOPM 4521 H VS. ITO, WARD-9(2) AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.F.JAIN REVENUE BY : SHRI A.K.KHANDELWAL O R D E R PER G.D. AGARWAL, VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT(A)-XV, AHMEDABAD DATED 29-1-2010 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS A S UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF I NTEREST OF RS.1,31,682/- MADE BY THE ASSESSING OFFICER U/S.40A (2)(B) BY COMPUTING INTEREST @ 12% AS AGAINST INTEREST PAID BY THE ASSE SSEE @ 18% WITHOUT PROPERLY APPRECIATING THE FACTS OF THE APPELLANT. 3. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED BY THE FOLLOWIN G DECISIONS OF THE ITAT IN WHICH THE DISALLOWANCE OF INTEREST UNDER SECTION 40 (A)(2)(B) OF THE INCOME TAX ACT WAS DELETED: ITA.NO.901/AHD/2010 -2- I) SUBHASH CHANDER & CO. VS. ITO, 121 TTJ (ASR) 718 WH EREIN THE INTEREST PAID AT THE RATE OF 15% TO THE PERSONS COV ERED UNDER SECTION 40(A)(2)(B), THE ASSESSING OFFICER ALLOWED INTEREST AT THE RATE OF 12%. THE ITAT DELETED THE ADDITION. II) ACIT VS. ALFA RUBBER INDS., 172 TAXMAN 35 (ASR) (MA G) WHEREIN 21% INTEREST PAID TO PERSONS COVERED UNDER SECTION 40A(2)(B) HELD ALLOWABLE; III) ITO VS. CHAMBA MAL ROOP CHAND, 70 TTJ (ASR) 43 IN T HE TRIBUNAL HELD THAT MARKET VALUE OF THE SERVICES AND NOT THE INDIVIDUAL ACTION OF THE ASSESSEE HAS TO BE LOOKED INTO WILE MAKING THE DISALLOWANCE UNDER SECTION 40A(2)(A) OF THE ACT MARKET RATE OF INTEREST @ 24% HELD TO BE REASONABLE . IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT IN T HE IMMEDIATELY PRECEDING YEAR, THE INTEREST PAID TO THE RELATIVES AT THE RAT E OF 18% WAS DULY ALLOWED BY THE ASSESSING OFFICER. ON THE OTHER HAND, IT WAS P OINTED OUT BY THE LEARNED DR THAT SINCE THE ASSESSEE PAID INTEREST TO THE OTHER PERSONS RANGING BETWEEN 12% TO 15%, THE INTEREST PAID TO THE RELATIVES AT THE R ATE OF 18% WAS CERTAINLY EXCESSIVE OR UNREASONABLE. IN THE REJOINDER, IT WA S EXPLAINED BY THE LEARNED COUNSEL THAT THE ADVANCE FROM THE RELATIVE IS FOR T HE LONG TERM WHILE THE ADVANCES FROM OTHER PERSONS WAS FOR RELATIVELY SHOR TER PERIOD. HE REITERATED THAT THE PAYMENT OF INTEREST AT THE RATE OF 18% FOR UNSECURED LOAN IS NEITHER UNREASONABLE NOR EXCESSIVE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATER IAL PLACED BEFORE US. FROM THE ABOVE DECISIONS OF THE ITAT IT IS EVIDENT THAT THE ITAT HELD THE INTEREST VARYING BETWEEN 15% TO 24% PER ANNUM TO B E REASONABLE. THEREFORE, THE INTEREST PAID AT THE RATE OF 18% PER ANNUM BY T HE ASSESSEE TO THE RELATIVES CANNOT BE SAID TO BE UNREASONABLE OR EXCESSIVE. MO REOVER, THE AO HIMSELF HAS ACCEPTED THE INTEREST AT THE RATE OF 18% TO BE REAS ONABLE IN THE IMMEDIATELY PRECEDING YEAR, THEREFORE, THE SAME RATE OF INTERES T CANNOT BE BECOME EXCESSIVE ITA.NO.901/AHD/2010 -3- IN THE SUBSEQUENT YEAR. IN VIEW OF THE ABOVE, WE DELETE THE DISALLOWANCE OF RS.1,31,682/- MADE BY THE AO UNDER SECTION 40(A)(2) (B). ACCORDINGLY THE GROUND NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. 5. GROUND NO.2 OF THE ASSESSEES APPEAL IS AGAINST THE CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT. BOTH THE PARTIES AG REED THAT IT IS CONSEQUENTIAL, WE THEREFORE DIRECT THE ASSESSING OFFICER TO RECALC ULATE THE INTEREST, IF ANY, AFTER DETERMINATION OF THE INCOME AS PER OUR ABOVE ORDER. 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN OPEN COURT ON 25 TH JUNE, 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 25-06-2010 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