SHRI NARESH KUMAR LUHADIA, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX , JAIPUR

ITA 984/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4095 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 24-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 984/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14. SHRI NARESH KUMAR LUHADIA F-17/18, IND. AREA, DUDU, JAIPUR. CUKE VS. THE DY. COMMISSIONER OF INCOME - TAX CIRCLE 7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABJPL 9768 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIKAS JAIN (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25.10.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26/10/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27 TH JULY, 2018 OF LD. CIT (A)-3, JAIPUR FOR THE ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND LAW THE COMMISSIONER OF INCOME TAX (APPEALS)-3, ERRED IN CO NFIRMING DISALLOWANCE OF RS. 1,61,782/- OUT OF INTEREST PAID TO RELATIVES U/S 40A(2)(B) BY RESTRICTING THE RATE OF INTEREST @ 15% INSTEAD OF 18% PAID BY THE ASSESSEE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND LAW THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN A SSESSING THE TOTAL INCOME AT RS. 73,86,346/- AS AGAINST NON CONTESTED TOTAL INCOME OF RS. 72,24,574/- DECLARED BY THE ASS ESSEE. 2 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR. 2. THE ASSESSEE IS A PROPRIETOR OF M/S. KISSAN PASH U AAHAR UDYOG AND DERIVES INCOME FROM MANUFACTURING AND SELLING OF CATTLE FEE D, TRADING OF SHARES AND INCOME FROM HOUSE PROPERTY. THE ASSESSEE FILED HIS RETURN OF INCOME ON 23.09.2013 DECLARING TOTAL INCOME OF RS. 70,90,920/-. THE AO NOTED THAT THE ASSESSEE HAS TAKEN LOANS FROM RELATED PARTIES @ 18% WHEREAS THE OTHER LOANS WERE TAKEN FROM UNRELATED PARTIES AT LOWER RATES. ACCORDINGLY, THE AO RESTRICTED THE PAYMENT OF INTEREST TO THE RELATED PARTIES AT 15% PER ANNUM AN D MADE DISALLOWANCE OF RS. 1,61,782/- UNDER SECTION 40A(2)(B) OF THE IT ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD N OT SUCCEED. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE ASSESSEE HAS TAKEN LOANS FROM 62 PARTIES AND PAID TOTAL INTEREST OF MORE THAN RS. 52 LACS. HE HAS FURTHER SUBMITTED THAT INTEREST PAID TO THE RELATED PARTIES IS ONLY RS. 9,70,697/-. THE LD. A/R HAS FURTHER SUBMITTED THAT EVEN OTHERWISE I N CASE OF 18 UNRELATED PARTIES THE ASSESSEE HAS TAKEN LOANS @ 15% AND 12% WHICH ARE LE SS THAN THE RATE OF 18% WHEREAS FOR THE REMAINING UNRELATED PARTIES WHICH I S THE MAJORITY OF THE CASES THE LOANS WERE TAKEN @ 18%. THEREFORE, THE AO HAS PICK ED UP ONLY THE SELECTED CASES WHERE THE LOANS WERE TAKEN AT LESS THAN 18% TO COMP ARE WITH THE LOANS TAKEN FROM THE RELATED PARTIES INSTEAD OF CONSIDERING THE COMP LETE FACTS OF LOANS TAKEN BY THE ASSESSEE FROM THE UNRELATED PARTIES AS WELL AS THE RELATED PARTIES. THE LD. A/R HAS FURTHER CONTENDED THAT EVEN OTHERWISE THE LOANS TAK EN FROM THE UNRELATED PARTIES INVOLVE OTHER COSTS, LIKE PROCESSING FEE, SECURITY ETC. AND FURTHER THE REPAYMENT IS AS PER SCHEDULE WHEREAS IN CASE OF LOANS TAKEN FROM TH E RELATED PARTIES, THERE IS NO OTHER EXPENDITURE AND REPAYMENT IS AS PER THE CONVE NIENCE OF THE ASSESSEE AND NOT AS PER THE FIXED SCHEDULE AS IN CASE OF UNRELATED P ARTIES. THE LD. A/R HAS RELIED 3 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR. UPON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNA L DATED 9 TH JULY, 2010 IN CASE OF VIPUL Y. MEHTA VS. ACIT IN ITA NO. 869/AHD/2010 AS WELL AS DECISION OF COORDINATE BENCH OF THIS TRIBUNAL DATED 25 TH JUNE, 2018 IN THE ASSESSEES OWN CASE IN ITA NO. 64/JP/2018. THUS THE LD. A/R HAS SUBMIT TED THAT THE ADDITION MADE BY THE AO OF 3% UNDER SECTION 40A(2)(B) OF THE ACT IS NOT JUSTIFIED WHEN IN THE MAJORITY OF THE UNRELATED PARTIES LOANS WERE TAKEN @ 18%. 4. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THERE IS NO DISPUTE THAT T HE ASSESSEE HAS PAID INTEREST TO THE RELATED PARTIES @ 18% WHEREAS THE INTEREST WAS PAID TO THE UNRELATED PARTIES @ 15%. THEREFORE, THE AO HAS RIGHTLY INVOKED THE PROV ISIONS OF SECTION 40A(2)(B) OF THE ACT AND DETERMINED THE FAIR RATE OF INTEREST AT 15% AND DISALLOWED THE 3% OF INTEREST PAID TO THE RELATED PARTIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT THE ASSESSEE HAS DEBITED THE TOTAL INTEREST OF RS. 46,26,990/- IN THE PROFIT & LOSS ACCOUNT. THE LIST OF THE PART IES, THE AMOUNT OF INTEREST AND RATE OF INTEREST ARE PRODUCED BY THE LD. CIT (A) AT PAGE S 3 TO 7 AS UNDER :- SL. NO. NAME OF THE PARTY INTEREST AMT. TDS AMT. TOTAL AMT. RATE OF INTEREST. 1 ASSAM EDIBLE OILS LTD. 67500.00 7500.00 75000.00 15% 2 MUSHKAN VINIMAY PVT LTD. 129600.00 14400.00 144000.00 15% 3. ALOK KUMAR PAHARYA 17025.00 1892.00 18917.00 15% 4. LAXMIPAT PAHARYA 7350.00 817.00 8167.00 15% 5. SHANTA BENGANI 22050.00 2450.00 24500.00 15% 4 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR. 5 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR. 6 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR. 16. ASHA AJMERA 81000.00 9000.00 90000.00 15% 17 KAVITA JAIN DUDU 67500.00 7500.00 75000.00 15% 18 RAJASTHAN UDYOG 21600.00 2400.00 24000.00 12% TOTAL : 946622 7 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR. THUS IT IS CLEAR THAT THERE ARE 56 PARTIES FROM WHO M THE ASSESSEE HAS TAKEN LOANS @ 15% AND @ 18% EXCEPT IN COUPLE OF CASES WHERE THE R ATE OF INTEREST WAS 12%. WE FURTHER NOTE THAT THE ASSESSEE GIVEN THE DETAILS WH EREIN IT WAS EXPLAINED THAT OUT OF 56 PARTIES, ONLY IN CASE OF 18 PARTIES THE INTEREST WAS PAID LESS THAN 18% I.E. 15% AND 12% IN CASE OF 3 PARTIES. THE REMAINING 38 PAR TIES HAVE GIVEN THE LOANS TO THE ASSESSEE @ 18%. THUS THE AO HAS CONSIDERED THE FAIR INTEREST RATE BY SELECTING THESE 18 CASES AND IGNORING THE REMAINING 38 PARTIE S. THE INTEREST PAID TO THE RELATED PARTIES IS ONLY ABOUT 10 CASES AND, THEREFO RE, COMPARING THESE 10 CASES OF INTEREST PAID @ 18% AGAINST THE SELECTED PARTIES WH ERE THE INTEREST WAS PAID @ 15% IS NOT JUSTIFIED WHEN THE OTHER 28 PARTIES WERE PAID THE INTEREST @ 18%. THEREFORE, WHEN THERE ARE COMPARABLE CASES OF UNREL ATED PARTIES AT LEAST IN CASE OF 28 PARTIES TO WHOM THE ASSESSEE PAID INTEREST @ 18% , THEN INSTEAD OF ADOPTING THE RATE OF INTEREST ON CHARRY FIXED BASIS, THE AO SHOU LD HAVE CONSIDERED THE COMPLETE FACTS OF PAYMENT OF INTEREST BY THE ASSESSEE TO UNR ELATED PARTIES. WE FIND THAT WHEN IN THE MAJORITY OF THE UNRELATED PARTIES ARE PAID B Y THE ASSESSEE AT 18%, THEN THE PAYMENT OF INTEREST TO THE RELATED PARTIES @ 18% IS NOT UNREASONABLE OR EXCESSIVE HAVING REGARD TO THE FACT THAT THERE ARE VARIOUS AD VANTAGES OF HAVING THE LOANS FROM THE RELATED PARTIES FOR REPAYMENT OF LOANS AS WELL AS NO COLLATERAL OR OTHER SECURITY IS REQUIRED. UNDISPUTEDLY, IN CASE OF UNRELATED PARTI ES, THE REPAYMENT HAS TO BE MADE STRICTLY AS PER THE SCHEDULE OR AGREEMENT BETWEEN T HE PARTIES WHEREAS IN CASE OF RELATED PARTIES THE REPAYMENT OF LOAN IS AS PER THE CONVENIENCE OF THE ASSESSEE AND THERE IS AN ADVANTAGE OF FLEXIBILITY OF REPAYMENT S CHEDULE. ACCORDINGLY, IN VIEW OF THE FACT THAT IN THE MAJORITY OF UNRELATED PARTIES THE INTEREST RATE WAS 18%, THIS CASE 8 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR. WOULD NOT FALL IN THE CATEGORY OF EXCESSIVE OR UNRE ASONABLE INTEREST PAID TO THE RELATED PARTIES, HENCE WE DELETE THE ADDITION MADE BY THE AO IN THIS REGARD. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 26/10/20 18. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 26/10/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI NARESH KUMAR LUHADIA, JAIPUR . 2. THE RESPONDENT THE DCIT, CIRCLE-7, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 984/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 9 ITA NO. 984/JP/2018 SHRI NARESH KUMAR LUHADIA, JAIPUR.