JACKIE MAHESH VORA,MUMBAI V. ACIT CIRCLE 19(2), MUMBAI

ITA 6018/MUM/2024

AI Insights

The case involves Jackie Mahesh Vora, the appellant, who appealed against the order of the CIT(A) confirming the addition of \\u20b928,05,940 to his income for the Assessment Year 2017-18. This addition was initially made by the Assessing Officer (AO) due to the disallowance of interest expenditure claimed by the assessee, which was deemed excessive compared to the interest income earned. The AO found that the assessee had lent money to family concerns at lower interest rates, which resulted in a reported loss. The Tribunal examined whether the interest rates applied to transactions with related parties were at arm's length compared to those with unrelated parties. The Tribunal concluded that the assessee did not satisfactorily explain the disparity in interest rates and thus upheld the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 652980 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Rajendra Prasad Moody [1979] 1 SCC 250, Akash Goyal vs. ACIT [2020] 113 taxmann.com 10 (Agra-Trib.)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KAVITA P. KAUSHIK; DR
• Assessee Lawyers: K. GOPALAKHILESH DESHMUKH; ARS

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 6018/Mum/2024 Assessment Year: 2017-18 Jackie Mahesh Vora 401/402A, Sanidhya Apts. 22A, Walkeshwar Rd. Mumbai - 400006 [PAN: ADTPV9483G] Vs Assistant Commissioner of Income Tax, Circle – 19(2), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri K. Gopal/Shri Akhilesh Deshmukh, A/Rs Revenue by : Ms. Kavita P. Kaushik, Sr. D/R सुनवाई की तारीख/Date of Hearing : 18/06/2025 घोषणा की तारीख /Date of Pronouncement: 20/06/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order of the ld. CIT(A)/Addl./JCIT(A)-3, Bengaluru [hereinafter “the ld. CIT(A)”] dt. 14/10/2024 pertaining to AY 2017-18. 2. The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of ₹ 28,05,940/-made by the AO by disallowance of the same u/s 57(iii) of the Act. 3. Representatives were heard at length. Case records carefully perused and the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT Rules, 1963. Judicial decisions relied upon duly considered. 4. Briefly stated the facts are that the assessee filed his return of income on 19/02/2018 declaring total income at ₹ 35,12,031/-. The I.T.A. No. 6018/Mum/2024 2 return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. 4.1. While scrutinising the return of income the AO noticed that the assessee has earned interest income of Rs. 1,04,82,353/- against which he claimed deduction of Rs. 1,32,88,293/- on account of payment of loan interest at Rs.1,32,14,955/- and management fees of Rs.73,338/- which resulted in a loss of Rs. 28,05,940/-. The AO asked the assessee to justify its claim of interest expenditure. The assessee filed a detailed reply which did not find any favour with the AO. The AO was of the opinion that the assessee has lent money to family concerns at lower rate of interest which resulted into loss. The AO restricted the amount of interest paid to the amount of interest received and made the addition of Rs. 28,05,940/-. 5. Before us, the ld. Counsel for the assessee vehemently stated that the AO cannot question the reasonableness of the interest paid qua the interest received. It is the say of the ld. Counsel for the assessee that, there is no bar in claiming interest u/s 57(iii) of the Act. Strong reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT vs. Rajendra Prasad Moody [1979] 1 SCC 250 and of the Co-ordinate Bench in the case of Akash Goyal vs. ACIT [2020] 113 taxmann.com 10 (Agra-Trib.). 6. Details of loans and advances and the interest charged is as under: – P.T.O. I.T.A. No. 6018/Mum/2024 3 7. From the above chart it can be seen that the assessee has lent money to its sister concerns from whom he has charged interest at the rate of 8.50%. The assessee has also lent money to 3 unrelated parties from whom the assessee has charged interest at the rate of 12%. The assessee could not give any satisfactory explanation for such discrimination. Even before us the ld. Counsel for the assessee kept on harping on the argument that reasonableness cannot be questioned. 8. We are of the considered view that neither the AO nor the Bench was questioning the reasonableness of the expenditure. The only explanation sought was in respect of disparity of rate of interest charged from related parties and the unrelated parties because in our considered opinion, in similar transactions with the related parties and unrelated parties all that has to be seen is whether it is at arm’s length or not. 9. Considering the factual matrix mentioned hereinabove, we are of the considered view that the assessee has grossly failed in justifying the lower rate of interest charged from the related parties vis-à-vis the rate I.T.A. No. 6018/Mum/2024 4 of interest charged with the unrelated parties. Therefore, we do not find any reason to interfere with the findings of the lower authorities. 10. Before parting, the decisions relied upon by the ld. Counsel are misplaced as in both the cases (supra) the question was whether the expenses have been incurred for the purpose of business or profession whereas the issue before us is the disparity in the rate of interest between the related parties and unrelated parties. 11. In the result, appeal of the assessee is dismissed. Order pronounced in the Court on 20th June, 2025 at Mumbai. Sd/- Sd/- (SAKTIJIT DEY) (NARENDRA KUMAR BILLAIYA) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 20/06/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0014ितिलिप अ\u0019ेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014 थ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "