M/s. P.Gautam & Co., Ahmedabad V. ACIT,Cir-11( Now Circle -5(3), Ahmedabad

MA 193/AHD/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9402 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 29-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JYOTISH M SHAH
• Keywords: Fair market value

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER MISC. APPLICATION NO.193/AHD/2018 WITH ./ ITA NO.3276/AHD/2015 / ASSESSMENT YEAR: 2011-12 M/S. P. GAUTAM & CO. NANDAVAN OPP: TOWN HALL ELLISBRIDGE, AHMEDABAD. VS THE ACIT, CIR.11 [NOW CIR.5(3)] AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI JYOTISH M. SHAH, AR REVENUE BY : SHRI MUDIT NAGPAL, SR.DR / DATE OF HEARING : 05/04/2019 /DATE OF PRONOUNCEMENT : 05/04/2019 O R D E R PER AMARJIT SINGH, ACCOUNTANT MEMBER : PRESENT MA IS DIRECTED AT THE INSTANCE OF THE ASSESSEE CONTENDING THEREIN THAT AN APPARENT ERROR IS CREPT IN THE ORDER OF THE ITAT DA TED 7.3.2018. 2. THE ASSESSEE HAS PLEADED THAT THE ASSESSEE HAS P AID INTEREST AT THE RATE OF 15% TO THE FAMILY MEMBERS. THE LD.AO RESTR ICTED ALLOWANCE OF INTEREST AT THE RATE OF 12% AND DISALLOWED 3% UNDER SECTION 40A(2)(B) OF THE INCOME TAX ACT. THE LD.COUNSEL FOR THE ASSESSE E CONTENDED THAT SIMILAR LOANS WERE ADVANCED IN THE ASSTT.YEAR 2012- 13 ALSO, AND IN THAT YEAR ALSO INTEREST WAS ALLOWED TO THE EXTENT OF 12% INSTEAD OF CLAIM AT MA NO.193/AHD/2018 WITH ITA NO.3276/AHD/2015 - 2 - 15%. WHEN THE DISPUTE WENT BEFORE THE TRIBUNAL IN ITA NO.3277/AHD/2015, THEN THE TRIBUNAL HAS CONSIDERED PAYMENT OF INTEREST AT THE RATE OF 15% EQUIVALENT TO THE RATE PREVALENT IN THIS REGARD AND ALLOWED THE CLAIM OF THE ASSESSEE VIDE ORDER DA TED 1.2.2018. HOWEVER, SUBSEQUENT IN THE ASSTT.YEAR 2011-12, THE TRIBUNAL HAS CONFIRMED THE DISALLOWANCE OF INTEREST MADE BY THE AO, AND THEREFORE, A CONTRADICTORY SITUATION HAS DEVELOPED. 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE DISALLOWANCE UND ER SECTION 40A(2)(B) CAN BE MADE IF SERVICES AND OTHER FACILITIES CAN BE AVAILABLE FROM THE OPEN MARKET AT A LESS RATE THAN THE ONE AVAILED BY THE ASSESSEE. THE PAYMENT OF INTEREST ON UNSECURED LOANS TO THE EXTEN T OF 15% PER ANNUM CANNOT BE CONSTRUED UNREASONABLE, AND NOT EQUIVALEN T TO FAIR MARKET VALUE OF SUCH SERVICES. IT IS ALSO PERTINENT TO NO TE THAT IN THE IMMEDIATELY SUBSEQUENT YEAR SUCH INTEREST RATE WAS ALLOWED TO THE ASSESSEE AT 15%. THE AO HAS JUST COMPARED THE RATE S PAID BY THE ASSESSEE TO THE PARTNERS ON THEIR CAPITAL CONTRIBUT ION. THE LD.COUNSEL FOR THE ASSESSEE STATED THAT INTEREST COULD NOT BE MADE MORE THAN 12% AS PER THE PROVISIONS OF LAW. HOWEVER, NO OTHER INDEPENDE NT FACTOR HAS BEEN CONSIDERED BY THE AO. WE FIND AN INADVERTENT MISTA KE HAS CREPT IN THE ORDER OF THE TRIBUNAL WHEREBY ALLOWANCE OF INTEREST AT THE RATE OF 12% HAS BEEN RESTRICTED. WE ALLOW THIS MA. CONSEQUENT LY, WE RECALL OUR ORDER DATED 7.3.2018 AND MODIFY THE FINDING RECORDE D IN PARA-18 AND 19 OF THE IMPUGNED ORDER WHEREBY WE DIRECT THE AO TO A LLOW INTEREST ON MA NO.193/AHD/2018 WITH ITA NO.3276/AHD/2015 - 3 - THE BORROWED FUNDS TO THE EXTENT OF 15% PAID BY THE ASSESSEE. GROUND NO.1 IN ITA NO.3276/AHD/2015 STANDS ALLOWED. 4. IN THE RESULT, MISC. APPLICATION OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 5 TH APRIL, 2019. SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (AMARJIT SINGH) ACCOUNTANT MEMBER