TaxTMI 
TaxTMI 
2021 (9) TMI 756
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....cts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition without any reference to incriminating material of cash purchase (Annexure-2) seized during the search action u/s 132 of the I.T. Act, 1961? 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing books of accounts in spite of the facts the assessee failed to furnish any evidence of bills of entry to determined whether the plant and machinery and other items for the year under consideration were actually received at any part of India and were being used for business purposes? 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing deduction u/s 35AD of the Act in spite of the fact the assessee has not furnished the report in Form No. 10CCB alongwith return of income which is mandated as per Rule 12(2) of the Income Tax Rules, 1962? 4. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing deduction u/s 35AD of the Act in spite of the fact the assessee has not got its recognition in two star or above category classified by....
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....without any reference to incriminating material of cash purchase (Annexure-2) seized during the search action u/s 132 of the Act. In this regard, the ld CIT-DR has vehemently supported the order of the A.O. 8. On the other hand, the ld AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the submissions made qua this issue are as under: "No incriminating material was found in search. The Ld. A.O. in assessment order gave finding that during the course of search, evidences in respect of 'out-of-books' purchases/expenses, in the form of Annexure-A-2 seized from business premises of the assessee are not verifiable. The assessee has not only failed to justified the expenses recorded in these seized documents but was unable to prove the genuineness of the parties mentioned therein. In this connection it is submitted that papers seized from assessee company being ann. A-2 are only bills of bricks purchased from local unregistered dealers for use in construction of hotel and payment therefor was made in cash which too was not in violation of section 40A (3) and....
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....e original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately (b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account , other documents, found in the course of search but not produced in the course of original assessment, and (ii) Undisclosed income or property discovered in the course of search. CIT vs Kabul Chawla Delhi High reported in (2016) 380 ITR 5733 (Delhi) vide ITA Nos. 707/2014 and others, dated 28.8.2015, (SLP dismissed by Hon'ble Supreme Court on 7-12-2015) wherein the Hon'ble Delhi High Court has reiterated the above settled legal proposition that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed .................... Rajasthan High Court in the case of Jai Steel (India) vs ACIT reported in 259 CTR (Raj.) 281 "..... The requirement of assessment or reassessment under the said section has to be read in the contex....
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....hat the additions made by the AO are not relatable to any seized material. I also find that for the A.Yr the assessments stood completed on the date of search. Further there was no time to issue notice u/s 143(2) for the instant A.Yr. Following information are taken from the assessment order u/s 143(3)/153A may be refereed to. A.Y. ROI Filling date 143(2) notice time expiry Date of Search 2010-11 30-09-2011 30-09-2012 15-10-2014 2011-12 29-09-2012 30-09-2013 15-10-2014 2012-13 30-09-2013 30-09-2014 15-10-2014 7.2 It is clear from the table above that assessments stood completed on the date of search and there was no time left to issue the notice u/s 143(2). Careful perusal of the assessment orders indicated that none of the additions/disallowances (except Ground of Appeal 4 in A.Y. 2011-12) made are based on seized material found during the course of search on the appellant premises. 7.3 in the remand report the Ld. AO has reffered to decision of Hon'ble High Court of Rajasthan in the case of CIT Vs Ravi Mathur (citation not provided) to counter the legal grounds taken. In my view the decision cited is a dated decision and the issue is now settled by....
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....bul Chawla vs. ACIT 380 ITR 573 (Del HC). The relevant observation of Hon'ble court could be seen in para 37 & 38 of order. Summary of the legal position 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light o/ the law exploited in the aforementioned decisions, the legal position that emerges is as under.' i Once a search takes place under Section 132 o] the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date o/ the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of' the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the s....
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..... passed assessment order u/s 143(3)/153A of the Act shows that the additions made by the AO were not relatable to any seized material. We find that for the A.Yr the assessments stood completed on the date of search. Further there was no time to issue notice u/s 143(2) of the Act for the instant A.Yr. Following information which came from assessment order is necessary to mention here, which is as under: A.Y. ROI Filling date 143(2) notice time expiry Date of Search 2010-11 30-09-2011 30-09-2012 15-10-2014 2011-12 29-09-2012 30-09-2013 15-10-2014 2012-13 30-09-2013 30-09-2014 15-10-2014 It is clear from the table above that those assessments stood completed on the date of search and there was no time left to issue the notice u/s 143(2) of the Act. Careful perusal of the assessment orders indicated that none of the additions/disallowances (except Ground of Appeal 4 in A.Y. 2011-12) made are based on seized material found during the course of search on the assessee's premises. 11. We also observed that in the remand report, the AO has referred to decision of Hon'ble High Court of Rajasthan in the case of CIT Vs Ravi Mathur (citation not provided) to count....
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....h Court as relied by the ld. CIT(A) in his order, in the case of Kabul Chawla vs. ACIT 380 ITR 573 (Del HC), wherein it was held as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light o/ the law exploited in the aforementioned decisions, the legal position that emerges is as under.' i Once a search takes place under Section 132 o] the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date o/ the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of' the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six AYs "in which ....
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....e of search at the business/residential premises of the assessee indicating any on money receipt/investment/advances made and any unexplained/overstated expenditure etc. in its books of account pertaining to the year under appeal, therefore, we are of the view that the mode and manner of the additions made in the orders passed u/s 153A deserves to be held bad in law. The ld. CIT(A) has passed a well-reasoned order discussing all material facts and legal position. No new facts or circumstances have been brought before us by the ld AR in order to controvert or rebut the factual findings recorded by the ld. CIT(A), therefore, we see no reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) qua this issue and we uphold the same. 13. Ground No. 2 raised by the Revenue relates to challenging the order of the ld. CIT(A) in allowing books of accounts in spite of the facts the assessee failed to furnish any evidence of bills of entry to determine whether the plant and machinery and other items for the year under consideration were actually received at any part of India and were being used for business purposes. In this regard, the ld CIT-DR has vehemently suppo....
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....A) and Ld. AO in response to remand report. The Ld. A.O. is thus wrong and has erred in law in invoking provisions of section 145 (3) thereby rejecting audited books of accounts in a very casual manner, on filmsy grounds in an arbitrary manner. The Ld. A.O. having not found any defect or discrepancy in books of accounts is not correct in law to reject books of accounts. The A.O. has not pointed out any specific mistake or deficiency in the books of accounts maintained and produced by the assessee. The correctness of the book results cannot be challenged without pointing out any specific mistake or deficiency in the books of accounts or without giving a firm finding that the method of accounting followed by the assessee was such that profit and gains cannot properly be deduced from such books of accounts. The A.O. is also required to give a finding that the books are incomplete or incorrect in any manner more so when accounts are statutorily audited and audit report has no qualification. Unless such a specific finding is given invoking of section 145 (3) and rejection of books of accounts is wrong and bad in law. The legal position is supported from many judicial decisions such as....
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....More so that audit report with requisite performa was also provided to him. The AO's requisition of all the bills and vouchers was not feasible seeing the qty. of bills and vouchers and also that such requisition was made on the fag end of the time barring date. These books and entire bills etc. were provided in the remand proceedings to the AO. In the remand proceedings the AO has not pointed a single defect in the books, bills or vouchers or the audit reports (both internal and external audit). In the remand proceedings the CIF bill, which were not produced before the AO were also produced. Even the allegation of unaccounted cash purchase of bricks of Rs. 8,59,200/- was seen to be duly incorporated in the cash book & also not adversely commented by the AO/auditor. The action of AO is not backed by any factual defect in the books of bills, vouchers or the audit report. The ld. CIT(A) has passed a well-reasoned order and no new facts or circumstances have been brought before us by the ld AR in order to controvert or rebut the factual findings recorded by the ld. CIT(A), therefore, we see no reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) qua this....
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.... authority showing commencement of operation of Hotel 1-4-2011 while assessee declared it 26-3-2011 in Form 10CCB. (c) That in the year under consideration it declared nominal income from operation and therefore it seems it is totally an entry to show commencement of operations and further in A.Y. 2011-12 it has capital expenditure/investment at Rs. 13,86,30,120/- while in A.Y. 2012-13 such investment is Rs. 73,22,98,854/- so it is not practical that hotel of 2 star and above can commence in A.Y. 2011-12 when only 16% of capital expenditure was incurred. (d) The assessee company failed to furnish bills of CIF imports of Rs. 9,18,16,770/- included in total capital expenditure in assessment proceedings before A.O. and as per ledger A/c of CIF imports the total figure is 8,67,71,584/- and as such there is difference. The Ld. A.O. on these grounds held that assessee failed to fulfill any of the pre-condition to be an eligible entity u/s 35AD and so disallowed deduction of Rs. 13,86,30,120/- claimed by assessee u/s 35AD. In this connection it is submitted that (a) It is submitted that assessee obtained certificate on Form 10CCB on or before the date of filing of return but ina....
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.... designed the hotel rooms and all other amenities according to the terms and conditions specified for three-star hotel. As per provisions of section 35AD, the expenditure incurred wholly and exclusively for the purpose of any specified business shall be allowed as deduction during the previous year in which he commences operations. The admitted fact is that assessee got the certification of categorization for above 2 star category from competent authority. The commencement of operation of hotel from 26-3-2011 has also been admitted by A.O. as he assessed the income from operation of hotel from 26-3-2011 to 31-3-2011. The deduction u/s 35AD would have been available to assessee even the operation of hotel would have commenced after 31-3-2011 or even thereafter and therefore, no additional benefit was derived so as make it antidate. The findings of A.O. that 'it seems that it is totally an entry to commencement of business is based only on surmises and conjectures. The date of commencement of hotel given in application of catagorisation as 1-4-2011 cannot be equated with date on which operation of hotel commences. The same cannot be a ground for disallowance of deduction u/s 35AD N....
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....he rival contentions of both the parties and perused the material placed on record. The ld. CIT(A) has dealt with the issue in para No. 17 & 18 of his order and the same is reproduced below: "17. I have perused the written submissions submitted by the Ld. A/R and the other of AO. I have also gone through various judgements cited by the Ld. A/R and those contained in the order of AO. I find the Ld. AO has disallowed claim u/s 35AD citing following reasons: 1. That the appellant company did not file 10CCB report alongwith the return of income. 2. That the approval for star categorization as obtained on 31-3-2016 while the appellant company declared it on 26-03-2011. 3. That the appellant company declared notional income for business operations. 4. That the appellant company fail to furnish CIF import bills of Rs. 9.18 crores while also there is difference of CIF import figure of Rs. 8.68 crores in the ledger. 17.2 I have carefully perused the contents of the Ld. AO and the submissions made by the Ld A/R. I have perused all the documents filed in support of the claim u/s 35AD of the Act in the APB from pages 18 to 423. I am of the view that the disallowance of claim u/s ....
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....lf and, thereupon, manner in which inspection was conducted and time frame taken by Competent Authority were all beyond control of assessee - Tribunal thus taking a view that holistic interpretation of provisions of section 35AD was to be made, allowed assessee's claim - Whether since revenue failed to controvert aforesaid findings of fact, impugned order passed by Tribunal did not require any interference - Held, yes [Paras 9, 10 and 16] [In favour of assessee] 18.2 Thus in the present case to the Ld. AO has accepted the part operation of the hotel and the revenue earned also is accepted or is not disputed. It may not be the out of place to extract the para 9, 10 & 16 of the aforesaid judgment; 9. The facts noted by the Tribunal clearly show thot the application filed by the assessee for such a classification was made on 19.4.2010 i.e in the assessment year 2010-11. Thereafter, it appears that there are certain procedure to be followed and an inspection requires to be conducted by an Approving Committee constituted for such purpose. The manner, in which, the inspection was conducted and the time frame taken by the Competent Authority are all beyond the control of the asses....
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....tel was to be allowed for deduction under section 35AD - Held, yes [Para 10] [In favour of assessee) Thus the case of appellant is squarely covered by the aforesaid two judgments. That the aspect of not furnishing of from 10CCB with the return is a bonafide error, as is submitted by the appellant. In any case it is not mandatory requirement as is duly supported by various case laws furnished by the Ld. A/R. namely; A CIT Vs. Berger paints 254 ITR 503 Section 32A8, read with section 139, o/ the Income-tax Act, J961 - Investment deposit account - Assessment year 1988-89 - Auditing of assessee's claim for investment allowance and ids accounts was duly completed - Whether furnishing of auditor's report on date of filing of return is not mandatory, but only directory in nature, and, therefore, assessee could not be denied investment allowance merely on ground that it failed to tender auditor's report an date of filing of return - Held, yes B CIT Vs. Krishan noir 259 ITR 727 Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1992-93 - Assessing Officer disallowed deduction claimed by assessee under section 80HHC, on ground that certificate as....
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....t company declared notional income for business operations. 4. That the appellant company fail to furnish CIF import bills of Rs. 9.18 crores while also there is difference of CIF import figure of Rs. 8.68 crores in the ledger. We observed that the only condition for claim benefit u/s 35AD is that it could be claimed by any person. No approval is required for the same. However, the hotel should be classified as 2-star category or above by the Central Govt. which is precisely the case here. The assessee did construct a hotel which was more than 2-star categories and an application was made on 26-3-2011 to a competent authority. In this application it was well reflected the said hotel is 4-star hotel. Approval of the same was received on 31-3-2016. The receipt of approval of star category letter does not imply that from the date of application to the date of receipt of star category the hotel did not have a star category or was functional without a star category. In fact, the assessee made the intention very clear in the application that it would be operational w.e.f. 26-3-2011. The hotel was operational is also evident from the gross receipt received in the relevant period. The l....
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....f expenses for which deduction is claimed under chapter - IV while computation of business income and not otherwise. In the case of assessee the expenses have been capitalized and carried forward as capital work in progress to next year and so no deduction therefor in computation of business income is claimed and so section 43B is inapplicable and disallowance made by A.O. for the sum of Rs. 62,31,856/- u/s 43B is wrong and bad in law on this ground also." 23. We have considered the rival contentions of both the parties and perused the material placed on record. The ld. CIT(A) has dealt with the issue in para No. 26.2 of his order and the same is reproduced below: "26.2 I am in agreement with the contention of Ld. AR that an interest of Rs. 6231856/- is not claimed as deduction under the chapter from profit from business and profession. Same is also evident from the audited accounts submitted. Same is evident from the APB pages 01 to 17. Since it is not a business deduction section 43B is not applicable. The Ld. AO is directed to delete the addition of Rs. 6231856.00." 24. We observe that Section 43B can be invoked if expenses for which deduction is claimed under chapter - IV w....
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....and copy of relevant A/c of purchases are produced herewith for verification. The full address of those unregistered suppliers are available on seized bills itself but being petty unregistered dealers they have no PAN or TIN but this does not make them unverifiable and as expenses are duly recorded in regular audited books of accounts and cash payment which is not in violation of provision of section 40A (3) and its source is verifiable therefrom and, therefore, Ld. A.O. is wrong on facts as well as in law to hold that these expenses have been made out of books. The Ld. A.O. also wrongly invoked provisions of section 69C which is applicable where assessee incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, any is not satisfactory while in this case expenditure is duly recorded in books of accounts and source of cash payment is clearly depicted in books of accounts being out of withdrawal of cash from Bank A/c(s) of assessee company. The provision of section 69C are inapplicable on facts as well as in law. The addition of Rs. 8,59,200/- is being wrong and bad in law deserves to be deleted." 27. We have cons....
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....ken following grounds of appeal: "1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition without any reference to incriminating material of cash purchase (Annexure-2) seized during the search action u/s 132 of the I.T. Act, 1961? 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing books of accounts in spite of the facts the assessee failed to furnish any evidence of bills of entry to determine whether the plant and machinery and other items for the year under consideration were actually received at any part of India and were being used for business purposes? 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing deduction u/s 35AD of the Act in spite of the fact the assessee has not furnished the report in Form No. 10CCB alongwith return of income which is mandated as per Rule 12(2) of the Income Tax Rules, 1962? 4. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing deduction u/s 35AD of the Act in spite of the fact the assessee has not got its ....
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.... has stated that the same has been made after due date. However from the said audit report it is also evident that the payment was made before due date of filing of return hence allowable. The complete details thereof was available in Tax Audit Report which A.O. overlooked and made addition. However we submit following information to support our claims. a. ESI Payment challan b. Copy of bank statement. The Ld. A.O. referred SLP filed before Supreme Court. However filing of SLP before Hon'ble Supreme Court do not stay the operation of judgement of Hon'ble jurisdictional High Court. It may be mentioned that the Hon'ble Rajasthan High Court in case of CIT Vs. JVVNL 98 DTR 105 (Raj.) has held that where PF/ESI were paid after due date under respective Act but before due date of filing of return of income u/s 139 (1), these cannot be disallowed under section 43B or under section 36 (1) (va) of the Act, 1961. Recently, the Hon'ble ITAT, Jaipur in the case of M/s K.S. Automobiles Pvt. Ltd. in ITA No. 1184/JP/2018 vide order dated 08.03.2019 has allowed such expenditure following the decision of Hon'ble Apex Court in the case of PCIT vs. Rajasthan State Beverages ....
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....he facts and in the circumstances of the case, these payments have been made before the due date of filing of return and therefore such addition of Rs. 5719 is directed to be deleted for A.Y. 2012-13 as well as amount of Rs. 601811/- for A.Y. 2013-14. On the facts and in the circumstances of the case, appellant's appeal in Ground No.4 is allowed for A.Y. 2012-13 and 2013-14." 35. From the record, we observed that the ld. CIT(A) has given relief to the assessee on the ground that addition of Rs. 5719/- of employees' contribution to ESI and PF has been made by the AO on account of delay in deposition of employees contribution towards ESI and PF u/s 36(1)(va) r.w.s. 2(24)(x) of the Act. The AO has noted that payments have been deposited after few days of the due dates of the said act and therefore no deduction could be claimed under the provisions. The assessee has stated that all the payments on account of ESI and PF have been made before the due date of filing of return of income and therefore no disallowance could be made on this account. The ld. CIT(A) has placed reliance on the decisions of the Hon'ble Rajasthan High Court in the case of CIT, Udaipur Vs. Udaipur Dugdh Utpadak Sa....
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.... that Ld. A.O. has wrongly understood that TDS deducted by persons under the provisions of the Act are from Income from other sources declared by assessee while the same is not correct. The taxes deducted at source under various sections of the Act are against the services rendered by the assessee in the form of sale of room nights, food and beverages and other operating revenues such as laundry services, guest transportation etc. The total revenues generated from operations in the A.Y. 2012-13 is Rs. 9,87,22,256/- against which total receipts of Rs. 1,68,51,674/- were subjected to taxes deducted at source amounting to Rs. 10,48,661/-. The receipts of Rs. 1,68,51,674/- appearing in Form 26AS is towards the revenues from operations and not towards the other income of the assessee. We submit following information to support our claim. a. Form 26AS copy alongwith complete reconciliation of TDS vis a vis receipts. b. Ledger extracts of the customers for the transactions from which TDS was deducted by them crediting revenue receipts from operations." 38. We have considered the rival contentions of both the parties and perused the material available on record. From perusal of the im....
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....receipt and detailed ledger extracts have been furnished and the same were subjected to remand proceedings too. No new facts or circumstances have been brought before us by the ld AR in order to controvert or rebut the factual findings recorded by the ld. CIT(A), therefore, we see no reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) qua this issue and we uphold the same. 40. In the result, this appeal of the Revenue stands dismissed. 41. Now we take ITA No. 1160/JP/2019 for the A.Y. 2013-14 wherein the Revenue has taken following grounds of appeal: "1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition without any reference to incriminating material of cash purchase (Annexure-2) seized during the search action u/s 132 of the I.T. Act, 1961? 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing books of accounts in spite of the facts the assessee failed to furnish any evidence of bills of entry to determined whether the plant and machinery and other items for the year under consideration were actually received at any part ....
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....and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 2,15,56,804/- made u/s 43B of the Act, on account of non-payment of interest payment during the financial year since no documentary evidences have been produced that payment of the same has been made before due date of filling of return? 2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 3,59,126/- made u/s 36(1)(va) of the Act (i.e. PF/ESI addition) relying on the ratio of CIT Vs SBBJ 265 CTR 471 which is sub judice as SLP has been admitted by the Hon'ble Apex Court? 3. Whether on the facts and in the circumstances of the case in law the Ld. CIT(A) has erred in deleting the addition of Rs. 1,48,35,603/- made on account of excess payment of interest @18% on unsecured loan by the assessee company to the related parties ignoring the fact that the interest @ 12.83% was determined after considering SBI's basic rate and risk factor or say on unsecured loan and assessee itself has taken loan from IDBI @ 14% per annum? The Appellant crave, leave or reserving the right to amend modify, alter add or foreg....
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....s were commenced in the year 2011. However, the business did not progress as envisaged, resulting in liquidity issues. Due to liquidity issues, there were delays in payment of interest, resulting in levy of penal interest/charges from the bank at 2% p.a. This resulted in the effective interest charge of 16% p.a. The promoters had to infuse money into the Company, in order to service the principal repayment of the loan. The promoters infused money in the company in the form of unsecured loans bearing an interest rate of 18% p.a. The prevailing market rates for unsecured loans from third party ranges between 18%-24% p.a. These loans are provided without any security/guarantee and such facility from a third party comes with higher cost as this is comparatively easier means of raising finance for the company. Further, the unsecured loans from third parties carries an upper limit upto which the loans are provided. However, in this case the support required was high regular and therefore,the promoters who obviously are related persons had to infuse the required amount in the form of unsecured loans without any stipulation of repayment on interest @ 18%. The demand loans provided by b....
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....nt of Omkarmal Gaurishankar Vs. I.T.O. , 92 TTJ (Ahd) 223 where the Tribunal held that the interest paid to relatives @ 24% is reasonable. CIT (A) also considered the fact presented by the assessee that the loan taken from the relatives cannot be compared with the bank loan as loans given by the relatives are unsecured whereas loans provided by the bank are secured. That in the case of M/s Khandelia Oil & General Mills (P) Ltd. Vs. ACIT, ITA No. 775 and 778/Chd/2012 where facts of the case were, assessee was a private limited company and had claimed interest on unsecured loans amounting to Rs. 1,23,15,529/- covered u/s 40A (2) (b) of the Income Tax Act, A.O. asked the justifiable reasons for payment of interest @ 15% where the borrowings from bank can be obtained at 10.5% against charge, the A.O. did not agree and restricted the interest rate at 12%. The assessee contested the additions before CIT (Appeals) and considering the submissions filed by the assessee, the CIT (A) held that the payment of interest was not unreasonable. The Dept. took case to ITAT who held that in spite of the fact that loan from bank can be availed at 10.5% but it is also a fact that loan from bank are t....
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....ssee company to related persons for loan taken for business purpose was not excessive and is at arm length price. The TPO has ignored these facts and position of unsecured loans from specified persons and compared the arms length price of such interest with average prime lending rate of SBI for F.Y. 2013-14 which arrived at 9.83% and added 300 basis points therein on account of loan provided to on concern which has low rating and no rating. The Ld. T.P.O. thus has totally failed to take into A/c that Bank loans which are always secured on assets and guaranteed and are repayable as term loan cannot be equated with unsecured loans taken from related parties which has no stipulation of payment at any fixed time." 47. We have considered the rival contentions of both the parties and perused the material available on record. From perusal of the impugned order, we noticed that the ld. CIT(A) has dealt with the issue in para No. 12 & 13 of his order and the same is as under: "12. I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. A/R and those contained in the order of TPO order dated 25-10-2....
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....ellant violating the principal of judicial discipline. The appellant has cited decision of Hon'b1e ITAT Jaipur namely ACIT Vs. Shiv Agrevo (ITA 995 & 1055 ( JP) which is directly on the issue. this decision is affirmed by Hon'ble Rajasthan High Court in 99 taxmann.com 405. The head note of the decision on is as under: Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payment (interest) - Where prevailing market rate of interest for long-term loans was between 18 per cent to 24 per cent, interest paid by assessee to family members at rote of 18 per cent for loans taken for business purpose was allowable [In favour of assessee] 12.5 The relevant para 13 of the Hon'ble High Court is as under: "13. With regard to issue of loan which was advanced by the family members, the Tribunal has rightly observed in para 13 which reads as under : "13. We have heard the rival contentions and perused the facts of the case. We are convinced with the arguments of the learned authorised representative as to prevailing market rote for the loans of permanent in nature and long-term loans is between 18 per cent to 24 per cent whereas the cas....
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....ent cited by the appellant violating the principal of judicial discipline. The appellant has cited decision of ITAT Jaipur namely ACIT Vs. Shiv Agrevo (ITA 995 & 1055 (JP) which is directly on the issue. This decision is affirmed by Hon'ble Rajasthan High Court 99 taxmann.com 405. The head note of the decision on is as under: Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payment (interest) - Where prevailing market rate of interest for long-term loans was between 18 per cent to 24 per cent, interest paid by assessee to family members at rote of 18 per cent for loans taken for business purpose was allowable [In favour of assessee] The relevant para 13 of the Hon'ble High Court order is as under: "13. With regard to issue of loan which was advanced by the family members, the Tribunal has rightly observed in para 13 which reads as under : "13. We have heard the rival contentions and perused the facts of the case. We are convinced with the arguments of the learned authorised representative as to prevailing market rote for the loans of permanent in nature and long-term loans is between 18 per cent to 24 per cent whereas the....
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....ns from third parties carries an upper limit up to which the loans are provided. However, in this case the support required was high regular and therefore, the promoters who obviously are related persons had to infuse the required amount in the form of unsecured loans without any stipulation of repayment on interest @ 18%. The minimum market rate of interest of unsecured loan through brokers in the year was 14.40% p.a. plus brokerage @ 1.2% and interest payment is to be made by monthly in advance and loan was to be for stipulated fixed period after which repayment has to be made and such loans are available only to persons having credit in market while the loan taken by assessee from above specified concerns who are promoters of company is @ 18% interest. The interest is only credited at year end and not actually paid and loan is unsecured without any stipulation of period in which it is to be paid. Thus on these facts the interest rate of 18% p.a. to specified person is justified and within the market rates of interest on such loans and are at arm's length. No new facts or circumstances have been brought before us by the ld AR in order to controvert or rebut the factual findings r....