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2015 (11) TMI 736 - ITAT JAIPUR

2015 (11) TMI 736 - ITAT JAIPUR - TMI - Excess interest paid by the assessee under section 40A(2)(a) - CIT (A) has allowed partial relief to the assessee whereby the interest has been restricted to 13.5% instead of 15% - Held that:- It is the consistent view of the Hon’ble Supreme Court that the rule of consistency should be followed in respect of assessment proceedings though the principle of res judicata is not applicable. During the course of hearing, it was enquired by the Bench whether the .....

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by the AO to 12% whereas in the matter for A.Y. 2006-07, the CIT (A) has uphold the payment of interest @ 15%. In the assessment year under consideration before us, the ld. CIT (A) has restricted it to 13.5% despite the fact that in the earlier assessment year the payment of interest @ 15% has been upheld. We do not find any justification in the order passed by the ld. CIT (A). The reason given by the AO were also available with him when ld. CIT (A) has passed the assessment order for A.Y. 2006 .....

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or The Revenue : Shri Rajendra Singh, (JCIT) ORDER PER SHRI LALIET KUMAR, J.M. This an appeal filed by the Assessee against the order of ld. CIT (A)-II, Jaipur dated 17.12.2013 for the A.Ys. 2008-09. The grounds raised in the appeals are as under :- 1. That the disallowance/additions made by the learned Assessing Officer are against the law and the facts on records therefore it is submitted that the additions/disallowances so made are unjustified and deserves to be set aside. 2. The appeal was p .....

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h definition in the Act, defining reasonable interest as stated in the assessment order dated 03.12.2010. The learned assessing officer allowed 12% interest on the unsecured loans taken from the friends and relatives as against 15% paid by the company. 3. Thus appellate authority has not consider the full interest amount @ 15% paid by the company to the related parties and allowed the interest @ 13.50% on deposits of the related parties. Hence appeal is partially allowed. 4. Under the facts and .....

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test check basis. It was found that interest was paid by the assessee to 9 (nine) persons for a total amount of ₹ 51,33,856/- @ 15% break up of which is as under : Shri Vijay Kumar Maheshwari ₹ 14,36,021/- Shri Ajay Kumar Maheshwari ₹ 14,51,281/- Smt. Kusumlata Maheshwari ₹ 1,50,609/- Shri Dhruv Maheshwari ₹ 19,306/- Shri R.B. Jakhotia ₹ 80,007/- Shri Ashish Maheshwari ₹ 7,55,121/- Smt. Usha Jakhotia ₹ 30,969/- Smt. Rameshwari Devi ₹ 6,33,52 .....

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submitted that the details are available at page no. 63 of the paper book submitted earlier. Your goodself has asked the justification of payment of interest @ 15% while PLR is 12%. In this regard it is submitted that :- a. All the loan and deposit accounts, whether relatives or not are old one, subjected to scrutiny assessment u/s 143(3) in earlier years too and there is no change in interest rate this year as is evident from the documents available on record as well as enclosed herewith in pa .....

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preciation of facts at page 176-185) wherein it is clear condition on OVERALL TERMS AND CONDITIONS: 11 & 19 that Friends/relatives from whom the unsecured loans has been raised shall provide an undertaking that they shall not withdraw these loans during currency of bank loan and borrower to undertake that same shall not be allowed to withdraw without prior permission of bank (condition 11 at page 184 of paper book). d. That the PLR of Bank is not the yardstick to judge/measure the excessiven .....

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t value of the facilities for which payment is made. In the light of these facts it is clear that the payment of interest is duly adjudged by the department in earlier assessment u/s 143(3) as the loan accounts are old and there was no change in interest rate this year. Further the assessee client was under a bar from the bank itself as stated above hence bound to pay the interest @ 15% only. Therefore, it is submitted that the payment of interest to friends and relatives are quite reasonable an .....

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een restricted to 13.5% instead of 15%. The relevant portion of ld. CIT (A) is as under :- 3.3. I have considered the facts of the case, assessment order and appellant s written submission. Assessing Officer disallowed interest in excess of 12% paid to related persons under section 40A(2b) on the ground that interest paid to partners is allowable only in the extent of 12% under section 40(b). Assessing Officer also mentioned that interest payable to the bank is not 15% which is paid to the relat .....

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ellant that provisions of section 40(b) applies to only partnership firm and this does not determine the market rate of interest and therefore disallowance of interest relying on this provision is not correct. However, if interest paid is excess considering the market rate, disallowance of excess interest is justified. Appellant submitted that it was paying bank 12.5% interest on secured loan of ₹ 20 crores. Processing charges and other costs associated with this loan will be maximum 1% an .....

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es. Considering this, 1.5% interest paid to related parties is considered disallowable as against 3% interest disallowed by the AO. Accordingly, disallowance is restricted to 1.5% of interest paid to related parties. 4. Aggrieved, the assessee is before us. 5. It is contended by the assessee before us that all the unsecured loans were taken by the assessee company in the earlier assessment years and no fresh amount was accepted by the assessee company. Besides this, it was also submitted that th .....

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refully. It is a fact that all these loans from related persons were not raised during the year but these were loan taken in preceding A.Y. @ 15% p.a. It is also not the case that during the year there is increase in the interest rate. When the loans has been taken on a particular interest rate in preceding A.Y. then till it is repaid it is the responsibility of the appellant to pay interest at the pre determined rate. Further, the banker has also provided conditions that during the currency of .....

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d excessive and with this discussion such disallowance of interest in the name of Excessive and Unreasonable to the extent of ₹ 5,92,197/- is hereby deleted. 6. The ld. D/R for the revenue relied upon the order passed by ld. CIT (A). 7. We have heard rival contentions and perused the material on record. It is the consistent view of the Hon ble Supreme Court that the rule of consistency should be followed in respect of assessment proceedings though the principle of res judicata is not appli .....

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s Financial Services Ltd. in para 11, 12 & 13 has reiterated the principle of res judicata and consistency in the following words :- 11. It would thus be clear from the above observations of the Hon ble Supreme Court that the principle of res judicata does not apply to income tax proceedings and each assessment year is considered as a separate unit. Still, however, the Hon ble Supreme Court has held that in absence of any material or substantial change justifying the revenue to take a differ .....

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lowed the claim of service charges under Section-40(A) of the Act. In the backdrop of these facts, the arguments canvassed by learned Senior Counsel Mr. M.R. Bhatt cannot be countenanced. 12 The Gujarat Gas Financial Services Limited (a Government Company), is engaged in distributing gas through pipelines to its customers, wherein the respondent company is 100% subsidiary company of the Gujarat Gas Company Ltd. It is accepted fact that the parent as well as assessee company had entered into an a .....

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ar 2005-06 to the tune of ₹ 7,07,00,028/-. The Assessment Officer, who found such amount as excessive for the assessment Year 2006-07, initiated proceedings by exercising powers under Section 40A(2) of the Act. It was the case of the assessee company that it is the company which is providing various kinds of services to the parents company and both the companies are paying the highest tax and, therefore, there was no evasion of tax by the assessee. The Assessment Officer could not accept t .....

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pect is concerned, the Hon ble Apex Court in the case of Commissioner of Income Tax vs Excel Industries Ltd, as reported at 295 ITR has held in paragraphs 28, 29, 30 and 31 which reads as under: 28 Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Cons .....

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rom Hoystead v. Commissioner of Taxation (1926) AC 155 (PC) wherein it was said (page 328 of 193 ITR): Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is e .....

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some traverse which had not been taken. 30 Reference was also made to Parashuram Pottery Works Co. Ltd vs ITO(1977) 106 ITR 1 (SC) and then it was held (page 329 of 193 ITR): We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way o .....

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Tax in the earlier proceedings,a different and contradictory stand should have been taken. 31 It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter re .....

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