TMI Blog2015 (11) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... essment 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. 2006-07. Since there is no material change in the circumstances, therefore, the interest payable cannot be reduced to 13.5%. Therefore, we are of the view that the orders passed by AO and ld. CIT (A) are required to be set aside and we accordingly held that the 15% interest claimed by the assessee for the loan borrowed is allowed. - Decided in favour of assessee. - ITA Nos. 138/JP/2014 - - - Dated:- 21-10-2015 - SHRI T.R.MEENA, AM SHRI LALIET KUMAR, JM For The Assessee : Shri Ashok Holani (C.A.) For 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mt. Usha Jakhotia ₹ 30,969/- Smt. Rameshwari Devi ₹ 6,33,527/- Shri Vijay Maheshwari HUF ₹ 5,77,015/- ₹ 51,33,856/- The AO was of the view that the prevailing market rate was 12% whereas the assessee has paid the interest @ 15%. The AO had issued show cause notice for the excess interest paid by the assessee to the said persons under section 40A(2)(a). In response to the show cause notice the assessee filed the reply as under :- Your goodself has asked to submit the details of payments of interest to relatives as defined u/s 40A(2)(b). It is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. Aggrieved the assessee has filed appeal before ld. CIT (A), and the ld. CIT (A) has allowed partial relief to the assessee whereby the interest has been 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 related parties hence it is excessive and unreasonable. Appellant submitted that it was paying bank interest @ 12.5% on the secured borrowings which involved processing fees and other charges to the extent of 1-2%. It was also submitted that in assessment year 2006-07, CIT (A) allowed the claim of interest paid to related parties @ 15%. Appellant further submitted that assessing officer relied upon the wrong provision of section 40(b) which applies to partnership and not company. I agree with the appellant that provisions of section 40(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the banker has also provided conditions that during the currency of bank loan any loan/deposits taken from friends and relatives shall not be withdrawn without prior permission of the bank. Further, the appellant has paid interest @ 15% p.a. to the non related party also namely Sh. S.S. Katta. Further, no instance has been given by AO that how 12% interest rate can be considered as reasonable not excessive. With this discussion and under these circumstances, in my considered view the interest paid to the related persons @ 15% in this case was not unreasonable and 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 applicable. During the course of hearing, it was enquired by the Bench whether the assessee and the person who had given the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the submissions made by the company that in past two years the claim made towards the expenditure was accepted by the Officer on the ground that there is no question of res judicata, however, has held that without any material, the maximum expenditure of the assessee company towards service charges is ₹ 10 crores as, if, the assessee company was only received the premiums belong to the foreign company, which is contrary to law laid down by the various courts and tribunals. As far as this aspect 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 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter and if there was no change, it was in support of the assessee - we do not think t the question should have been reopened and contrary to what had been decided by the Commissioner of Income 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 rest rather than spend the tax payers money in pursuing litigation for the sake of it. 13. As has been found by us in the preceding para of this judgment that the respondent company as well as the parent company, both are assessed to income tax at the maximum marginal rate and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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