TMI Blog2020 (5) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of interest u/s 40A(2)(a) - HELD THAT:- Neither the AO has brought on record that the interest paid by the assessee is on higher side as compared to the market rate for getting the unsecured loan for such business as undertaken by assessee. Nor the AO has recorded that assessee made the payment to its sister concern for evasion of tax. We have noted that on similar rate of interest, the addition was deleted in assessee s group case in Puspanjali Realtors [ 2018 (1) TMI 1588 - ITAT MUMBAI] and on appeal before the ITAT, the order of ld. CIT(A) was confirmed. In view of the above discussion, and respectfully following the order of the coordinate bench in Puspanjali Realtors Pvt. Ltd. In the ground of appeal raised by the assessee is allowed. - ITA No. 2699/Mum/2016, ITA No. 5161/Mum/2016, ITA No. 4987/Mum/2016 - - - Dated:- 1-11-2019 - Shri Pramod Kumar, Vice-President And Shri Pawan Singh Judicial Member For the Appellant : Shri Reepal Tralshawala (AR) For the Respondent : Shri Dharm Veer Singh (DR) ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. This set of three appeals out of which two cross appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d liable to be deleted. 5. The Ld. CIT(A) further failed to appreciate that apart from interest cost and brokerage cost [about 3% and not 1.50% or 0.50% as observed by CIT(A)], there were hardly any expenses claimed by the lender sister concerns and except for net profit earned and offered for tax and therefore, no part of interest paid to sister concerns had actually benefited the sister concerns in any manner so as to apply provisions of section 40A(2)(a) of the Act and that the majority amount of interest paid to sister concerns has in turn been utilized by the sister concerns to make payment of interest and brokerage to outside third parties from whom the funds were borrowed and hence, there is no question of making any excessive payment of interest to sister concerns and the disallowance therefore made and partly confirmed by the Ld. CIT(A) may be deleted. 6. The Ld. CIT(A) further failed to appreciate that all the group concerns were filing return of income and paying taxes at the maximum marginal rates and in fact in the case of assessee, majority of interest expenses were capitalized as WIP [out of total disallowance of ₹ 4,68,73,515/-, ₹ 4,28,56,367/- is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75,500/- 01.02.2011 Unnati Seva Sangh 1,02,000/- 9,59,300/- 5. The ld. AR of the assessee submits that the expenses were incurred for advertising of the business of the assessee and the major expenses which consist of membership to Mumbai Cricket Association were incurred on account of corporate membership to have a meeting with various clients. All the expenses were incurred for the purpose of business and rest of the expenses were incurred for donations. The ld AR for the assessee submits that the assessee explained the expenses to the lower authorities that payment made to Unnati Seva Sangh and United Association for social education and public Welfare (Dahihandi), it was incurred for putting hoarding for advertising of its upcoming projects. For the expenses incurred on member ship of Club, the ld. AR of the assessee relied upon the decision of Hon ble Bombay High Court in case of Otis Elevator Co. (India) Ltd. Vs CIT (195 ITR 682 Bom). 6. On the other hand, the ld. Departmental Representative (DR) for the revenue relied upon the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son for erecting hoarding are also allowable expenses. Therefore, considering the nature and expenses, the Assessing Officer is directed to allow all the expenses and delete the disallowance accordingly. In the result, Ground No.A of the appeal is allowed. 9. Ground No. B relates to disallowance of interest under section 40A(2)(a). The ld. AR of the assessee submits that the assessee borrowed loan for the purpose of its business for construction of Building project. The assessee also borrowed funds from Bank, which is secured loan and that all securities could be given for the Bank borrowings exhausted. 10. The ld. AR of the assessee further submits that on same set of fact in assessee s group case in Puspanjali Realtors Pvt. Ltd. In ITA No. 483/Mum/2016 dated 17.01.2018, wherein the assessing officer treated similar rate interest paid by that assessee as unreasonable, however, on appeal, the ld. CIT(A) deleted the entire interest addition, on further appeal before the Tribunal the order of ld. CIT(A) was affirmed. The ld. AR of the assessee finally submits that this ground of appeal is covered in favour of assessee. In support of his submission, the ld. AR of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition was deleted in assessee s group case in Puspanjali Realtors (supra) and on appeal before the ITAT, the order of ld. CIT(A) was confirmed. In view of the above discussion, and respectfully following the order of the coordinate bench in Puspanjali Realtors Pvt. Ltd. In ITA No. 483/Mum/2016, (supra) the ground of appeal raised by the assessee is allowed. 14. In the result, appeal of the assessee is allowed. ITA No. 5161/Mum/2016 A.Y. 2012-13 by assessee 19. We have noted that the assessee has raised identical Ground of appeal as raised in Ground No. B in appeal for Assessment Year 2011-12, which we have allowed by following the order of Tribunal in assessee s group case in Puspanjali Realtors Pvt. Ltd. In ITA No. 483/Mum/2016 dated 17.01.2018. No variation of facts for the year under consideration is brought to our notice. Therefore, following the principle of consistency, this Ground of appeal is allowed with similar direction. 20. In the result the appeal of the assessee is allowed. ITA No. 4987/Mum/2016 A.Y. 2012-13 by revenue 21. The ld. AR of the assessee submits that the tax effect involved in the revenue s appeal is less than the monetary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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