TMI Blog2022 (4) TMI 176X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the Ld. CIT(A) has been pointed out by the Revenue. In such circumstances, we find no reason to interfere with the order of the Ld. CIT(A) and thus, Ground No.1 of Revenue is dismissed. Disallowances u/s 40A(2) - assessee had availed loans from Punjab and Sind Bank at an interest rate of 9.56%, whereas it was paying interest at the rate of 16.34% on the loans availed from M/s. Samara Automax Private Limited, a related party - HELD THAT:- It is a well-known fact that the interest charged on unsecured loans are higher than the interest charged on secured loans in view of the fact that secured loans as the name suggests, are secured and are generally secured either by a mortgage or hypothecation of certain properties, whereas on the other hand, unsecured loans are not secured and therefore the lender carries much more risk and therefore the rates at which the amount lent on secured loans are lower than the rates at which the unsecured loans are lent. Before us, the Learned AR has pointed to the State Bank of India Benchmark Prime lending rate to be in the range of 14.5% to 15% for secured loans. We further find that before CIT(A), assessee with the support of data ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lisation of fund is established for business purposes. He further noted that on identical facts in assessee s own case for the A.Y. 2012-13, the Ld. CIT(A) had deleted the addition. He noted that since there are no change no change in the facts and circumstances of the case as compared to A.Y. 2012-13, he, following the order of his predecessor for the A.Y. 2012-13 deleted the addition made by the A.O. Before us no fallacy in the findings of CIT(A) has been pointed out by the Revenue. - ITA.No.6470/Del./2018, C.O.No.218/Del./2018 Arising out of ITA.No.6470/Del./2018 - - - Dated:- 31-3-2022 - Shri Anil Chaturvedi, Accountant Member And Shri N.K. Choudhary, Judicial Member For the Revenue : Shri Vipul Kashyap, SR DR For the Assessee : Shri Tapas Mishra, Advocate And Shri Manpreet Bagga, C.A. ORDER PER ANIL CHATURVEDI, A.M. : This appeal filed by the Revenue has been directed against the Order of the Ld. CIT(A)-9, New Delhi, Dated 03.07.2018, relating to the A.Y. 2014-15. The assessee has also filed the Cross Objections (CO) in support of the order of the Ld. CIT(A). 2. Briefly, the facts of the case as culled out from the material on record are as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before or during the hearing of this appeal. 4. The assessee in its cross objections has raised the following grounds: On the facts and circumstances of the case the Ld.CIT(A) erred in not accepting the claim of the assessee that the rate of interest charged by the sister concern on unsecured loans and advances to assessee was reasonable and fair. 5. We first proceed with the Revenue s appeal. 5.1. Ground No.1 is with respect to deletion of addition of ₹ 85,45,000/- under section 2(22)(e) of the Income Tax Act, 1961. 5.2. During the course of assessment proceedings and on perusal of the bank statement the A.O. noticed that the assessee has received funds from M/s. Samara India Private Limited and the total amount received during the year aggregated to ₹ 80,45,000/- (the details of which are tabulated at Page-2 of the assessment order). The A.O. also noticed that Shri Rajnish Wadhawan and Shri Anish Wadhwan hold 33.50% shares of the company and on perusal of the audited Balance Sheet of M/s. Samara India Private Limited, he noted that Shri Rajnish Wadhwan held 33.33% of its shares and Mr Anish Wadhwan held 21.84% of its shares. He on examination of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er given a finding that M/s. Samara India Private Limited had transferred the funds on behalf of and under the directions of Shri Rajnish Wadhwan debiting his loan account and the assessee had received the same as loan on account of Shri Rajnish Wadhwan which was credited in his name. He has, thereafter, given a finding that the transaction involved was not really in the nature of loan from M/s. Samara India Private Limited to the assessee, but, it was a loan transaction between Shri Rajnish Wadhwan and the assessee. He, thus, held that the provisions of Section 2(22)(e) of the Income Tax Act 1961 in the aforesaid circumstances does not apply and accordingly directed deletion of the addition. 6. Aggrieved by the order of the Ld. CIT(A), the Revenue is now before us. 7 Before us the Ld. D.R. took us through the findings of the A.O. and supported the order of A.O. 8. The Learned A.R, on the other hand reiterated the submissions made before the A.O. and the Ld. CIT(A) and supported the order of the Ld. CIT(A). He further pointed to the copy of the loan account in the name of Shri Rajnish Wadhwan appearing in the books of M/s. Samara India Private Limited and the loan account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cured overdraft, the security being company s fixed deposit pledged to the bank. It was further submitted that in case of secured overdraft, generally 5% over and above the interest rate on fixed deposit is charged on loan and, therefore, the bank has charged only 9.56% as interest. As far as the interest payment at 16.34% by the assessee to its associated concern was concerned, it was submitted that the normal rate of interest on loan charged by the bank to the similarly engaged companies in real estate activity was 20% and since assessee was paying the interest at 16.34% it was lower when compared to the market rate. The submissions of the assessee were not found acceptable to A.O. The A.O. was of the view that assessee had paid excess interest to M/s. Samara Automax Private Limited and the excess interest being worked out by the A.O. was to the extent of ₹ 41,02,909/- (being the difference in rate between 16.34% and 9.56%). He accordingly made addition of ₹ 41,02,909/-. 10.1. Aggrieved by the order of the A.O, assessee carried the matter in appeal before the Ld. CIT(A). Before the Ld. CIT(A), it was submitted that the loan from M/s. Samara Automax Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omax Private Limited was an unsecured loan which did not involve much of paper work, whereas, the secured loan from banks involve lot of paperwork and further the interest on overdraft charged by the bank was 5 % over and above the fixed deposits which were kept as security with the bank. He therefore submitted that CIT(A) has erred in directing the AO to consider the SBI Benchmark Prime Lending rate of secured loan to work out the excess interest on unsecured loan taken by the assessee. He, therefore, submitted that no addition is called for with respect to the disallowance under section 40A(2) and the disallowance directed by the Ld. CIT(A) may also be deleted. 14. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance on account of interest paid on unsecured loan u/s 40A(2)(a) of the Act. 14.1. Section 40A(2) of the Income-tax Act, 1961, puts a curb on expenditure in respect of which payment has been made to close associates having substantial interest in the company for goods, services and facilities. Under this section, the Assessing Officer can disallow only that portion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d loans. We are thus of the view that no addition under section 40A(2) is called for in the present case. We thus direct the A.O. to delete the addition. Ground No.2 of the appeal of the Revenue is dismissed and the cross objection of the assessee is allowed. 15. Ground No.3 of the Revenue is with respect to deletion of addition of ₹ 2 crores under section 68 of the Income-Tax Act 1961. 15.1. During the course of assessment proceedings, the A.O. noticed that the assessee had received substantial loan aggregating to ₹ 15,78,79,446/-, from several parties including Directors and Shareholders (the details of which are tabulated by the A.O. in para 3.1 of the order). The assessee was asked to prove the creditworthiness of the parties by explaining their source for giving the loans. The assessee filed the detailed submissions. 15.2. With respect to loan of ₹ 2,02,38,000/- received from Shri Avinash Wadhwan AO noted that the income declared by him was only to the extent of ₹ 39,821/-. Before AO assessee submitted that Shri Avinash Wadhwan is a non resident based in Kuwait for more than 45 years who had in the past invested in various companies in India an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. He is in the business of trading in automobile parts in Kuwait since then and has made investments in companies over a period of many years out of foreign remittances. It has been further observed that Mr. Avinash Wadhawan has been filing his income tax returns in India declaring his income accrued in India and has also been subjected to detailed scrutiny under section 143(3) of the Act in the past previous year i.e. AY 2013-14. A copy of the said assessment order acknowledging these facts has been placed. 5.15. Further, ledger accounts were called from the Appellant for the last four years including the impugned year of Mr. Avinash Wadhawan in the books of accounts of various companies in which he has made investments. The requisite details were filed by the appellant which is placed in record. It has been observed from the above documents that all the investments and loans of Mr. Avinash Wadhawan have been made over the last many years and the source of the impugned loan of ₹ 2,00,00,000/- provided by Mr. Avinash Wadhawan to the appellant company, is from withdrawal of his loan balance outstanding in other associate companies. 5.16. I have also perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments which reveal that all the investments and loans made by Shri Avinash Wadhwan was made out of last many years and the source of the impugned loan was out of the withdrawal of his loan balance outstanding in other associated companies. He has further given a finding that Shri Avinash Wadhwan being a non-resident Indian, the return of income filed in India reflected only the income which accrued to him in India. He has further given a finding that the perusal of balance sheet of Shri Avinash Wadhwan for financial year 2013-14 depicted the capital account of ₹ 20.01 crore loan liability from ICICI Bank Ltd., for ₹ 1.08 crores against which he had granted loan and advances amounting to ₹ 9.77 crores, investment ₹ 9.84 crores. He, therefore, considering the details furnished before him has given a finding that assessee has discharged his onus of proving the identity, creditworthiness and the genuineness of the transaction and thus, no addition could be made under section 68 of the Income Tax Act 1961. Before us no fallacy in the findings of the Ld. CIT(A) is pointed-out by the Revenue. In such circumstances, we find no reason to interfere with the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival submissions and perused the material on record. The issue in the present ground is with respect to the disallowance of interest expenses holding it to be capital in nature. We find that Ld. CIT(A) while deleting the addition has given a finding that the business of the assessee is in trading in real estate and renting the properties since 1996 and the funds obtained through overdraft as working capital or through unsecured loan was deployed for the purpose of business and extending the advances for booking of property's was in the line of its business activity and that mere non-recognition of rental income cannot be the basis for allowing expenditure when the utilisation of fund is established for business purposes. He further noted that on identical facts in assessee s own case for the A.Y. 2012-13, the Ld. CIT(A) had deleted the addition. He noted that since there are no change no change in the facts and circumstances of the case as compared to A.Y. 2012-13, he, following the order of his predecessor for the A.Y. 2012-13 deleted the addition made by the A.O. Before us no fallacy in the findings of CIT(A) has been pointed out by the Revenue. In such a situation we find ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
