TMI Blog2022 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ed down the quantum of disallowance by deleting interest-portion - HELD THAT:- ITAT in assessee s own case in preceding AY 2012- 13 [ 2018 (7) TMI 2288 - ITAT INDORE] is directly favouring the claim of assessee that no disallowance is required to be made for interest-component. Ld. DR fairly agreed to this submission of Ld. AR. Dismiss Ground No. 2 of the revenue. Disallowance of interest expenditure u/s 40(A)(2)(b) - AO disallowed 3% excess interest - HELD THAT:- AO has simply made a blanket comparison of the interest rate of 15% paid to specified persons against 12% interest-payment to other persons and came to a straight-forward conclusion that interest-payment is excessive. We feel that such a blanket comparison without going into the fair market rate or the legitimate needs of business or the benefit derived by assessee therefrom is not sufficient for section 40A(2). Section 40A(2)(b) is a disallowance provision, therefore a heavy burden lies on the head of Ld. AO to prove the existence of required parameters and then only he can make a disallowance. Having failed to do so, in our view, the disallowance made by AO is not in accordance with the requirement of section 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the factual position of the issue. 2. Whether in the facts and in the circumstances of the case, Ld. CIT(A) has erred in law in restricting the disallowance made u/s 14A of the Income Tax Act in respect of interest expenses incurred for investment in subsidiaries and administrative expenses. Further, the assessee has raised following grounds in its Cross-Objection: 1. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax (Appeal)-II erred in confirming the disallowance of interest expenses under section 40A(2)(b) of the Act. 2. Accordingly, the Appellant humbly prays that the said disallowance be deleted. 4. We first adjudicate Revenue s appeal and thereafter Assessee s Cross-objection. Revenue s Appeal Ground No. 1: 5. The issue involved in this Ground is the disallowance of expenditure on account of sales-commission of Rs. 1,50,22,016/- claimed by assessee. 6. Facts qua this issue are such that the assessee paid a commission/brokerage of Rs. 1,50,22,016/- to its representatives (called agents/brokers ) and claimed the same as a deduction in computing taxable income of business. During ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of I.T.A.T. order has been submitted by the appellant during the course of appellant proceedings. 3.2 The appellant has also relied on the decisions of CIT vs. Gobald Motor Services P. Ltd. (100 ITR 240) (Mad) and Amarjothi Pictures v. CIT [1968] (69 ITR 755)(Mad) in support his case. After carefully gone through the findings of the case, it is clear that this issue on commission has been covered by the order of I.T.A.T. Bench. Hence I don t find any basis for sustainability of the disallowance of Rs.1,50,22,016/- on account of expenses under the head of commission and this ground of appeal is allowed. 8. During hearing before us, both sides fairly agree that the issue is directly covered by the decision of ITAT, Indore Bench in assessee s own case for AY 2011-12 and AY 2012-13 in ITA No. 620/Ind/2016 order dated 16.01.2016 and ITA No. 1356/Ind/2016 order dated 12.07.2018, copies of orders are placed on record. Ld. AR also submitted that the decision of ITAT for AY 2011-12 has also been upheld by Hon ble High Court of Madhya Pradesh in ITA No. 92 93/2017 dated 01.02.2018, a copy of the judgement is also filed. As the issue is squarely covered, we do not find any re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -component even while applying Rule 8D. Ld. AR also submitted that identical issue came up in assessee s own case in preceding AY 2012- 13, ITA No. 1356/Ind/2016 order dated 12.07.2018 (supra), where the ITAT held as under: 7. We, therefore, in the given facts and circumstances of the case and also the revenue being unable to controvert the findings of the learned Commission of Income-tax (Appeals), are of the considered view that no interest disallowance was called for u/s 14A of the Act as the assessee had sufficient interest-free funds in the shape of share capital to cover up the investment in equity shares and accordingly are not inclined to make any interference in the findings of the learned Commissioner of Income-tax (Appeals). Ld. AR submitted that the decision of ITAT in assessee s own case is directly favouring the claim of assessee that no disallowance is required to be made for interest-component. Ld. DR fairly agreed to this submission of Ld. AR. 14. After a careful consideration, we observe that the issue is directly covered by order of ITAT in assessee s own case which is on the same facts and same law. Therefore, we do not find any reason to deviate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans taken from specified persons. Ld. AR submitted that due to these material differences, the assessee was justified in paying 15% interest to specified persons. Ld. DR placed a strong reliance upon the order of Ld. AO and argued that the Ld. AO has rightly disallowed 3% excess interest. 19. We have considered rival submission of both sides. Relevant portion of section 40A(2) reads as under: (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accuring to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction : On a careful reading of this provision, we observe that disallowance under this section is attracted only if the Assessing Officer is of the opinion that the expenditure is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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