2017 (5) TMI 305 - HC - Income Tax

Addition of excess payment of interest expenditure - whether the assessee did not establish the commercial expediency of making payment of interest at @ 15% instead of 12.50%? - ITAT delted the addition - Held that - considering the fact that the respondent assessee paid the interest at the rate of 15% and the Assessing Officer was of the opinion that the assessee ought to have paid the interest at the rate of 12.5% and as observed by the learned tribunal the respondent assessee paid the interest at the rate of 15% looking to the commercial expediency, it cannot be said that the learned tribunal had committed any error in deleting the addition . We are complete agreement with the view taken by the learned tribunal. - Decided in favour of assessee

Summary

Issues:
1. Excess payment of interest expenditure - Commercial expediency
2. Set off/carry forward of unabsorbed depreciation

Analysis:

Issue 1: Excess payment of interest expenditure - Commercial expediency
The appellant challenged the impugned judgment directing the deletion of an addition of excess interest expenditure. The Assessing Officer contended that the interest should have been paid at a lower rate, resulting in an addition of ?3,00,544. However, the tribunal ruled in favor of the respondent, stating that the interest paid at 15% was justified due to commercial expediency. The tribunal held that the interest paid at a higher rate was not unreasonable, leading to the deletion of the additional amount. The High Court concurred with the tribunal's decision, emphasizing that the commercial expediency of the respondent in paying the higher interest rate was a valid consideration. Therefore, the court dismissed the appeal, stating that no substantial question of law arose in this regard.

Issue 2: Set off/carry forward of unabsorbed depreciation
Proposed questions (b) to (e) regarding the set off and carry forward of unabsorbed depreciation were dismissed by the court based on a previous decision in the case of Commissioner of Income Tax I Vs. Integra Engineering India Ltd. The court noted that these issues were already decided against the revenue in the mentioned case. The appellant did not dispute this position. Consequently, the court upheld the dismissal of the appeal concerning the set off and carry forward of unabsorbed depreciation. The court's decision was based on the precedent set by the earlier judgment, and no further arguments were entertained on these specific issues.

In conclusion, the High Court dismissed the Tax Appeal concerning the excess payment of interest expenditure and the set off/carry forward of unabsorbed depreciation based on the reasons and precedents discussed above. The judgment highlighted the importance of commercial expediency in determining interest rates and reiterated the significance of established legal decisions in similar matters.