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TMI Blog2016 (1) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, we are of the opinion that the consistency should have been followed in completing the assessment proceedings unless there is cogent reason or justifiable grounds for the Revenue to depart from its earlier decisions made u/s 143(3) of the Act. We are of the opinion that the ld. CIT (A) was not right in confirming the disallowance made by the AO on account of interest paid to the persons u/s 40A(2)(b) by holding it unreasonable and excessive and also restricting the interest payment to them @ 12%. Accordingly, we allow the ground of appeal taken by the assessee and order deletion of the same. - Decided in favour of assessee. - ITA No. 4573/Del./2015 - - - Dated:- 26-11-2015 - N K Saini, AM And A. T. Varkey, JM For the Appellant : Shri K K Sahu, Adv For the Respondent : Shri K K Jaiswal, Senior DR ORDER Per A. T. Varkey, Judicial Member This appeal, at the instance of the assessee, is directed against the order of CIT (Appeals), Meerut dated 05.06.2015 for the assessment years 2010-11. 2. The only ground is against the confirmation of disallowance of ₹ 8,32,696/- out of interest paid to the persons who comes u/s 40A(2)(b) of Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were directly employed and getting salary from the business firm, some let out their property and enjoyed rental income; some of them were also engaged in similar or associated business activity and enjoyed job- work receipts or make -sale and purchase from that business and these were very common and general features in almost all business families. He was of the opinion that in such conditions, rate of interest of 12% was not in any way was a lesser rate. 3.2 The AO also considered the plea of the assessee that in A.Y. 2006-07 A.Y. 2007-08, the assessments were completed under scrutiny and interest paid to these persons @18% was accepted and the same should also be accepted as reasonable in this assessment year. The AO observed that comparison could not be made between rate of interest which were three years before with rate of interest in this year. Moreover, he opined that resjudicata is not applicable in income tax proceedings even in the case of same assessee for different assessment years. Relying on some judicial precedents and observing that as no speaking order was passed in those earlier years, he observed that as far as rule of consistency was concerned, if cogent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahabad High Court, the appellant company had taken loan from its sister concern. Thus, in this case, the loan transactions were between two different business entities which can have different needs for finance. However, in the case of the appellant the lenders are individuals who are relatives of the directors -of the company. It should also be kept in mind that section 40A begins with a non-obstante clause and the provision of this section consequently has to be given a strict interpretation. 3.6 Based on above discussion, Ground of appeal No.1 is dismissed and addition of ₹ 8,32,696/- is confirmed. 4. The assessee, being aggrieved, is in appeal before us. 5. Ld. AR for the assessee reiterated the submissions made before the lower authorities below and concised his submissions as under :- (i) A comparable chart of interest paid on unsecured loans of person who come u/s 40A(2)(b) of the Act in AY: 2006-07, AY : 2007- 08, AY: 2008-09, AY: 2009-10 and AY: 2010-11 was filed before the authorities below. The assessment for AY 2006-07 and AY 2007-08 were completed under scrutiny u/s 143 (3) and the interest paid to these persons was accepted to be reasonable and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the interest paid to other unsecured loans. (v) With regard to the reliance placed by the AO that interest allowed by the assessee on unsecured loans in AY : 2006-07 AY : 2007-08 in the scrutiny assessment cannot be accepted as res-judicata as the same is not acceptable in income Tax proceedings in the case of same assessee for different years, the ld. AR submitted that the consistency should be maintained and in this regard, he relied on various judicial pronouncements which he relied upon before the ld. CIT (A). In view of the aforesaid submissions, the ld. AR prayed that the orders of the authorities below be set aside and the appeal of the assessee be allowed. 6. On the other hand, the ld. DR relied on the orders of the ld. CIT (A) and the AO and does not want us to interfere in the impugned order. 7. We have heard both the sides on the issue and perused the material on record. The only issue involved is whether the interest paid by the assessee at a rate of more than 12% per annum on unsecured loans of the parties attracts section 40A(2)(b) of the Act and can be held as excessive or not in the facts and circumstances of the case in hand. We find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of business and the amount of interest is paid, they have no jurisdiction to determine whether the rate of interest to pay is reasonable or not and to disallow a portion of interest which has been paid. (ii) ITAT Ahmedabad Bench the case of Omkar Mal Gauri Shanker vs. ITO - (1991) held that the rate of 24% cannot be treated as unreasonable or excessive and therefore directed allowance of entire interest. Further it was held that deposits being old, interest thereupon was never disallowed in the past. In view of the above, it was held that the fund were used for business purpose coming over from preceding assessment years, in the past it had been allowed at the rate of 24%, interest of 24% was not excessive or unreasonable. (iii) ITAT, Rajkot Bench in the case of AC-3, Jamnagar vs. Suresh Magan Lal Ravani - (2013) 143 ITD 25 has held that interest @ 18% in AY 2008-09 on unsecured loans of family can not be said to be excessive or unreasonable u/s 40A(2)(b) of the Income Tax Act, 1961. (iv) Hon'ble Allahabad High Court in the case of Abbas Wazir (P) Ltd. Vs. CIT - 265 ITR 77 (All.) has held that even while invoking the provisions of section 40A(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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