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TMI Blog2018 (7) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... nd conjectures without any basis the order of disallowance of 6% interest as made excessive. We therefore set aside the order of disallowing interest expense of ₹ 12,330/-. Thus, ground of appeal preferred by the assessee is allowed. Disallowance of depreciation on Car - rate claimed by the assessee can only be considered had it been a commercial vehicle and used in the business of hiring and thus 50% of the depreciation was allowed by the AO and excess depreciation denied - Held that:- We find merit in the plea of the assessee towards inadvertence for omitting to raise a specific ground for adjudication before CIT(A) despite detailed presentation of facts in ‘statement of facts’. In the facts and circumstances of the case, we consider it fair and proper and in the interest of justice to set aside the order passed by the authorities below on the issue in dispute and restore the matter to the file of the ld.CIT(A) to decide the issue afresh upon giving a proper opportunity of hearing to the assessee and further taking into consideration of the entire evidence already available on record as well as other documentary evidence which the assessee may choose to file in support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the interest of the business is concerned. Addition on account of interest of late payment of Excise duty - Held that:- It is well settled that interest on belated payment of excise duty is compensatory in nature and is not in the nature of penalty or offence in terms of Explanation 1 to Section 37 of the Act. Thus, we find merit in the plea of the assessee for the claim of interest amount as business expenditure and we therefore delete the addition. - ITA 2049/Ahd/12, ITA No. 2054/Ahd/12 And CO No.213/Ahd/12 - - - Dated:- 4-7-2018 - SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER For The Assessee : Shri P.M. Mehta, AR For The Revenue : Shri Saurabh Singh, Sr.DR ORDER PER Ms. MADHUMITA ROY - JM: The two appeals being ITA Nos.2049/Ahd/2012 and 2054/Ahd/2012have been filed before us against the common order dated 11.06.2012 passed by the Commissioner of Income Tax(Appeals)-Gandhinagar, Ahmedabad [Ld.CIT(A) in short] both for Assessment Year (AY) 2009-10 by the assessee and the revenue respectively. A Cross Objection being CO No.213/Ahd/2012 for AY 2009-10 has been filed by the assessee in regard to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue is that the assessee gave funds to one M/s.Sona Stainless Steel @ 12% interest whereas the assessee was paying interest @18% on the said amount of funds on loan. In response to the show cause notice the assessee replied that due to business relations the interest is paid @ 12%. The facts of paying 18% by the assessee when the funds are advanced @ 12% was not accepted by the AO; the balance 6% appeared to be excessive according to the AO particularly when no such business purpose was shown by the assessee for charging interest @ 12% only. Thus, 6% interest i.e. ₹ 12,330/- has been disallowed by the AO and added to the income of the assessee which was affirmed by the Ld. CIT(A) in appeal, hence, the appeal before us. 7. We find that the AO has not made any enquiry as to the prevailing market rate of interest independently and only on surmises and conjectures without any basis the order of disallowance of 6% interest as made excessive. We therefore set aside the order of disallowing interest expense of ₹ 12,330/-. Thus, ground of appeal preferred by the assessee is allowed. 8. The third ground relates to disallowance of depreciation on Car of ₹ 61,286/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice clerks which according to the assessee was normal and not unreasonable. However, the Ld.AO invoking section 40A(2)(b) of the Act made disallowance on the premise that the assessee has failed to file the details of services, nature of duties to prove payment of those employees to show the reasonableness. In fact, the assessee has submitted such details in the course of assessment proceeding along with submission dated 05.12.2011 which is also evident at page No.21 of the paper-book. 11. At the time of hearing of the instant appeal, Ld.AR submitted before us that the services rendered by the employees in the business of the assessee and the payment of salary towards such performance was not disputed by the Department in the earlier assessment years. He, therefore, prays for setting aside the order of disallowance on such count. The Ld. DR, however, relies upon the order passed by the authorities below. 12. We have heard both the parties. We have perused the relevant records relating to the issue. We have found justification in the submission made by the Ld.AR particularly when no deliberation has been made by the ld.AO while deviating from his earlier stand taken by Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment made to agents. The said issue was rejected by the AO basically on the premise that the details of the work done by the agents, the justification of expenses thereto, the copies of agreement with those agents, bills showing names of those agents, rate of commission were not provided by the assessee. The confirmation of the purchasers of GSFC Limited, GNFC Limited, KRIBHCO Limited or RCF Limited since not filed and the commission paid to those agents were according to the AO was too high without any basis the Ld.AO disallowed the same. On the other hand, the Ld.CIT(A) in appeal preferred by the assessee on the basis of the available evidence inter alia the copy of account of respective parties with cross confirmation, Permanent Account Numbers, bank statement, the details of commission and the deduction of TDS came to a finding that the identities of those parties have been established by the assessee particularly when payments were made through banking channels, TDS deducted and payees are assessed to income-tax. According to the Ld.CIT(A), the assessee has discharged its basic onus. The Ld.CIT(A) has followed the observation made in the judgement of CIT vs. Associated Electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.CIT(A). 20. We have heard the Ld. representatives of the parties. We have perused the relevant materials available on record. We find that the Ld. CIT(A) observed that the assessee had paid 18% interest in earlier years too on unsecured loans. He agreed with the fact that interest on unsecured loans in market has to be practically and logically higher than that of the interest is paid in hypothecation of stock where paper work is involved. He further recorded that no evidence has been brought on record which shows unsecured loans available in the area of business during the year at lower rates. Further that the rate of interest will definitely be lesser in respect of the partners since the partners have interest in profits and even the partners may agree to forgo the capital interest also. On this premise, the payment of 18% interest to the parties lending unsecured loans have reasonably given by the Ld. CIT(A) and disallowance made by the AO has been deleted. The reasons for allowing the interest @ 18% as assigned by the Ld. CIT(A) is, according to us, justiciable so far as the interest of the business is concerned. We therefore find no infirmity in the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. The third issue relates to validity of the order passed by the Ld.CIT(A) in upholding the addition made by the AO of ₹ 1,01,000/- on account of salary payment u/s.40A(2)(b) when no disallowance was called for. The same issue was considered by us in assessee s own case in ITA No.2049/Ahd/2012 for AY 2009-10 where we have passed order as follows:- The fourth ground relates to the order of disallowance out of total interest expenses/salary being excess u/s.40A(2)(b) of the Act. The assessee made payment of salary to persons who are covered by section 40A(2)(b) of the Act. The assessee was paying ₹ 5,000/- to three employees and ₹ 7,000/- to other three office clerks which according to the assessee was normal and not unreasonable. However, the Ld.AO invoking section 40A(2)(b) of the Act made disallowance on the premise that the assessee has failed to file the details of services, nature of duties to prove payment of those employees to show the reasonableness. In fact, the assessee has submitted such details in the course of assessment proceeding along with submission dated 05.12.2011 which is also evident at page No.21 of the paper-book. At the time ..... X X X X Extracts X X X X X X X X Extracts X X X X
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