SHRI NARESH KUMAR LUHADIA,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7, JAIPUR

In this appeal, the assessee is aggrieved for disallowance of Rs. 1,88,032/- out of interest paid to relatives by invoking provisions of Section 40A(2)(b) of the Act.

2 ITA 1110/JP/2018_ Naresh Kr. Luhadia Vs DCIT 3. Rival contentions have been heard and record perused. The facts in brief are that the assessee is a proprietor of M/s Kissan Pashu Aahar Udyog and derives income from manufacturing and selling of cattle feed and from trading of shares and from income from house property. During the course of assessment proceedings, the A.O. found that the assessee has taken loan on interest from various parties, rate of interest was varying from 15 to 18%. The A.O. alleged that the assessee has paid higher rate of interest @ 18% to the parties related to him, therefore, by invoking provisions of Section 40A(2)(b) of the Act he made disallowance of Rs. 1,88,032/-. By the impugned order, the ld. CIT(A) confirmed the action of the A.O. against which the assessee is in further appeal before the ITAT.

At the outset, the ld AR of the assessee has drawn our attention to the decision of the ITAT Jaipur Bench in (ITA NO. 984/JP/2018) in assessee's own case on the same ground of appeal for the A Y 2013-14, wherein the Tribunal held that:

On the other hand, the ld DR has relied on the orders of the authorities below.

We have considered the rival contentions and carefully gone through the orders of the authorities below and found that exactly similar issue was decided by the Tribunal in assessee’s own case for the immediate preceding year i.e. A.Y. 2013-14. The Tribunal have dealt with the issue threadbare and after recording the detailed findings reached to the conclusion that the majority of the unrelated parties were paid, interest rate at the rate of 18%, therefore, payment of interest @ 10% to the related parties would not fall in the category of excessive or unreasonable interest. Hence, no disallowance is warranted. As the facts and circumstances during the year under consideration are pari materia, respectfully following the order of the Tribunal in assessee’s own case,

In the result, appeal of the assessee is allowed. Order pronounced in the open court on 05th April, 2019.