JACKIE MAHESH VORA ,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 19(2), MUMBAI

This appeal by the assessee is preferred against the order of the dated 26/05/2025 passed by the NFAC, Delhi [hereinafter “the ld. CIT(A)"] pertaining to AY 2018-19. 2. The solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the disallowance of interest expenditure of Rs.7,23,784/- made by the AO u/s 37(iii) of the Act.

Heard the parties. Case records carefully perused.

Briefly stated the facts of the case are that the assessee filed his return of income on 29/09/2018 declaring total income at Rs. 1,01,16,520/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.

While scrutinizing the return of income, the AO noticed that the assessee has shown interest income under the head income from other sources at Rs.95,03,234/-. The AO also found that the assessee has incurred interest expenses on sums borrowed from HDFC Ltd. amounting to Rs.99,18,705/-and claimed the interest expenditure from the interest income under the head income from other sources. The AO further found that the assessee has lent money to its family companies, namely, JMP Securities Pvt. Ltd., Vora Financial Services Pvt. Ltd. and Sunil Capital and Securities Pvt. Ltd.. The assessee paid interest on its borrowings at a much higher rate than what it charged from its related parties. The AO questioned that and on receiving no plausible reply made the addition of the difference in the interest earned and interest paid amounting to Rs.7,23,784/-. The assessee carried the matter before the ld. CIT(A) but without any success.

We find that on identical set of facts in ITA No. 6018/Mum/2024; AY 2017-18, the Co-ordinate Bench has held as under:- "

Before us, the ld. Counsel for the assessee vehemently stated that the AO cannot question the reasonableness of the interest paid qua the interest received. It is the say of the ld. Counsel for the assessee that, there is no bar in claiming interest u/s 57(iii) of the Act. Strong reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Rajendra Prasad Moody [1979] 1 SCC 250 and of the Co-ordinate Bench in the case of Akash Goyal vs. ACIT [2020] 113 taxmann.com 10 (Agra-Trib.).

Details of loans and advances and the interest charged is as under: – Annexure 6: Details of Loans and Advances Name Opening Balance as on 1.04.2016 Addition during the year Repayment during the year Interest Rate Interest Amount TDS Sunil Capital & Securities Private Limited 2,31,38,261.25 2,59,00,000 2,50,00,000 8.50% 27,54,794 2,75,479 Vora Financial Services Private Limited 47,12,664 38,81,055 8,38,011 8.50% 4,80,625 48,063 JMP Securities Private limited 8,99,24,835 84,38,944 3,63,59,000 8.50% 65,34,382 6,53,438 Mahendra J Shah 50,00,000 12.00% 2,16,986 Sudhaben H Shah 50,00,000 12.00% 2,16,986 Usha M Shah 50,00,000 18,00,000 12.00% 1,87,989 NN Doshi Disha Shah 20,000 10,000

From the above chart it can be seen that the assessee has lent money to its sister concerns from whom he has charged interest at the rate of 8.50%. The assessee has also lent money to 3 unrelated parties from whom the assessee has charged interest at the rate of 12%. The assessee could not give any satisfactory explanation for such discrimination. Even before us the ld. Counsel for the assessee kept on harping on the argument that reasonableness cannot be questioned.

We are of the considered view that neither the AO nor the Bench was questioning the reasonableness of the expenditure. The only explanation sought was in respect of disparity of rate of interest charged from related parties and the unrelated parties because in our considered opinion, in similar transactions with the related parties and unrelated parties all that has to be seen is whether it is at arm's length or not.

Considering the factual matrix mentioned hereinabove, we are of the considered view that the assessee has grossly failed in justifying the lower rate of interest charged from the related parties vis-à-vis the rate of interest charged with the unrelated parties. Therefore, we do not find any reason to interfere with the findings of the lower authorities.

Before parting, the decisions relied upon by the ld. Counsel are misplaced as in both the cases (supra) the question was whether the expenses have been incurred for the purpose of business or profession whereas the issue before us is the disparity in the rate of interest between the related parties and unrelated parties.

In the result, appeal of the assessee is dismissed. On finding parity of facts, respectfully following the decision of the Co-ordinate Bench (supra), we dismiss the grounds raised by the assessee.

In the result, appeal of the assessee is dismissed. Order pronounced in the Court on 24th October, 2025 at Mumbai. (NARENDRA KUMAR BILLAIYA) ACCOUNTANT MEMBER Mumbai, Dated 24/10/2025 *SC SPPS आदेश की प्रतिलिपि अग्रेषित/