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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This cross appeals by the assessee and the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-2, Nashik dated 29-05-2-15 for the assessment year 2010-11.
The assessee in appeal has raised two grounds. The ground No. 1 is in respect of time barring assessment and in ground No. 2 the assessee has assailed GP addition of Rs.2,13,31,368/- by estimating GP profit @ 1.90% as against 1.27% declared by the assessee on the total sales of Rs.3,36,20,59,754/-.
The Revenue in appeal has assailed the findings of Commissioner of Income Tax (Appeals) on the following grounds : “01. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs.4,27,70,660/- made on account of fictitious transaction with its sister concerns u/s 40A(2)(a) of the Income Tax Act,1961. 02. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.10,85,361/- made on account of disallowance u/s.14A r.w. Rule 8D. From the facts of the case it can be seen that assessee has deliberately diverted its interest bearing funds into the shares of its own sister concerns for the purpose of avoiding payment of taxes. 03. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.28,53,942/- made on account of disallowance of excess interest paid on Gold Deposit Scheme to partners. 04. On the facts and circumstances of the case and in law, the order of the Ld. CIT(A)-II, Nashik be cancelled on the above issue and that of the A.O be restored. 05. The appellant craves leave to add, alter, modify, delete amend any of the grounds with prior permission of the Hon'ble CIT, as per the circumstances of the case. 06. The appellant prays to file any of the additional evidence appropriate to the grounds taken in appeal.”
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Dr. Sunil Pathak appearing on behalf of the assessee submitted that he is not pressing ground No. 1 relating to time barring assessment raised in the appeal by the assessee.
4.1 In respect of ground No. 2, the ld. AR submitted that the assessee had declared GP @ 1.27% of the total sales. During the assessment proceedings the Assessing Officer has made itemized addition. No ad hoc addition was made by the Assessing Officer by estimating GP rate. The Commissioner of Income Tax (Appeals) leaving behind specific additions made by Assessing Officer estimated GP @ 1.90% without any basis. The Commissioner of Income Tax (Appeals) before making such ad hoc addition neither gave enhancement notice nor any opportunity of hearing to the assessee. The assessee has maintained day to day stock register wherein all the sales and purchases are recorded. The assessee has also maintained separate register in respect of inward and outward movement of gold and silver to „Karigars‟ (workers). The defects as pointed in the books of the assessee are per se not defects.
4.2 The ld. AR further submitted that the Tribunal in the case of assessee‟s sister concerns M/s. Rajmal Lakhichand has estimated GP @ 1.20% as against 1.13% declared in the period relevant to the assessment year 2009-10. Thus, the addition sustained by the Tribunal was to the tune of 0.07%. The Commissioner of Income Tax (Appeals) in the case of assessee has estimated GP @ 1.90% as against 1.27% declared by the assessee. The addition comes to 0.63% which is very much on the higher side. The ld. AR referred to the assessment order dated 30-03-2015 for assessment year 2012-13 at pages 87 to 98 of the paper book and submitted that the Assessing Officer has estimated GP @ 1.57% as against 1.55% declared by the assessee. Thus, the addition made by the Assessing
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Officer is only 0.02%. The ld. AR submitted that the addition made by the Commissioner of Income Tax (Appeals) assessment year under appeal is very much on the higher side and is unjustified.
4.3 The ld. AR in respect of grounds raised by the Revenue in appeal submitted that the ground No. 1 in the appeal by Revenue is with respect to deleting the addition of Rs.4,27,70,660/- made u/s. 40A(2)(a) of the Act. The ld. AR submitted that the addition has been made in respect of inter- group purchase and sale transactions. The Assessing Officer held that the assessee has paid higher cost to group concerns for purchase of gold/silver ornaments. The Assessing Officer has applied the rate of Bombay Bullion Association whereas, the assessee has applied Jalgaon rates. The ld. AR submitted that the chart at pages 69 to 72 of the paper book clearly shows that the assessee has not paid higher rate to the sister concerns for purchase of gold/silver ornaments. Hence, no disallowance is warranted. The ld. AR further submitted that similar disallowance was made by the Assessing Officer in the case of assessee‟s sister concern Rajmal Lakhichand in assessment year 2009-10. The Tribunal vide order dated 16-01-2015 in ITA No. 607/PN/2013 deleted the disallowance.
4.4 In respect of ground No. 2 raised in the appeal by the Revenue the ld. AR submitted that the Commissioner of Income Tax (Appeals) has deleted the disallowance of Rs.10,85,361/- u/s. 14A r.w. Rule 8D. The ld. AR submitted that the assessee has invested sum of Rs.1,15,00,000/- in the shares of group companies as under : i. Manraj Motors Pvt. Ltd. Rs.45,00,000/- ii. Manraj Jewellers P. Ltd. Rs.45,00,000/- iii. Rajmal Lakhichand Jewellers Pvt. Ltd. Rs.25,00,000/- ________________ Total Rs.1,15,00,000/-
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4.5 The assessee has not received any dividend income from any of these companies. Since, no tax free income has been received by the assessee form the above investments, no disallowance under the provisions of section 14A r.w. Rule 8D is warranted. In support of his submissions, the ld. AR placed reliance on the following decisions : i. Cheminvest Ltd. Vs. Commissioner of Income Tax, 378 ITR 33 (Delhi); ii. Commissioner of Income Tax Vs. Corrtech Energy P. Ltd., 372 ITR 97 (Guj); iii. Redington (India) Ltd. Vs. Additional Commissioner of Income Tax, 392 ITR 633 (Mad); iv. Shri Goyal Ishwarchand Kishorilal Vs. JCIT in ITA No. 422/PN/2013 for assessment year 2009-10 decided on 26-06-2014.
4.6 The ld. AR submitted that in ground No. 3 of the appeal the Revenue has assailed deleting the disallowance of Rs.28,53,942/- on account of interest paid to the partners on Gold Deposit Scheme. The ld. AR submitted that the partner Shri Manish Jain had accepted gold deposits from various persons on the interest rate ranging from 6% to 9%. The partner thereafter handed over these deposits to assessee firm for which the firm paid interest @ 9%. The Assessing Officer disallowed the excess interest paid by the assessee to the partner. The ld. AR asserted that interest on capital contributed by the partner is governed by the provisions of section 40(b) of the Act. According to the provisions of section 40(b) simple interest up to 12% per annum on the capital contributed by the partner is allowable as deduction while computing the income of firm. The fact whether capital is contributed out of own funds or borrowed funds of the partner would not make any difference to the firm. The assessee firm paid interest @ 9% to the partner in accordance with the partnership deed
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and the payment of 9% interest is within the limits permitted by the provisions of section 40(b), therefore, no disallowance of such interest paid by the firm to the partner is called for. The ld. AR submitted that similar disallowance was made in the case of assessee‟s sister concern M/s. Rajmal Lakhichand in the assessment year 2009-10. The Tribunal in ITA No. 532/PN/2013 for assessment year 2009-10 decided on 16-01-2015 deleted disallowance of interest paid to the partner under similar set of facts.
On the other hand Shri Mukesh Jha representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in estimating GP @ 1.90%. The ld. DR submitted that the GP estimated by the Commissioner of Income Tax (Appeals) is fair and reasonable. Therefore, it warrants no interference.
5.1 In so far as the additions deleted by the Commissioner of Income Tax (Appeals) that have been assailed by the Revenue in appeal, the ld. DR submitted that special audit was carried out. It was found that the assessee has indulged in transactions with its sister concerns and the assessee has paid inflated price for purchase of gold/silver ornaments from sister concerns. However, the ld. DR fairly admitted that this issue of disallowance u/s. 40A(2) had emerged in the case of assessee‟s sister concerns. The matter travelled up to the Tribunal and the Tribunal deleted the addition.
5.2 In respect of addition of Rs.10,85,361/- u/s. 14A, the ld. DR submitted that admittedly the assessee has not received dividend income from any of the group companies during the period relevant to the assessment year under appeal. The disallowance has been made by
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applying the provisions of Rule 8D (2)(3). It is an undisputed fact that the assessee has made investments in the shares of sister concerns. Therefore, some disallowance under the provisions of section 14A r.w. Rule 8D is warranted.
5.3 The ld. DR in respect of ground No. 3 raised in the appeal by the Revenue submitted that the assessee has accepted gold deposits as a capital of the partner on which the assessee has paid excess interest of Rs.28,53,942/-. The assessee has paid total interest of Rs.41,26,851/- to Shri Manish Jain on account of interest on gold shown as capital. Whereas, Shri Manish Jain has paid only Rs.12,72,909/- as interest to the depositors of gold with him as a part of Gold Deposit Scheme. Thus, the assessee has paid excess interest of Rs.28,53,942/- to its partner. The manner in which excess interest has been paid by the assessee to the partner shows that the assessee has used Gold Deposit Scheme as a colourable device to reduce tax liability. The ld. DR prayed for reversing the findings of Commissioner of Income Tax (Appeals) on the grounds raised in the appeal by the Revenue.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We observe that the grounds raised by the assessee in appeal and the grounds raised by the Revenue assailing the findings of Commissioner of Income Tax (Appeals) in its appeal are similar to the one raised in the appeal by the assessee‟s sister concern M/s. Rajmal Lakhichand in ITA No. 532/PN/2013 (supra) and the cross appeal by the Revenue in ITA No. 607/PN/2013 (supra) for the assessment year 2009-10 decided on 16-01- 2015. Admittedly, the nature of transactions in all the group concerns are carried out in similar manner.
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The first ground raised in the appeal by the assessee relating to time barring assessment has not been pressed by the ld. AR. Thus, in view of the statement made by the ld. AR of assessee at the Bar ground No. 1 raised in the appeal by the assessee is dismissed as not pressed.
Estimation of Gross Profit – Addition of Rs.2,13,31,368/-
With respect to ground No. 2 in the appeal by assessee, we find that similar disallowance was made in the case of assessee‟s sister concerns M/s. Rajmal Lakhichand in assessment years 2009-10 and 2010-11. The Co-ordinate Bench of the Tribunal in the case of M/s. Rajmal Lakhichand in ITA No. 670/PUN/2015 for assessment year 2010-11 decided on 28-02- 2018 by following the earlier decisions of Tribunal in the case of M/s. Rajmal Lakhichand Vs. JCIT in ITA No. 532/PN/2013 (supra) deleted the disallowance u/s. 40A(2)(a) by observing as under : “21. We find that identical disallowances u/s.40A(2)(a) was made by the Assessing Officer in assessee’s own case in assessment year 2010-11. The Co-ordinate Bench of the Tribunal, after taking into consideration entire facts of the case concluded that the average price formula adopted by Assessing Officer and Commissioner of Income Tax (Appeal) is not correct. The Tribunal made the addition by estimating GP. The Commissioner of Income Tax (Appeal) in the impugned order has extracted the findings of the Tribunal on this issue. For the sake of brevity, we are not reproducing the same here. However, the gist of observations made by Tribunal on the issue in assessment year 2009-10 are as under: (a) The sale and purchase of gold bullion and gold ornaments within a group concerns are only paper transactions without involving any real transfer of bullion/ornaments.
(b) The assessee entered into fictitious transactions within the group to inflate purchases and sales to obtain higher bank finance. This fact is evident from increase in turnover of the assessee in the last two years by 11.5 times. The turnover of assessee increased from Rs.82.55 crore in assessment year 2007-08 to Rs.955.78 crores in assessment year 2009-10.
(c) The books of account of the assessee do not reflect the correct picture of its true state of financial affairs, therefore, the same are to be rejected. (d) Both the Authorities below i.e. Assessing Officer/ Commissioner of Income Tax (Appeal) have failed to understand the trading transactions in gold bullion and gold ornaments in right perspective. The method of
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average price of the year is not correct method to determine reasonableness of the amount paid for purchasing gold bullion from sister concerns. There are certain instances where the assessee had paid lesser price as compared to the local market and Bombay market to the sister concerns. This fact has not been considered by both the Authorities below. (e) There are mistakes in the recasted trading account prepared by the Commissioner of Income Tax (Appeal) as the total turnover of the assessee as shown in the recasted trading account is Rs.1065.32 crores whereas the actual turnover is Rs.955.78 crores. Similarly, transactions with the third parties including gold bullion and gold ornaments as per recasted trading account is Rs.679.66 crores as against cost of actual transaction Rs.435.37 crores. Therefore, no reliance can be placed on recasted trading account. (f) While making addition in respect of sale of gold ornaments to group concerns/ sister concerns, both the Authorities below have adopted comparison formula based on the sale of ornaments to the unrelated parties and sale of ornaments to the related parties. The average price method adopted by the Assessing Officer and Commissioner of Income Tax (Appeal), as far as the issue of ornaments is concerned; the price may vary from design to design, item to item, purity of gold etc. Therefore, average price method of ornaments cannot be taken to the entire sale of the year as different factors are involved in the price of ornaments. Apart from difference in design, purity of gold, there is variation in the labour charges as well. Thus, method adopted by the Authorities below on account of lower price charge from sister concerns were rejected by the Tribunal. (g) For invoking the provisions of section 40A(2)(a), the Assessing Officer has to establish that the payments made to the related parties is not reasonable. Both the Authorities below have not considered the local conditions of the gold market. The average price method adopted by both the authorities is erroneous considering the market conditions of the bullion. Thus, the basis for computing excess payments made to sister concerns by assessee is faulty, therefore, provisions of section 40A(2)(b) cannot be applied. 22. The Co-ordinate Bench of the Tribunal after taking into consideration various facets of the transaction in sale/purchase of gold ornaments/bullion with related/unrelated parties concluded as under: “8.35 In the light of our above discussion, we are of the opinion that approach of both the authorities below is not correct for making high pitch additions in the hands of the assessee by invoking provisions of section 40A(2)(b) and for alleged selling of the ornaments to the related entities at a lower price. As per the financial accounts of the assessee, the GP worked out at 1.13%. The possibility of purchasing the bullion and ornaments from the group entities at a higher price cannot be ruled out even though there is no strict proof against the assessee. Even the exercise done by both the authorities below is not based on any scientific method. We therefore are of the opinion that adoption of GP rate of 1.20% as against 1.13% disclosed by the assessee will meet the ends of justice. We hold and direct accordingly. We accordingly set-aside the order of the Ld. CIT(A) and direct the AO to work out the GP @1.20% on the total sale of Rs.955,78,81,767/- as
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per audited accounts. After reducing the GP declared by the assessee at Rs.10,79,15,449/-, the balance GP is to be added to the total income of the assessee. This covers the grounds on the addition made by invoking provisions of section 40A(2) (b) i.e. purchase of bullion from the sister concerns/related entities by paying higher price as well as sale of the ornaments at lower price. Accordingly, the relevant grounds taken by the assessee are partly allowed and the grounds of appeal No. 1 and 2 by the Revenue are dismissed.”
Both sides are unanimous in admitting that the transactions carried out by the assessee during the assessment year under appeal are similar in nature and their accounting has also been done in similar manner. The Commissioner of Income Tax (Appeals) while estimating GP at the rate of 0.90% has taken cue from the decision of the Tribunal in assessment year 2009-10. The relevant extracts of the findings of Commissioner of Income Tax (Appeal) in this regard are as under:
“7.17 There is substantial increase in the turnover of the appellant during the year as compared to the last year. However, there is huge fall in G.P. and N.P in this year. The appellant continues to be engaged in the same business and the market conditions remain the same. The appellant has no convincing explanation for such steep fall of G.P. for the year.
7.18. Thus, following the decision of the Hon'ble ITAT, the adoption of G.P. rate of 0.90% as against the G.P. rate of 0.61% disclosed by the appellant will be fair and meet the ends of justice. Therefore, the A.O. is directed to work out the G.P at 0.90% on the total sale of Rs.1961,54,11,702/- as per the audited accounts. The revised G.P. comes to Rs.17,65,38,705 as against G.P. shown by the appellant at Rs.11,99,83,810/-. After reducing the G.P. shown by the appellant at Rs.11,99,83,810/-, the balance G.P. is to be added to the total income of the appellant which comes to Rs.5,65,54,895/-. This covers the grounds on the addition made by invoking provisions of section 40A(2)(a) i.e. purchase of gold bullion and gold ornaments from the sister concerns by paying higher price. The other income shown by the appellant will remain unchanged. The other confirmed additions will not be affected.” 24. The assessee has assailed the G.P. estimated by Commissioner of Income Tax (Appeal) being very much on the higher side. As against the addition of 0.07% made by the Tribunal in assessment year 2009-10, the Commissioner of Income Tax (Appeal) has enhanced G.P. rate by 0.30% (approximately). The assessee in the assessment year under appeal has disclosed G.P. @ 0.61%. Taking into consideration entirety of facts, we are of considered view that increase in G.P. rate by 0.09% would meet the ends of justice. Thus, G.P. is enhanced from 0.61% to 0.70% of the total sale of Rs.1961,54,11,702/- as per audit accounts. In so far as disallowance made by the Assessing Officer u/s.40A(2)(a) in respect of purchase of gold bullion and gold ornaments is concerned, the same is rejected for the reasons given by the Tribunal in assessment year 2009-10. Thus, in view of our above findings, the ground No. 3 raised in appeal by assessee is partly allowed and ground No. 1 raised in appeal by Department is dismissed.
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We find that in the present case as well disallowance u/s. 40A(2)(a) has been made for similar reasons and the nature of transactions are also on same lines. In the assessment year under appeal the GP declared by the assessee is @ 1.27%. The Commissioner of Income Tax (Appeals) estimated GP @ 1.90%. Thus, there is increase of 0.63% resulting in addition of Rs.2,13,31,368/-. We are of considered view that the GP estimated by Commissioner of Income Tax (Appeals) is on the higher side. Taking into consideration entirety of facts and the decision in the case of assessee‟s sister concern (supra) we are of considered view that the GP if increased by 0.13% over and above the GP declared by assessee, it would meet the ends of justice. In other words, the GP is enhanced from 1.27% as disclosed by the assessee to 1.40% on the total sales as per audited accounts. Accordingly, ground No. 2 raised in the appeal by assessee is partly allowed in the terms aforesaid.
In the result, appeal of the assessee is partly allowed.
Now, we will take up the issues raised by the Department in its appeal. The first ground raised by the Department in appeal is against deleting the addition of Rs.4,27,70,660/- u/s. 40A(2)(b) of the Act on account of excess payments made to sister concerns on purchase of gold/silver ornaments. The Commissioner of Income Tax (Appeals) has deleted the addition by following the order of Tribunal in the case of assessee‟s sister concern M/s. Rajmal Lakhichand in ITA No.607/PN/2013 (supra). Identical addition was made in the case of M/s. Rajmal Lakhichand in assessment year 2011-12. The matter travelled to the Tribunal in ITA No. 2463/PUN/2016. In the said case, the Commissioner of Income Tax (Appeals) had sought remand report from the Assessing Officer. The Assessing Officer in remand report admitted that the assessee
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has not made excess payments to the sister concerns for purchase of ornaments. The Tribunal after considering the decision rendered in the case of M/s. Rajmal Lakhichand in ITA No. 607/PN/2013 (supra) and the comments of Assessing Officer in remand report deleted the addition by observing as under :
“7. It is an admitted fact that there is no change in the facts and the nature of transactions are identical. We further observe that similar disallowances were made in the case of other sister concerns of the assessee viz. Rajmal Lakhichand Jewellers Pvt. Ltd. and R.L. Gold Pvt. Ltd. The matter travelled up to the Tribunal and the Tribunal in the cases of Rajmal Lakhichand Jewellers Pvt. Ltd. Vs. Jt. Commissioner of Income Tax (supra) and R.L. Gold Pvt. Ltd. Vs. Dy. Commissioner of Income Tax (supra) has deleted the disallowances u/s. 40A(2) of the Act. 8. We further observe that the Assessing Officer in the remand report has accepted that after applying local rates, the assessee has not made any excessive payments to the sister concerns for the purchase of ornaments. The local rates as published in the local Newspapers have been compared with the rates applied by the assessee and on verification it is found to be in order. Thus, the Assessing Officer accepted that no excessive payments were made by the assessee to its sister concerns. Under such circumstances disallowance u/s. 40A(2)(a) is uncalled for.
In view of the above facts, we do not find any infirmity in the order of Commissioner of Income Tax (Appeals). Accordingly, the same is upheld and the appeal of Revenue is dismissed being devoid of any merit.”
No material has been placed on record by the Revenue highlighting the distinguishing feature in the transactions with sister concerns in the present case. The nature of the transactions in all the group concerns are identical. Thus, in the light of the decision of Tribunal in the case of assessee‟s group concerns no disallowance u/s. 40A(2)(a) of the Act is warranted. Accordingly, the ground No. 1 raised in the appeal by the Revenue is dismissed.
The ground No. 2 of the appeal by the Revenue is directed against deleting of addition of Rs.10,85,361/- u/s. 14A r.w. Rule 8D. It is an undisputed fact that during the period relevant to the assessment year
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under appeal, the assessee has not received any dividend income from the investments in the group companies. The Commissioner of Income Tax (Appeals) has further observed that the investment of Rs.1,15,00,000/- made in the shares of group companies was made in earlier assessment years and no fresh investment was made during the period relevant to the assessment year under appeal. The Revenue has not assailed these findings of the Commissioner of Income Tax (Appeals). The Hon‟ble Delhi High Court in the case of Cheminvest Ltd. Vs. Commissioner of Income Tax (supra) has held that where no exempt income has been earned by the assessee in the relevant assessment year, no disallowance u/s. 14A is to be made. Similar view has been taken by the Hon‟ble Madras High Court in the case of Redington (India) Ltd. Vs. Additional Commissioner of Income Tax (supra) and the Hon‟ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Corrtech Energy P. Ltd. (supra). Thus, in view of unrebutted facts and in the light of judgments mentioned above, we do not find any infirmity in the findings of Commissioner of Income Tax (Appeals) in deleting disallowance made by Assessing Officer u/s. 14A r.w. Rule 8D. Accordingly, ground No. 2 raised in the appeal by Revenue is dismissed.
In ground No. 3 of appeal, the Revenue has assailed deleting of addition Rs.28,53,942/- made on account of excess interest paid to the partner of the assessee firm. The assessee has paid interest @ 9% per annum to Shri Manish Jain on the capital contributed by him. Ostensibly, the capital contributed by Shri Manish Jain has been raised against Gold Deposits from various persons which Shri Manish Jain paid interest @ 6% to 9%. The assessee has paid interest to the partner on such contribution of capital @ 9%. The Assessing Officer disallowed difference in interest paid by partner and interest paid to partner by the assessee. We find that
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similar disallowance was made by the Revenue in the case of M/s. Rajmal Lakhichand in assessment year 2009-10 (ITA No. 532/PN/2013) (supra). The Co-ordinate Bench of the Tribunal deleted the addition by observing as under : “12.6 We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find in the instant case the Assessing Officer made addition of Rs.18,92,421/- being the difference between the interest paid by the firm to the partner at Rs.45,31,460/- and the interest paid by the partner Shri Ishwarlal I. Lalwani to the customers on GDS. According to the Assessing Officer, if the gold would have been directly routed through the firm, the firm would have saved Rs.18,92,421/-. Although the firm has paid interest @9%, however, indirectly it has benefitted the partner and therefore this is a colourable device and the firm gave excess interest of Rs.19,82,421/- to the partner. It is the submission of the Ld. Counsel for the assessee that since the assessee firm had given interest @9% on the gold deposit by the partner which is below the prescribed limit of 12% as per the partnership deed, therefore, there should not be any disallowance u/s.40A(2)(b). Further, according to the Ld. Counsel for the assessee, the assessee firm could receive additional gold deposit than what it could have received under its own gold deposit scheme on account of gold deposit scheme started by one of its partner. It is also the submission of the Ld. Counsel for the assessee that the firm would have paid higher amount of bank interest by getting that much quantity of gold than it paid to the partner on account of such quantity of gold. 12.7 We find merit in the above submission of the Ld. Counsel for the assessee. There is no bar for the partner to obtain the gold under the gold deposit scheme which was simultaneously done by the assessee firm also. As long as the interest paid to the partner on such gold under the gold deposit scheme is within the permissible limit, there should not be any disallowance. Since in the instant case the firm has paid interest @9% on the gold deposited by the partner obtained from the customers under the gold deposit scheme account, therefore, it is immaterial as to at what rate of interest the partner has paid to the customers. In this view of the matter, we set-aside the order of the CIT(A) on this issue and direct the Assessing Officer to delete the addition. This ground by the assessee is accordingly allowed.”
The transaction in the present case is similar to the one in the case of M/s. Rajmal Lakhichand (supra). Ostensibly the assessee has paid interest on capital introduced by partner within permissible range as specified in partnership deed. Thus, we are of considered view that no addition is warranted on account of alleged excess interest paid to the partner by the assessee. We concur with the findings of Commissioner of
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Income Tax (Appeals) and dismiss the ground No. 3 raised in the appeal by the Revenue.
The ground Nos. 4, 5 and 6 of the appeal by the Revenue are general in nature, hence, require no adjudication.
In the result, the appeal of Revenue is dismissed.
To sum up, the appeal of the assessee is partly allowed and the appeal by the Revenue is dismissed.
Order pronounced on Friday, the 31st day of August, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 31st August, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-2, Nashik 3. 4. The Pr. Commissioner of Income Tax-II, Nashik ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune