VIJAY PHARMA,MUMBAI vs. ACIT CIR 31(3), MUMBAI

This appeal filed by the assessee on 16.9.2016 is against the order of the CIT (A)-42, Mumbai dated 24.6.2016 for the assessment year 2008-2009.

In this appeal, assessee raised the solitary issue relating to the disallowance of interest payment over and above 12% paid by the assessee in respect of the loan creditors. Assessee uniformly paid interest amount to the loan creditors applying the flat rate of 15% to 24% of the loan creditors, which includes both the relatives and others. Without invoking the provisions of section 36(1) or u/s 40A(2)(b) of the Act etc, Assessing Officer restricted the above rate of interest of 12% on the ground that rate of interest applied in respect of the partners towards the capital contribution is 12%. On appeal, CIT (A) confirmed the above. Aggrieved, assessee is in appeal before the Tribunal. 3. Before me, Ld Counsel for the assessee submitted that the said loan creditors are appearing in the books of accounts. In the earlier year also they received interest @15% and the claim was accepted by the Assessing Officer in the past. Thus, it is a case of floating principle of consistency so far as the Revenue is concerned. Bringing my attention to the chart at page 66 of the paper book, Ld Counsel for the assessee submitted the Gross Profit (GP) and Net Profit (NP) figures are not interpreted against the Revenue. Bringing my attention to the decisions of the Tribunal in the case of Shyam Chemicals Pvt Ltd vs. ACIT in (AYs 2007-08) and others, dated 25.3.2015, Ld Counsel for the assessee submitted that for the purpose of approval of the rate of interest of 15%, the said decision is relevant. Relying on the decision of the ITAT, Ahmedabad Bench in the case of Shri Hitesh Narendrabhai Shah (HUF) vs. ITO in ITA No.2370/Ahd/2010 (AY 2007-08), dated 4.1.2013, Ld Counsel for the assessee submitted that such disallowance of 3% (15% - 12%) is unacceptable. In this case, the Tribunal held that the rate of interest @15% cannot be held excessive. Bringing my attention to the facts of the case, ld Counsel for the assessee mentioned that the Assessing Officer made a disallowance in the instant case holding 15% is higher side. 4. On hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the above cited orders of the Tribunal (supra), I am of the opinion, the rate of interest of 15% claimed by the assessee cannot be held as excessive. Accordingly, the decision of the CIT (A) on this issue is required to be reversed. Accordingly I order. Thus, grounds raised