Hon'ble Dr. Satish Chandra,J.
1. The present appeal is filed by the Department against the impugned order dated 2nd March, 2005 passed by the Income Tax Tribunal in I.T.A. No.387/LUC/2004 for the assessment year 2001-02.
2. On 12.9.2007, a coordinate Bench of this Court has admitted this appeal on the following substantial question of law:-
"Whether the Tribunal was right in holding that the Commissioner has wrongly exercised its power to revise the assessment order under section 263 of the Income Tax Act, on the facts and circumstances of the present case."
3. The brief facts of the case are that the assessee is a private limited company and during the year under consideration, was engaged in trading and processing of spices. As per audit report, huge interest of loan was taken from the persons as specified under section 40(A)(2)(b) and the interest paid thereupon has been claimed as a deduction. The A.O. has allowed the deduction of interest @ 21% following the earlier years. The C.I.T. passed an order under section 263 of the Act where it was observed that the market rate of interest was 15%, so he set aside the assessment order and remanded the matter back to the A.O. for fresh adjudication in the light of the observations made in the order. The said order was assailed before the Tribunal who has set asided the order passed by the C.I.T. Under section 263 of the Act. Being aggrieved, the Department has filed the present appeal.
4. Heard Sri Dhananjay Awasthi, learned counsel for appellant/Department and Sri S. D. Singh, learned Senior Counsel assisted by Sri Krishna Dev Vyas, learned counsel for assessee/respondents.
5. After hearing both the parties and on perusal of the materials available on record, it appears that the in the earlier assessment years the Department has accepted the payment of interest @ 21 %. Though every assessment year is a different assessment year, but it is fundamental aspect of the fact that consistency should be followed in subsequent years as per the ratio laid down in the following cases:-
(i). Radhasoami Satsang Vs. CIT, 193 ITR 321, 329;
(ii). Sardar Kehar Singh Vs CIT [1992] 195 ITR 769 Rajasthan; and
(iii). Lachhiram Puranmal, (2002) 171 CGTR 640 (MP).
6. Further, the yardstick of commercial reality will have to be from the businessman's point of view and not from the Department's point of view, as per the ratio laid down in the following cases:-
(i). C.I.T. Vs. Motor Credit Compay (P) Ltd. 127 ITR 572, 576 (Madras);
(ii). Voltamp Transformers (P.) Ltd. Vs. C.I.T.; 129 ITR 105 Gujrat; and
(iii). Walchand & Co. (P.) Ltd. (1967) 65 ITR 381 (SC)
7. In the instant case, it is for the assessee to take loan from the market or Bank. The rate 15% interest was with the Bank but the loans were continuing from several years.
8. In the case of Anandji Shah Vs. CIT, 181 ITR 171(Kerala), it was observed that the payment of interest @ 18% is reasonable.
9. In the light of the above discussions, we are of the view that the assessee has claimed payment of interest @ 21%, the A.O. restricted it @ 18%. In the peculiar facts and circumstances of the case, the same appears reasonable. When it is so then there is no occasion to pass an order under section 263 by the C.I.T.. Hence we find no reason to interfere with the impugned order passed by the Tribunal, who has rightly quashed the order passed by C.I.T. under section 263 of the Act and the same is hereby sustained alongwith the reasons mentioned herein.
10. The answer to the substantial question of law is in favour of the assessee and against the Department.
11. In the result, the appeal filed by the Department is dismissed.
Order Date :- 20.8.2014 Dev/-
(Dr. Satish Chandra,J.) (Tarun Agarwala,J.)