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2013 (11) TMI 1599 - ITAT AHMEDABADAddition u/s 36(1)(iii) - Held that:- If rate of interest paid to specified persons in compared with rate on unsecured loan are more or less are same. Besides this, various formalities are required to avail the finance from the bank. It is also settled law that how the business should be carried on is the prerogative of the assessee and the Assessing Officer cannot dictate the terms as to how the business should be carried on. While considering the claim u/s. 36(1)(iii) what is to be required to judge is whether the amount is borrowed for the purpose of business or not. Since the amount has been borrowed in earlier years as well as during the year at a stipulated rate of interest and which has been still utilized for the purpose of business, the interest rate could not have been re-negotiated for earlier year. Therefore, rate of interest, paid by the assessee is quite reasonable having regard to the fair market value of such services. Therefore, the CIT(A) was incorrect in restricting the interest payable to the extent of 15% or 14% which is supported by various decisions mentioned in the order in preceding paras. Since the interest rate paid by the assessee is reasonable, the order of the CIT(A) is reversed and addition is deleted. Thus, assessee’s appeals are allowed and Revenue’s appeals are dismissed on this ground. Addition u/s 14A - Held that:- The assessee has mixed fund in books of account i.e. borrowed as well as self generated. Therefore, the assessee had to prove fund invested in the shares are from the exempted or self generated fund. Now Rule 8D is applicable. Accordingly, the assessee has calculated itself disallowance as per Rue which is very nominal. Thus, we confirm the order of the CIT(A).
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