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2016 (1) TMI 1078 - AT - Income TaxDisallowance out of interest expenses @ 3% u/s 40A(2)(b) - Held that:- The decision of Hon’ble Gujarat High Court in the case of Principal CIT vs. Gujarat Gas financial Services Ltd. (2015 (7) TMI 743 - GUJARAT HIGH COURT) wherein it has been held that in a situation when the Assessing Officer found that assessee was using some space of the parent company and, therefore, initiated proceedings u/s 40A(2)(b) and deducted and remitted rent of space from services charges it was observed that as assessee company and parent company both were taxed at marginal rate and therefore it cannot be said that service charges paid to parent company are unreasonable so as to evade tax and, therefore Revenue could not point out that assessee evaded payment of tax and it was held that invocation of section 40A(2)(b) was not valid. Thus considering the relation transactions entered into by the assessee company with its director, K.K. Bansal and its sister concern Mahavir Rolling Mills were normal business transactions and did not reflect any intention of the assessee to will-fully evade tax by paying higher rate of interest and therefore, we delete the addition made by Assessing Officer - Decided in favour of assessee Deemed dividend u/s. 2(22)(e) - Held that:- As the assessee company is not a share holder in Mahavir Rolling Mills Pvt. Ltd., therefore, no addition could be made u/s 2(22)(e) of the Act, as deemed dividend and accordingly, we find no reason to interfere with the order of ld. CIT(A). We uphold the same - Decided in favour of assessee
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