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2021 (1) TMI 46 - AT - Income TaxExemption u/s 11 - interest payment u/s 11 (1) to 13 (1)(c) r. w. s 13 (3) - treat the amount paid to persons covered u/s 13(3) as excessive by treating the rate of interest of unsecured loan (liabilities) with rate of interest of deposits (assets) - assessee’ s interest derived from fixed deposits @ 7. 5 % to 7. 75 % with the interest paid in issue @ 10 % - HELD THAT:- We find no reason to sustain either of the twin limbs of excessive as well as unjustified interest on aspects in favour of the Revenue. Paper Books suggest that the assessee had 17 fixed deposit accounts with the bank(s) out of which the first one was in the nature of margin money security in favour of the Dental Council of India whereas accounts 2 to 14 thereof are fund security(ies) of Nursing College(s) in favour of the Baba Farid University of Health Sciences. Meaning thereby that the said fixed deposit accounts are deposits are in the name(s) of affiliating/regulatory bodies than fixed deposit investment per se. We observe that these facts that it was very much justifiable on assessee’ s part to maintain all the said fixed deposits for the purpose of carrying out the trust’ s medical education activities. Excessive interest payments @ 10 % to its trustee Shri Grewal - As come on record that the department has itself accepted interest paid to the lender banks @ 14. 75 % in case of secured loans are against unsecured loans availed from Shri Grewal. That itself suggests that the impugned interest rate @ 10 % is not excessive so as to attract the impugned disallowance/addition. We are dealing with this assessee paying market rate of interest to the trustee. We go by all this elaborate reasoning to conclude that the assessing authority had erred in disallowing assessee’ s interest payment followed by the CIT(A)’ s enhancement action under challenge which is also not sustainable. The same stand reversed therefore. Assessee’ s appeal is allowed.
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