2011 (2) TMI 1518 - AT - Income Tax

Summary

Issues involved: Appeal against order deleting addition of Godown rent, Weighbridge rent, and interest expenses u/s 40A(2)(b) of the Income Tax Act, 1961 for the assessment year 2007-08.

Godown and Weighbridge Rent Disallowance:
The Assessing Officer disallowed Rs. 90,000 for godown rent and Rs. 27,000 for weighbridge rent u/s 40A(2)(b) of the Act. The Commissioner of Income Tax (Appeals) deleted both disallowances, citing an increase in rent due to business growth and lack of evidence for excessive payments. The Tribunal set aside the order, directing the assessee to provide old and new rent agreements to re-examine the additions.

Interest Expenses Disallowance:
The Assessing Officer disallowed Rs. 5,40,251 of interest expenses u/s 40A(2)(b). The Commissioner of Income Tax (Appeals) overturned this, stating that interest paid at 18% to family members was not excessive. The Tribunal upheld this decision, referencing precedents and the reasonable interest rate, rejecting the revenue's appeal.

Conclusion:
The Tribunal partly allowed the appeal, upholding the disallowance of Godown and Weighbridge rent additions for reassessment and rejecting the disallowance of interest expenses, deeming them reasonable.