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2014 (3) TMI 145 - GUJARAT HIGH COURTDisallowance of excess Interest u/s 40A(2)(a) of the Act - Commercial expediency not proved - Held that:- The assessee paid interest in the range of 12% to 18% on unsecured loans - in the business of making beedies finances were needed for steady flow of cash to keep the business going - The interest rates were related to old borrowings - In the earlier years, such interest rate was accepted by the Revenue – also, the directors in question were in the highest tax bracket – thus, there is no reason to interfere in the findings of the Tribunal – thus, there was no question of law arises - Decided against Revenue. Addition made u/s 41(1) - waiver of sales tax liability – Mercantile system of accounting followed - Held that:- The Revenue submitted that the Karnataka Government had issued a circular during the previous year relevant to the assessment year under consideration waiving sales tax liability to the tune of Rs.22.51 lacs, but it was during the year that the liability thus ceased - The assessee instead accounted for such amount much later during the year when the refund was actually paid - the assessee following mercantile system of accounting must surrender the benefit when the right is accrued and cannot wait for the actual repayment – thus, the question is admitted for consideration – Decided partly in favour of Revenue.
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