Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (5) TMI 1084 - AT - Income TaxDisallowance u/s 40A(2)(b) - payment being excessive or unreasonable - disallowing 3% of excess rate of interest paid to the parties @15% on the borrowed funds - HELD THAT:- Before disallowing u/s 40A(2)(b) for such payment being excessive or unreasonable it has to be ascertained that such payment is made to specific person under clause 40A(2)(b) and secondly there must be a clear finding that such expenditure is excessive or unreasonable having regard to the fair market price of the goods, service or facilities for which the payment is made - the opinion of the AO for the expenditure excessive or unreasonable is to be confirmed vis-à vis fair market price for such goods services or facilities. We find that such finding is absolutely missing from the orders passed by the authorities below. Relying upon the said ratio of CIT-vs Sarjan Realities [2014 (8) TMI 206 - GUJARAT HIGH COURT] also passed order deleting addition made by Revenue on excess payment of interest made by the assessee. Since no deliberation has been made by the authorities below so as to compare the rate of interest paid by the assessee with that of the market rate of interest before making addition we delete the addition made by the authorities below. Disallowance u/s 36(1)(iii) being interest at 12% on certain advances made by the assessee - HELD THAT:- AR before us failed to substantiate that the impugned advance to the tune of ₹ 5,00,000/- has been made for business purposes. Apart from that it appears from the balance sheet of the assessee being part of the record before us that the assessee is having capital as own interest free fund of ₹ 34,14,312/- therefore it seems that the assessee made advances of ₹ 15,85,678/- (50,00,000-34,14,312) from the borrowed funds. We, therefore, fail to appreciate as to why disallowance has been made u/s 36(1)(iii) at 12% on the entire investment of ₹ 50,00,000/-. We, therefore, restrict such disallowance to the tune of ₹ 1,90,283/- u/s 36(1)(iii) being 12% of investment of ₹ 15,85,678/- made from the borrowed funds by the assessee.- Assessee’s appeal is partly allowed.
|