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2022 (4) TMI 1386 - AT - Income TaxAddition on account of excess interest paid - HELD THAT:- As the assessee itself has worked out that excess interest has been charged by the various banks, naturally this amount cannot be said to be an expenditure incurred by the assessee for the purpose of the business of the assessee for the assessment year 2009 – 10. However, the whole interest expenditure stated to be excess charged cannot be disallowed, as it has not been claimed as expenditure during the year. During the year the total expenditure claimed which has been charged excessively by those banks is amounting to ₹ 2,629,006 and 49 only. In view of this, even if there is any disallowance it could be restricted only to the sum. Therefore, we direct the learned assessing officer to restrict the disallowance only to ₹ 2,629,649. Accordingly, ground number 1 of the appeal is partly allowed. Addition on account of charging of 2% as guarantee fees by the Maharashtra government and then converting it into a capital by disallowing the guarantee fee of that amount - HELD THAT:- It is an undisputed fact that guarantees fee is an expenditure incurred by the assessee. It is also not in dispute that it has been incurred by the assessee during the year and crystallized during the year. Therefore, the corporate guarantee fee payable by the assessee to the government of Maharashtra has OF an expenditure incurred by the assessee for the purposes of the business. Therefore, we hold that the expenditure has been incurred by the assessee during the year for the purposes of the business therefore it is allowable to the assessee under the provisions of Section 37 (1) of the. Mere fact that it has been converted into equity capital by government of Maharashtra does not change the character of expenditure of guarantee fee paid by the assessee. It is a manner of payment of such expenditure by assessee to government of Maharashtra. Further, the conversion of guarantee fee is also backed by the Cabinet committee decision of the government of Maharashtra. Therefore, it cannot be stated that these are mere paper transactions. In view of this, we reverse the findings of the lower authority and direct the learned assessing officer to delete the disallowance of ₹ 9283 lakhs on account of guarantee fee paid to government of Maharashtra. Accordingly, ground number 2 of the appeal is allowed.
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