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2022 (12) TMI 22 - AT - Income TaxDisallowance of expenditure on account of sales-commission - Expenditure on business purposes only - CIT- A deleted the addition - HELD THAT:- Both sides fairly agree that the issue is directly covered by the decision of ITAT, Indore Bench in assessee’s own case for AY 2011-12 [2016 (1) TMI 1490 - ITAT INDORE] and AY 2012-132018 (7) TMI 2288 - ITAT INDORE] upheld by Hon’ble High Court of Madhya Pradesh in [2018 (4) TMI 1578 - MADHYA PRADESH HIGH COURT] a copy of the judgement is also filed. As the issue is squarely covered, we do not find any reason to deviate from the consistent view being taken and also upheld by the higher forum i.e. Hon’ble High Court. We are, therefore, inclined to uphold the action of Ld. CIT(A) in this regard and dismiss Ground No. 1 of the revenue. Disallowance u/s 14A - assessee made investment in shares of companies from which exempted-dividend was earned - AO has worked out the amount of disallowance in terms of Rule 8D, which consists of two components, viz. (i) interest-component, and (ii) standard disallowance for other expenses - CIT(A) scaled down the quantum of disallowance by deleting interest-portion - HELD THAT:- ITAT in assessee’s own case in preceding AY 2012- 13 [2018 (7) TMI 2288 - ITAT INDORE]is directly favouring the claim of assessee that no disallowance is required to be made for interest-component. Ld. DR fairly agreed to this submission of Ld. AR. Dismiss Ground No. 2 of the revenue. Disallowance of interest expenditure u/s 40(A)(2)(b) - AO disallowed 3% excess interest - HELD THAT:- AO has simply made a blanket comparison of the interest rate of 15% paid to specified persons against 12% interest-payment to other persons and came to a straight-forward conclusion that interest-payment is excessive. We feel that such a blanket comparison without going into the fair market rate or the legitimate needs of business or the benefit derived by assessee therefrom is not sufficient for section 40A(2). Section 40A(2)(b) is a disallowance provision, therefore a heavy burden lies on the head of Ld. AO to prove the existence of required parameters and then only he can make a disallowance. Having failed to do so, in our view, the disallowance made by AO is not in accordance with the requirement of section 40A(2). Alternatively, the assessee is justified in claiming that the bank rate of interest is a universal rate of industry and can be said to be fair, subject to the adjustments on account of the variations between the terms like security-requirement by bank, levy of charges, fulfillment of formalities etc. Therefore, 3% margin on account of these factors cannot be said to be excessive or unreasonable. We are satisfied that 15% interest-rate paid by assessee on unsecured loans taken from relative cannot be said to be unreasonable. In view of these reasoning, we do not find adequate reason for the disallowance made by Ld. AO. Accordingly, we are inclined to delete the disallowance.
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