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2024 (2) TMI 1105 - ITAT MUMBAIDisallowance of interest expenditure u/s 40A(2)(b) - interest paid to related parties - Addition on the ground that the appellant had the enough funds to pay the debts and the borrowings from the related parties were not necessary - HELD THAT:- In the present case, it is pertinent to note that it is not anybody’s case that the interest has been paid by the assessee to its partners and rather fact of the case is that the assessee has availed unsecured loans from its related persons at the interest rate of 18% per annum. Thus, we find no merits in the reliance placed by the learned CIT(A) on the aforesaid provision for justifying the rate of interest at 12%. Since, in the present case, the relevant material for determining the fair market value of the interest rate for availing unsecured loans has not been examined, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication. In the interest of justice, one more opportunity is granted to the assessee to furnish the relevant material/documents to justify its claim that payment of interest @18% is at fair market value. With the above directions, the impugned order on this issue is set aside and ground no. 1 raised in assessee’s appeal is allowed for statistical purposes. Addition on account of notional interest on the amount lying idle in assessee’s bank account - HELD THAT:- From the perusal of the summary, duly supported by the statements of the bank accounts of the assessee maintained with the Bank of Bahrain and Kuwait as well as HDFC Bank, we find that prior to the payment to various airlines such as Jet Airways, Global Aviation, Cathay Pacific, Air France, etc. assessee’s bank accounts are maintaining huge balance, however after the payment to the aforesaid airlines the balance in assessee’s accounts even goes down to negative balance. Thus, we agree with the submissions of the assessee that it needs funds for its working capital to run the business. Therefore, we find no merits in the findings of the AO on this issue. Thus as huge funds in assessee’s bank account were required for the purpose of working capital and were paid to various airlines during the course of its business as a freight agent - aforesaid addition has been made by the AO without invoking any provision of the Act, and therefore in our considered view, also lacks the authority of law. The impugned addition is set aside. As a result, ground no. 2 raised in assessee’s appeal is allowed. Disallowance of transportation charges - Appellant has not deducted TDS thereon as applicable - HELD THAT:- During the hearing, the learned AR by referring to the provisions of section 194C(6) of the Act submitted that TDS under this provision is not required to be deducted while crediting or paying a sum to the transporter upon the furnishing of PAN of the transporter to the person paying or crediting such sum. AR submitted that the assessee must have provided the PAN to the AO during the assessment proceedings, however, there is no documentary evidence, at present, regarding the same. In the interest of justice, we grant one more opportunity to the assessee to provide the PAN of the transporter to AO in order to prove the compliance of provisions of section 194C(6) of the Act. Accordingly, this issue is restored to the file of the AO for de novo adjudication.
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