TMI Blog2014 (1) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured loans are available - It is considered reasonable to allow a deduction of interest @ 15% - The issue was restored for fresh adjudication. - ITA No. 108/Rjt/2012 - - - Dated:- 2-1-2014 - Shri T. K. Sharma JM And Shri B. R. Jain AM,JJ. For the Petitioner : Shri D. M. Rindani, C.A. For the Respondent : Shri J. B. Jhaveri, D. R. ORDER Per B. R. Jain, A. M. This appeal by the assessee against the order dated 09/02/2012 of Sri N.R. Soni, learned CIT(A)-II, Rajkot raises the solitary ground as under:- "1. The learned Commissioner of Income Tax (Appeals)-II, Rajkot has erred in dismissing the appeal and upholding the disallowance made u/s 40A(2)(b) of the I.T. Act, by the Assessing Officer of Rs. 8,34,077/-, is unw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the assessee has raised loan from bank @ 10.5% per annum, considered it reasonable to allow the deduction of interest @ 12% by invoking provisions of Section 40A(2)(b) of the Act. He proceeded to make disallowance of 6% of interest out of interest payment made @ 18% per annum on the loans as contained in para 6 of the assessment order reproduced as under:- Sr. Name of Depositor Interest 18% Interest 12% Excess No. Int. Paid 1. Arvindbhai S Sorathia (HUF) 67500 45000 22500 2. Bipinbhai S Sorathia (HUF) 67500 45000 22500 3. Geetaben K Sorathia 126230 84153.33 42077 4. Hemaxiben V Sorathia 218250 145500 72750 5. Hetalben H Sorathia 207000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wholly and exclusively for the purpose of business. Dealing with relatives in contrast with or in preference to strangers is neither prohibited by law nor can be tabooed. Indeed, it is natural to do so but this does not give a licence to cover up dishonest transaction or impermissible transfers. The Courts and Authorities are not to wear blinkers to overlook or condone the passing off of public revenue to one's own kith and kin by subterfuge or clandestine or clever devices clothed in legalistic jargon. Instead it is there duty to lift the veil of apparent legality and get to the truth or substance of a transaction to deal with it in accordance with law. It is only appropriate, indeed normal, the dealings involving transfer of funds to near ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A), Gandhinagar for subsequent year where the Ld. CIT(A), Gandhinagar has considered the payment @ 18% as reasonable and deleted the disallowance. Since the A.O. failed to discharge his onus that payment of interest by assessee is unwarranted or excessive, the disallowance needs to be deleted. 5. On the other hand, the Ld. D.R. contends that the impugned order being reasoned and supported by judicial pronouncements, cannot be interfered with as the assessee has not given any justification or stand to show that the payment of interest @ 18% is reasonable. The subsequent years, order by the Ld. CIT(A) cannot be applied to the facts of the present case as the impugned order is of a later date. Reliance of Hon'ble Supreme Court judgment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record to show that there was payment of interest @ 18% to outside parties in the year under consideration or in any of the earlier or subsequent years. No other justification to show that payment of interest @ 18% rate is reasonable was given nor any compelling circumstances have been brought to our notice. The various Tribunal judgments do not advance any support to the case of the appellant as all such cases reveal that these parties had raised loans from persons other than relatives also at a rate higher than that was paid to related persons. The facts are also not shown to be similar to the case of the appellant before us. Likewise the two High Court judgments brought on record before us do not lay any ratio as the decision in these ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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