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2015 (9) TMI 1411 - ITAT AHMEDABAD

2015 (9) TMI 1411 - ITAT AHMEDABAD - TMI - Deduction of Employees Contribution to PF - whether same was paid after due date and hence to be treated as income u/s.2(24)(x) r.w.s. 36(1)(va) of the Act - Held that:- Issue in dispute is suqarely covered against the assessee by the decision of Hon’ble Jurisdictional High Court rendered in the case of CIT vs. Gujarat State Road Transport Corporation reported at (2014 (1) TMI 502 - GUJARAT HIGH COURT ) wherein held that if the assessee failed to deposi .....

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st rate prevailing in the open market. An order in case of Vipul Y. Mehta vs. ACIT [2010 (7) TMI 1051 - ITAT AHMEDABAD] has been brought to our notice, wherein Tribunal has upheld the allowance of the interest rate @ 18% per annum to the relatives on unsecured loan. Considering all these aspects, we are of the view that ld. First Appellate Authority has appreciated the controversy in right perspective. Assessee has not extended any undue benefit to the persons covered u/s.40A(2)(b) of the Income .....

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be a share holder in the lender company and such holding should be more than 10% of the voting rights, only then Section 2(22)(e) would be attracted. CIT(A) correctly deleted the addition - Decided against revenue - ITA No. 1834/Ahd/2012 - Dated:- 29-9-2015 - Shri G. D. Agarwal, Vice President Shri Rajpal Yadav, Judicial Member By Appellant Shri Narendra Singh, Sr. D.R. By Respondent Shri M. J. Shah, A.R. ORDER PER : Rajpal Yadav, Judicial Member Revenue is in appeal before us against the orde .....

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ed for scrutiny assessment and a notice u/s.143(2) of the Income Tax Act was issued on 25th September, 2010, which was duly served upon the assessee. On scrutiny of the accounts, it reveals to the Assessing Officer that assessee has collected the employees contribution but failed to make deposits of such amounts in the PF accounts of those employees within time limit provided under the PF and ESI Act. Therefore, the Assessing Officer has made a disallowance of ₹ 1,81,414/-. 4. On appeal, l .....

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at if the assessee failed to deposit the amounts representing employees contribution to PF & ESI accounts within the time limit prescribed under these Acts, then assessee will not be entitled for deduction. Respectfully following the decision of Hon ble Gujarat High Court, we allow this ground of appeal and reverse the finding of CIT(A). The order of ld. Assessing Officer is restored on this issue. 6. In the next ground, the grievance of the Revenue is that ld. CIT(A) has erred in deleting t .....

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allowance is computed as under R.J. Cama & Co. Pvt. Ltd. Interest @ 16% Rs.23,50,167/- Interest @ 12% Rs.17,62,625/- Difference ₹ 5,87,542/- Cama Motors Pvt. Ltd. Interest @ 16% ₹ 4,78,846/- Interest @ 12% ₹ 3,83,077/- Difference ₹ 95,769/- Accordingly, excess payment of interest of ₹ 6,83,311/- is disallowed. 8. On appeal, ld. CIT(A) has deleted the disallowance. We find from the computation of income in the assessment order that Assessing Officer has made disa .....

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e assessee, then the deduction claimed for that benefit ought to be disallowed to the assessee. In other words, if the assessee can avail the facility from the open market at a lower price, then similar facility availed from the persons covered u/s.40A(2)(b) then that excess payment would not be allowed to the assessee as deduction. The question before us is what was the fair market value of interest paid by the assessee on the loans obtained from the persons covered u/s.40A(2)(b). According to .....

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to the persons even if covered u/s.40A(2)(b) cannot be termed as exorbitant when the fair market value of such interest cost is being considered. The assessee has paid interest commensurate with the interest rate prevailing in the open market. An order of the ITAT, Ahmedabad in ITA No.869/Ahd/2010 rendered in case of Vipul Y. Mehta vs. ACIT has been brought to our notice, wherein Tribunal has upheld the allowance of the interest rate @ 18% per annum to the relatives on unsecured loan. Considerin .....

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s, it reveals to the Assessing Officer that assessee has received an amount of ₹ 62,06,638/- from Cama Motors Pvt. Ltd. and received ₹ 1,69,38,020/- from R. J. Cama & Co. Pvt. Ltd.. The ld. Assessing Officer has considered these loans as deemed dividend in the hands of assessee. He accordingly made addition of ₹ 2,63,12,188/- u/s. 2(22)(e) of the Income Tax Act. On appeal, ld. CIT(A) has deleted the addition. 12. The ld. Counsel for the assessee, at the very outset, submitt .....

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