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2016 (4) TMI 1009 - ITAT DELHI

2016 (4) TMI 1009 - ITAT DELHI - TMI - Addition u/s 40A(2)(b) - Held that:- In the present case, it is noticed that neither the AO nor the ld. CIT(A) has given any basis for restricting the interest claimed by the assessee on the loans raised for the business purposes. In the instant case, nothing is brought on record to substantiate that the loans raised by the assessee were not utilized for the business purposes or were diverted for any other purposes. It is also noticed that neither the AO no .....

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1,21,200/-. However, the AO disallowed 1/5th of car insurance, car depreciation, telephone expenses, interest on car loan also. In the instant case, it is not in dispute that car insurance, car depreciation and interest on car loan was to be borne by the assessee even when the vehicles were not used for the personal purposes or remained idle. In the present case, nothing is brought on record that those vehicles were not used for the business purposes and were not the asset of the assessee. Ther .....

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bove and by keeping in view the peculiar facts of this case the disallowance out of car insurance, depreciation and interest on car loan is deleted. - ITA No. 5787/Del/2015, ITA No. 5788/Del/2015 - Dated:- 15-3-2016 - Sh. N. K. Saini, AM And Sh. A. T. Varkey, JM For The Assessee : Sh. Vikas Goyal, CA For The Revenue : Smt. Anima Barnwal, Sr. DR ORDER Per N. K. Saini, AM: These appeals by the assessees are directed against the separate orders each dated 21.08.2015 of ld. CIT(A)-16, New Delhi. 2. .....

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y and interest is always payable to the bank of day to day basis whereas assessee has been paying interest on yearly basis. 2. That the Order of the Learned CIT(A) in confirming sum of ₹ 53,558/- out of expenses claimed by the assessee on account of various expenses such as Car Insurance, Car Depreciation, Telephone Expenses, Vehicle Maintenance and interest on Car Loan is totally wrong, bad in law and needs to be quashed. 3. That the assessee prays permission to add, delete or amend one o .....

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that the assessee had paid interest of ₹ 12,85,507/- on the unsecured loans. He asked the assessee to explain as to why interest paid to the persons specified u/s 40A(2)(b) of the Act could not be restricted to 12%. The assessee vide letter dated 12.01.2015 submitted as under: That the assessee firm has paid interest of ₹ 15,46,788/- during the financial year 2011-12 and received interest of ₹ 2,66,281/- on late payment received from customers. Ledger copy of interest account i .....

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nd OD Charges. The assessee firm has arrange loan from outsider parties other than banks to promote the more sales and Arhat Income and to get better profits. Assessee Firm has not so much Goodwill to get the cheaper loans below 15% p.a. That the Assessee Firm is earning much more than interest paid. The Assessee Firm declare Net Income of ₹ 4,60,085/- after allowing remuneration of ₹ 9,15,000/- and interest of ₹ 1,20,038/- to partners as compare to last year Net Income of S .....

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tricted the interest to 12% and made the addition of ₹ 2,84,674/-. 6. Being aggrieved the assessee carried the matter to the ld. CIT(A) and the submissions are reproduced verbatim as under: 2. Addition of ₹ 2,84,674/- out of interest:- The AO disallowed some portion of interest as in his opinion interest at the higher rate has been paid to the persons u/s 40A(2)(b). In his opinion the interest rate shouldn t be more than 12%. Sir it is well settled that interest rate on unsecured loa .....

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on unsecured loan is ITAT Ahmadabad in case of Omkamal Gaurishankar 92 IIJ (Ahd) 223 has held that even interest to relatives at the rate as reasonable, although the case before them is that aid interest at the rate 18%. This decision has been made view the decision of Sh. G.D. Aggarwal, VP of ITAT Ld. In the case of Vipul Y. Mehta. Further please note that AO has not brought any evidence on record regarding the reasonableness of interest @ 12%. We you will agree and appreciate that the assesse .....

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the submissions made before the authorities below and further submitted that the interest was paid to the lenders for the business exigency. It was stated that the assessee did not offer any security against the loans raised from friends & relatives while in the loan from banks, the securities was also required. He further submitted that neither the AO nor the ld. CIT(A) has given any basis for allowing the rate of interest at 12% and 13% respectively. He requested to allow the claim of the .....

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ns raised by the assessee were not utilized for the business purposes or were diverted for any other purposes. It is also noticed that neither the AO nor the ld. CIT(A) brought any material on record to substantiate that the rate of interest paid by the assessee was excessive. We, therefore, delete the addition sustained by the ld. CIT(A) and direct the AO to allow the claim of the assessee. 11. The next issue vide Ground No. 2 relates to the confirmation of disallowance of ₹ 53,558/- out .....

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ce expenses on account of personal use of partners and thus, disallowed a sum of ₹ 24,240/-. However, the AO disallowed ₹ 77,798/- being 1/5th of all the expenses and after reducing the disallowance made by the assessee itself amounting to ₹ 24,240/-, a further disallowance of ₹ 53,558/- was made. 12. Being aggrieved the assessee carried the matter to the ld. CIT(A) who sustained the disallowance made by the AO. He did not accept this contention of the assessee that car i .....

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