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2016 (10) TMI 176 - ITAT MUMBAI

2016 (10) TMI 176 - ITAT MUMBAI - TM - Disallowanece of interest under the provisions of section 40A(2)(b) - Held that:- As decided in assessee's own earlier years since the assessee as well as the relatives, to whom assessee has paid interest are being taxed higher rates, the entire exercise undertaken by the Assessing Officer is neutral exercise as far as the payment of tax is concerned and there is no question of evading of payment of tax by any of the parties - Decided in favour of assessee .....

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g the earlier decision of Co-ordinate Bench of the Tribunal in assessee s own case for the assessment year 2004-05 out of interest as made by the AO under the provisions of section 40A(2)(b) of the Income Tax Act, 1961(hereinafter referred to as the Act). 3. At the time of hearing, the ld.AR submitted that the present case of the assessee is covered by the decision of Co-ordinate Bench of the Tribunal in assessee s own case in ITA No.466/Mum/2013 (AY-2009-10) vide order dated 18.5.2016. The ld. .....

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efully considered the submissions of the parties, perused the material placed before us including the orders of authorities below. We find that the decision referred by the ld.AR in the case of ITA No.466/Mum/2013 (supra) in assessee s own case was passed by the co-ordinate Bench of the Tribunal after considering the decision for the assessment year 2004-05 which was the basis for dismissing the appeal of the assessee and thus, the facts of the case in hand and relied upon by the assessee are id .....

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ade for the reason that the expenditure is not genuine. The disallowance has been made by virtue of the provisions of sec. 40A(2) whereby any expenditure which is excessive or unreasonable is required to be disallowed. The assessee has not shown as to how the interest @ 18% paid to persons specified u/s 40A(2)(b) was not excessive and unreasonable in light of the opinion of the Assessing Officer that the interest at the rate of 12% was reasonable and the findings of the Hon'ble Tribunal in t .....

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re us, Ld. Counsel for the assessee clearly stated that the interest payment is neither doubted by the lower authorities or ITAT in assessment year 2004-05. The only issue, according to Ld. Counsel for the assessee is that interest payment is excessive i.e.18% and Tribunal has restricted the same at 12%. However, Ld. Counsel for the assessee stated that in assessment year 2004-05 assessee s appeal is pending before the Hon'ble Bombay High Court, wherein the substantial question of law on thi .....

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ention to assessee s Paper Book page-22, wherein comparative chart of interest paid to family members and others and also details of interest paid to various persons during the relevant assessment years are filed. According to Ld. Counsel those persons have included the interest paid by assessee as income in their respective return of income and paid taxes accordingly. The details are enclosed at pages 22 to 24 of assessee s Paper Book. According to the Ld. Counsel for the assessee, the interest .....

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6, 2006-07, 2007-08 and 2008-09. According to him, the disallowance made by the Assessing Officer and confirmed by CIT(Appeals) is perfectly as per the provisions of the Act. 7. We have gone though the details of interest paid to the family members and noticed that these parties have included the receipts of interest in their respective return of income. The details are filed at pages 23-24 of the assessee s paper book. We find that most of the payees are taxed in highest tax bracket and there i .....

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is purely out of business necessity and decision to pay interest @18% per annum is guarded by commercial consideration and in the interties of its business necessities and exigencies. Ld. Counsel for the assessee before us demonstrated that the prevailing rate of interest of commercial transaction is 18% or more and for this purpose he produced some bills issued to the assessee by various suppliers for this year, in which it is clearly mentioned that in case of late payment interest @18% to 26% .....

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ayment of instalments and also satisfactory securities of equal amount or more of loan. According to Ld. Counsel for the assessee this loan taken from bank is for fixed period and payment is made by the end of the period with constant monitoring and checks. Whereas, the loan from the family members and relatives can be obtained and returned without any hustles so there is premium on the same and this a normal market practice. We find that the assessee has tried to explain his case from all angle .....

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