TMI Blog2017 (12) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... mongst the parties by bringing on record the various rate of interest on FDRs at the relevant time offered by different the bank which was far below than 7.25%, which in our opinion the onus on the assessee if any to prove the reasonableness too has been discharged, which though in our opinion was not required. AO has treated the subscription of ICD as a loan which in our understanding is not a correct way to interpret an ICD, because it is a deposit made by the subscriber of the ICD issued by a company on a fixed rate of interest and hence it cannot be treated as a loan. Thus such an enhancement of notional income as done by the AO cannot be appreciated, because the AO cannot step into the shoes of the businessman to hold that he shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this reduction of rates, w.e.f., 1.1.2010 as it was not possible to obtain a better rate of interest from any safe source such as leading banks. The AO required the assessee to justify the reduction of rate of interest on the ICD from 10% to 7.25% per annum. In response to which, the assessee filed detailed reasons alongwith documents in support justifying the reduction of rate of interest on ICD. However the Ld. AO did not accept the assessee s explanation and observed that rate of interest should be adopted at 15% on loans to BCCL as the charging of interest is not on arm s length. Accordingly, he proceeded to compute the interest @ 15% per annum at ₹ 17,39,83,561/- thus making an addition of ₹ 6,77,97,413/-. 3. Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% and accordingly, the addition made by the AO was deleted. 4. After hearing both the parties and considering the relevant finding of the impugned orders as well as the material referred to before us, we find that the sole issue raised by the revenue is, whether the rate of interest by the assessee on the ICD @ 7.5% per annum could have been enhanced by the AO or not. It is an undisputed fact that assessee has advanced an amount of ₹ 147 crores as an ICD to BCCL which is its 100% holding company. Initially it was agreed that interest rate of 10% per annum for a period of three years would be given, however as per the insistence of BCCL, it was proposed that the rate of interest would be at 7.2% which was based on then prevailing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any enforceable right to receive the income to the assessee over and above what has been agreed amongst the party, because as per the mutual agreement between the parties the rate of interest agreed was 7.25%, which alone could have enforced by the assessee and not what has not been agreed upon. Hence here in this case it cannot be held that any income has accrued to the assessee. In any case the assessee has tried to justify the rate of interest agreed amongst the parties by bringing on record the various rate of interest on FDRs at the relevant time offered by different the bank which was far below than 7.25%, which in our opinion the onus on the assessee if any to prove the reasonableness too has been discharged, which though in our op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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