2018 (4) TMI 629

rate of 12.5%, 12% and 10% and on certain lending to the related parties interest has been charged at the rate of 8% or lower rate - Held that:- Since the business of the appellant was of financing, these interest rate keeps on changing depending upon the demand and supply of fund requirements. Since the assessee first has having the surplus funds and there was no demand that is why the surplus funds given to the parties on lower rate of interest. Further also it was argued by the ld. AO that the interest rates depend upon various other factors also like the borrowed/advances are call money or for fixed period. - Jurisdictional High Court in the matter of Aaditya Medicals Ltd. vs. CIT [2010 (5) TMI 823 - GUJARAT HIGH COURT] wherein, the .....

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r consideration, the assessee has engaged in the business of Money Landing and has shown income from profits and gains of business. 4. During the assessment proceedings, it was noticed by the AO that assessee has accepted unsecured loan from 34 parties and given loans and advances to 21 parties. Out of 34 parties under unsecured loan, the assessee has paid interest at the rate of 12.5% to 16 parties, at the rate of 12% to 6 parties. Wherein, assessee has charged interest at the rate of 8% from 17 related parties and at 6% from 2 parties. 5. After observing this, ld. AO held that it can be safely concluded that the assessee, on one hand, charging 8% of interest on loans and advances and on the other hand the assessee is paying interest expen .....

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st expenses claimed. Also, when it comes to charging of interest from related parties, the assessee has advanced amount to related parties at the rate of 8% to almost all, except one, which is at 13%. So, assessee pays higher interest expenses at higher rate and charges lower interest income at 8% from loans and advances from related parties and calculated the disallowance as below: No. of parties Rate of interest Interest expense Amount of interest to be disallowed in excess of 8% Total amount to be disallowed from interest expenses 16 12.5 3888729 1399942.44 35,90,804 6 12 6565891 2188630.333 1 10 11156 2231.2 9. Against the said order assessee preferred first statutory appeal before the ld. CIT(A) who partly allowed the appeal of the ass .....

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