TMI Blog1989 (6) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... t for opinion by the Income-tax Appellate Tribunal, Cochin Bench: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that section 40A(2) was attracted to the payment of interest by the assessee to the estate of late Smt. Taramathi S. Shah ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officer to be excessive and invoking the provision of section 40A(2) of the Income-tax Act, he allowed interest only at 12% per annum and disallowed the balance. Similar action was taken in the original assessment for the year 1978-79. On appeals, the Commissioner of Income-tax, (Appeals) held that interest at 18% will be reasonable and restricted the disallowance of interest to only the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all partners of the firm. The said firm in which the father of one and the husband of the other are partners paid interest at 24% per annum. Section 40A(2)(a) provides that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person being a relative of a partner and the Income-tax Officer is of opinion that such expenditure is excessive or unreason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taramathi S. Shah. Therefore, the interest payments made to son and wife of two partners, respectively, are clearly hit by the provision of section 40A(2) of the Act. The interest paid is 24% per annum. The assessee, admittedly, paid interest only at 12% per annum on the amounts belonging to the manager. The statement of the Income-tax Officer that the bank rate of interest was only 15% or less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in holding that the payment of interest at the rate of 24% by the assessee to the estate of the late Smt. Taramathi S. Shah was excessive and that only interest at the rate of 18 per cent. can be said to be reasonable. Therefore, both the questions are answered in the affirmative, that is, in favour of the Revenue and against the assessee. A copy of this judgment under the seal of the High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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