TMI Blog1996 (10) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... hich worked out to Rs. 1,12,577 and the balance of Rs. 84,433 found in excess was disallowed. 3. On appeal, it was claimed that neither the trustees nor the beneficiaries of Shiv trust were connected in any manner with the assessee nor the partners of the assessee-firm were beneficiaries of the trust. Therefore, provisions of s. 40A(2)(b) are not attracted. It was also argued that the AO has accepted the fact that the amount was borrowed for business purposes and the same was also utilised for business. The rate of interest was slightly higher because the assessee did not give any security while in the case of loan from the bank security has to be given. It was also claimed that the market rate in fact is much more than 21 per cent. It was also pointed out that in the next asst. yr. 1988-89 the amount was repaid and as per the revised agreement lower rate of interest was paid. The first appellate authority noted that the rate of bank and other institutions was limited at 18 per cent. According to the CIT(A) there was no specified reason for taking loan from this party while the assessee had sufficient assets for guarantee, etc. to the bank and other institutions for securing loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Having once accepted that the loan raised was genuine and for business purposes and the interest was paid and provisions of s. 40A(2)(b) are not applicable the AO was not justified in considering the reasonableness of the rate at which the interest was paid. Moreover, the market rate of interest is always higher than the bank rate. Looking to the fact that the bank rate was at 18 per cent and other service charges were also involved at about 2 per cent, the interest paid at 21 per cent was not unreasonably high looking to the prevailing market rate which might not had (sic-been) less than 24 per cent. The interest thus paid at the rate of 21 per cent is in no way unreasonable. 6.1 In the case of East India Industries the Hon'ble Madras High Court held that as the genuineness of borrowing of capital for the purposes of business and the fact of payment of amount claimed was not disputed the disallowance of interest was not justified. Having considered the facts and ratio of the aforecited decisions, we are of the view that interest claimed at 21 per cent is fully allowable and disallowance made therefrom is directed to be deleted. This disposes of the ground preferred by both, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal decision in the case of the assessee for the asst. yr. 1982-83 in ITA No. 1231/Ahd/1986 and the Gujarat High Court decision in the case of CIT vs. Elecon Engineering Co. Ltd. wherein it was held that hotel and theatre building are tools of trade of an assessee and such buildings are required to be treated as 'plant' for the purpose of depreciation at higher rate. He also submitted that decision of the CIT(A) in this regard has since been accepted by the Revenue as no second appeal has been filed on this count. Having accepted the hotel building as a plant the said items added therein would obviously warrant deduction under s. 32AB. In support (sic-he) has relied upon the following decisions: (i) CIT vs. Tajmahal wherein sanitary and pipeline fittings were held as 'plant' entitled to development rebate. (ii) CIT vs. Tarun Commercial Mills Ltd. (1984) 38 CTR (Guj) 148 : (1985) 151 ITR 75 (Guj), wherein air-conditioner and electric fan installed in office premises were held as 'plant' entitled to depreciation and development rebate. (iii) CIT vs. S.L.M. Maneklal Industries Ltd. (1993) 115 CTR (Guj) 397 : (1994) 205 ITR 547 (Guj) wherein wall-clock used in factory was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, filed the return declaring total income at Rs. 1,20,017 on 20th July, 1988. The return was, therefore, delayed by 11 months. The AO while completing the assessment has thus charged interest under s. 139(8). On hearing both the representatives of the assessee as well as the Revenue, and considering the (sic-facts) we see no infirmity in the direction given by the CIT(A). As regards, the charge of interest under s. 215 the counsel for the assessee made a submission that the assessee filed the return declaring total income of Rs. 1,20,017 on which necessary tax has been paid. The AO, however, assessed the total income at Rs. 3,16,560 by way of making certain additions which the assessee never anticipated at the time of making the advance tax payment. He, therefore, claimed that no such interest is leviable in view of the ratio of the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Bharat Machinery Hardware Mart (1982) 136 ITR 875 (Guj). The learned Departmental Representative on the other hand has made (sic-the) submission that aforesaid decision of the Hon'ble Gujarat High Court has since been overruled by the Hon'ble (sic-to) Supreme Court in the case of Mod ..... X X X X Extracts X X X X X X X X Extracts X X X X
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