1990 (4) TMI 78 - AT - Income Tax

Summary

Issues:
1. Disallowance of interest under section 40A(8) in the assessment year 1983-84.
2. Charging of interest under section 215 of the Income-tax Act.

Analysis:
1. The assessee appealed against the disallowance of interest on the loan account of Directors and shareholders under section 40A(8). The counsel argued that the disallowance was not valid, citing precedents and judgments. The counsel referred to the decision of the Special Bench and the High Court, contending that interest paid to Directors and shareholders on current accounts cannot be disallowed under section 40A(8). The counsel provided details of interest payments and accounts to support the claim that the accounts were current accounts. The counsel urged for the deletion of the disallowance made by the assessing authority and confirmed by the CIT(A).

1.1 The counsel further argued that there was no shortfall in advance tax payment, based on the tax on declared income, citing a judgment of the High Court. The counsel sought to avoid the levy of interest under section 215.

2. The Departmental Representative (D.R.) contended that the disallowance of interest under section 40A(8) was valid and supported by the Tribunal's decision in the assessee's previous year's case. The D.R. argued that the levy of interest under section 215 was automatic and justified, as confirmed by the CIT(A).

3. The Tribunal examined the submissions and reviewed the orders passed by the lower authorities. Regarding the disallowance of interest under section 40A(8), the Tribunal considered recent judgments and held that no disallowance would be made for interest on current accounts of Directors and shareholders. The Tribunal distinguished between current accounts and deposits, noting that current accounts involve frequent transactions, while deposits are made once or occasionally. After analyzing the accounts provided by the assessee, the Tribunal concluded that the disallowance related to deposits, not current accounts, and upheld the disallowance under section 40A(8).

This detailed analysis of the issues involved in the judgment provides a comprehensive understanding of the legal reasoning and decisions made by the Appellate Tribunal ITAT AHMEDABAD-C in this case.