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TMI Blog2017 (1) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... 153A of the Income-tax Act for the Assessment Years 2005-06 to 2010-11 and order u/s 143(3) of the Act for Assessment Year 2011-12. 3. The grievance of the assessee common in all these appeals is that the ld. CIT(A) erred in law and on facts in holding that the interest paid @ 18% in relation to the borrowing made from the persons specified u/s 40A(2)(b) is unreasonable and excessive and in disallowing the interest paid in excess of 12%. 4. Briefly stated the relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has paid interest @ 18% on borrowings from specified persons u/s 40A(2)(b), but, the Assessing Officer was of the view that such payments should be rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A), but without any success. Ld. CIT(A) rejected the claim of the assessee that 18% per annum interest paid by the assessee is reasonable. When the assessee invited attention of the ld. CIT(A) to the decision of the Co-ordinate Bench of this Tribunal in the case of CIT vs. M/s. Navjivan Roller Flour & Pulse Mills P. Ltd in ITA No.2695/Ahd/2009, ld. CIT(A) stated that "with due respect to the judgment of Hon'ble ITAT, there are contrary decisions of various High Courts in this regard". He then referred to the judgments of Hon'ble Kerala High Court in the case of CIT vs. V.I. Baby & Co. [2002] 123 Taxman 894 (Ker.) and Hon'ble Allahabad High Court in the case of CIT vs. H.R. Sugar Factory (P.) Ltd. [1990] 53 Taxman 63 (All.). Ld. CIT(A) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsent of the parties and the business exigency or expediency and, therefore, it is prerogative of the business man to see as to what rate the interest should be paid so that its business gets maximum benefit and the Revenue has no part to play in this respect. Many a times, specially, when a business man has to seek loan from private parties, he failed to get because of so many reasons and in that situation, he has no option but to approach the close relative and friends and if in that situation, he is compelled to pay interest at a marginally higher rate, there is no illegality in accepting the loans and pay a little bit higher interest. The over all position to be seen is as to whether the assessee has earned the profit or not; i.e. whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to it borrowers cannot be treated as a benchmark for loans taken by the assessee from individuals who are not carrying on the business of banking. Essentially, a loan taken from the bank not only involves furnishing of securities and documentation but also is advanced after safeguarding the interest of the lenders in a robust manner. Quite unlike such transactions/borrowings from individuals are much less organized and without the cumbersome requirements of documentation and collateral securities etc. In our considered view, the very action of the Assessing Officer in holding that the borrowings from the specified persons at a rate higher than the rate at which bank would lend its loans to the borrowers, would be excessive and unreasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. We may therefore, proceed on that basis. Despite this, the question that still survives is whether the Revenue can tax the same income in the hands of the company on which the Directors had already paid the tax at the same rate at which the company would have been liable to be assessed. In this context, we may recall that consistently before Assessing Officer, CIT(Appeals) and Tribunal, the assessee had canvassed that all the four Directors who had received such remuneration, were taxed in the highest bracket of 30%; at the same rate at which the assessee company at the relevant time was assessed. In fact, the assessee had demonstrated before CIT(Appeals) that the tax liability of the company on such disputed remuneration amount was exac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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