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TMI Blog2018 (4) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interest at the rate of 24% to the related parties was treated to be allowable. Thus it does not warrant any disallowance u/s.40A(2)(b) of the I.T. Act. Arguments of Ld. AR that interest depend upon the number of factors such as amount of loan, period of loan, creditworthiness of the parties etc. - Decided against revenue - ITA No. 2054/Ahd/2015 - - - Dated:- 4-4-2018 - Shri Mahavir Prasad, Judicial Member And Shri Manish Borad, Accountant Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 expenses to majority of its related parties at 12% or 12.5%. In this manner, the assessee has managed to pay interest at 12% or 12.5% to majority of its related parties and has taken interest 8% or lower from majority of its related parties. 6. Ld. AO further held that the following table represents the breakup of interest expenses, interest charged by assessee and interest income shown by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significant amount of loan has been taken from related parties and related parties also from significant number out of total parties, this Act of assessee is resulted into reducing profits to an extent of over and above 8% of interest 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 12. Jurisdictional High Court in the matter of Aaditya Medicals Ltd. vs. CIT in Tax Appeal No.559 of 2009, wherein, the interest at the rate of 24% to the related parties was treated to be allowable. Thus it does not warrant any disallowance u/s.40A(2)(b) of the I.T. Act. 13. We are agree with the arguments of Ld. AR that interest depend upon the number of factors such as amount of loan, period of loan, creditworthiness of the parties etc. 14. In view of the above said di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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