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TMI Blog2013 (12) TMI 1684X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the learned A.O. on account of difference in rate of interest in lending and borrowing of loans. 2. Learned CIT(A) has erred in confirming the above disallowance of ₹ 1430681/- made by the A.O. u/s.40A(2)(b) although the A.O. has not proved that the rate of interest of 15% is higher than the market rate of interest prevailing in the business community at the relevant time. 3. Learned CIT(A) has erred in not appreciating the fact that the receipt of interest by lending to the secured borrowers is receipt analogues to sales in the case of the assessee and Sec.40A(2)(b) cannot be pressed into service for disallowing short realization of sale price because it is applicable to excessive expenditure only and is not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds of appeal at the time of or before the hearing of appeal. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 08/12/2008, thereby the Assessing Officer(AO) made addition of ₹ 14,30,681/- on account of difference in rate of interest in lending and borrowing of loans by invoking the provisions of section 40A(2)(b) of the Act. The assessee feeling aggrieved by the order of the AO and preferred an appeal before the ld.CIT(A), who rejected the submissions of the assessee by following the order in earlier year. 3. The ld.counsel for the assessee submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well the judgement relied upon by the ld.counsel for the assessee. We find that in AY 2005-06 this issue has been decided by the Coordinate Bench (ITATAhmedabad) against the assessee on identical facts, but the assessee was not able to prove that recipients of the interest were also paying tax at maximum marginal rate, however in the instant case, the ld.counsel for the assessee has submitted the details at page No.37 of the paper-book which shows that the recipients of the interest were also paying maximum marginal rate of tax, therefore there is no evasion of tax. The undisputed facts are that the trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reasonable and fair manner. It should be borne in mind that the provision is meant to check evasion of tax through excessive or unreasonable payments to relatives and associate concerns and should not be applied in a manner which will cause hardship in bona fide cases. The AO has not given any finding as to how these expenses are unreasonable and excessive and how this payment has resulted into evasion of tax. Therefore, respectfully following the decision of Hon ble Bombay High Court in the case of CIT vs. Indo Saudi Services (Travel) (P) Ltd.(supra), we direct the AO to delete the addition. Thus, grounds of assessee s appeal are allowed. 6. In the result, the appeal of the assessee is allowed. Order pronounced in Court on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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