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TMI Blog2019 (5) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed vis- vis fair market price for such goods services or facilities. We find that such finding is absolutely missing from the orders passed by the authorities below. Relying upon the said ratio of CIT-vs Sarjan Realities [ 2014 (8) TMI 206 - GUJARAT HIGH COURT] also passed order deleting addition made by Revenue on excess payment of interest made by the assessee. Since no deliberation has been made by the authorities below so as to compare the rate of interest paid by the assessee with that of the market rate of interest before making addition we delete the addition made by the authorities below. Disallowance u/s 36(1)(iii) being interest at 12% on certain advances made by the assessee - HELD THAT:- AR before us failed to substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income of ₹ 5,46,870/- which was duly processed. Upon scrutiny notice u/s 143(2) dated 12.08.2013 was served. During the assessment proceeding, it was found from the record that the assessee has paid interest at 15% totaling to ₹ 25,00,469/- to certain parties covered u/s 40A(2)(b) whereas 10% - 12% to other parties. A show-cause dated 10.02.2015 was issued to the assessee as to why 3% (in excess of 12%) of such payment to the parties u/s 40A(2)(b) should not be disallowed. In reply, the assessee submitted that funds were borrowed for business purpose and such interest @15% was paid according to the demand of the lenders. The contention of the assessee was not accepted by the Learned AO and ₹ 5,00,094/- was disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A(2)(b) while disallowing 3% of excess rate of interest paid to the parties @15% on the borrowed funds, no deliberation has been made by the authorities below as regards the prevailing market rate of interest on similar service. In terms of the order passed by the Jurisdictional High Court in the matter of CIT-vs-Suzlon Energy Ltd as relied upon by the Learned AR, it is the duty incumbent upon the Learned AO to assess the fair market price and give comparative instance for payment of interest for similar services. Firstly; before disallowing u/s 40A(2)(b) for such payment being excessive or unreasonable it has to be ascertained that such payment is made to specific person under clause 40A(2)(b) and secondly there must be a clear finding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was issued as to why proportionate disallowance of interest expenses should not be made in view of Section 36(1)(iii) of the Act. In reply whereof the assessee submitted that unsecured loans were borrowed for the purpose of business and investment were made out of own funds and not out of borrowed funds. Ultimately, the Learned AO disallowed ₹ 6,00,000/- u/s 36(1)(iii) being 12% of the investment of ₹ 50,00,000/-. In appeal, the said order was confirmed by the Learned CIT(A). Hence, the instant appeal before us. 7. At the time of hearing of the instant appeal, the Learned AR submitted before us that the advances were made on account of business expediency. Such advances to the builders was made to acquire commer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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