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TMI Blog2022 (10) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... rd any commercial expediency why the assessee took loans at such high interest rates from related parties to give loans. Notably, the assessee has consistently taken loans at the interest rate of 12% per annum in the majority of the cases, whereas while charging interest, maximum rate of 9% per annum has been charged. The assessee has paid interest at the rate of 12% per annum to a son s HUF but has not charged any interest from the son in his individual capacity against whom there was a closing balance of ₹ 3, 94, 82,000/-. In the instant facts, the assessee took unsecured loans from several parties at rates ranging from 6%, 8%, 8.5% and 12% (totaling to rupees 22,67,99,016/-) and the assessee gave loans amounting to ₹ 22,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notional interest of Rs. 21,13,971/- on adhoc basis with certain assumptions and presumptions and also without doubting genuineness of the transactions is against the documents available on records and against the provision of law. Therefore the addition sustained of Rs. 21,13,971/- may please be deleted. 4. That the Ld. CIT(A) has disallowed the Interest expenses of Rs. 21,13,971/- without considering the facts that the Interest paid to the persons are paying tax on their respective income which amounts to double taxation, which is against the principal of law and natural justice. Therefore addition sustained by CIT(A) for Rs. 21,13,971/- may please be deleted. 5. Without prejudice to the grounds of appeals, The Ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of the period of limitation prescribed under the general or special laws, shall stand extended with effect from 15-3-2020 till further orders. The suo motu proceedings were, disposed of issuing the directions as to in computing the period of limitation for any suit, appeal, application or proceeding, the period from 15-3-2020 till 14-3-2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15-3-2020, if any, shall become available with effect from 15-3-2021. In view of the above, since the delay of 30 days in filing appeal is falling within the Covid pandemic period, the delay is hereby being condoned. 4. On merits, the brief facts of the case are that the return of income was filed on 31.07.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gave part relief to the assessee by holding that the AO has not given any finding that the said loans on which higher rates of interest was paid were not utilized for earning interest income. The AO only found that the rate of interest paid was comparatively higher and therefore excessive and unreasonable. Therefore, disallowance under Section 57(iii) was incorrect. However, Ld. CIT(A) held that section 58(2) r.w.s 40A(2) talks about disallowance of any expenditure which is excessive and unreasonable having regard to the fair market value of goods, services or facilities. The AO has while making the said addition noticed and considered this fact that the higher rate of interest as compared to what has been paid to other parties are mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s disallowed and added back to the appellant s income under Section 58(2) r.w. 40A(2) of the Act. The Ld. CIT(A) directed the Ld. Assessing Officer to allow/ delete the balance addition of Rs. 56,01,214/- (Rs. 77,15,185/- minus Rs. 21,13,971/-) Accordingly, Ld. CIT(A) partly allowed the assessee s appeal. 6. The assessee is in appeal before us against the aforesaid order of Ld. CIT(A). Before us, none appeared on behalf of the assessee. In response, Ld. Departmental Representative argued that Ld. CIT(A) has taken a reasonable approach and has correctly disallowed a reasonable amount of interest while granting substantial relief to the assessee. 7. We have heard the contentions of Ld. Departmental Representative and perused the materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. On verifying the accounts, the Assessing Officer found that the assessee had advanced an interest free loan to a sister concern. The Assessing Officer held that diversion of borrowed fund on which interest was paid by the assessee to the sister concern without collecting interest called for proportionate disallowance. The High Court held that unless the interest free loan given by assessee to sister concern goes to advance business interest of the assessee, there cannot be any commercial expediency. For example, if a company or a firm supplying raw material for manufacture of products of the assessee goes into financial crisis and if assistance, rendered by the assessee, would retain their business which in turn helps the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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