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TMI Blog2024 (2) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest of justice, one more opportunity is granted to the assessee to furnish the relevant material/documents to justify its claim that payment of interest @18% is at fair market value. With the above directions, the impugned order on this issue is set aside and ground no. 1 raised in assessee s appeal is allowed for statistical purposes. Addition on account of notional interest on the amount lying idle in assessee s bank account - HELD THAT:- From the perusal of the summary, duly supported by the statements of the bank accounts of the assessee maintained with the Bank of Bahrain and Kuwait as well as HDFC Bank, we find that prior to the payment to various airlines such as Jet Airways, Global Aviation, Cathay Pacific, Air France, etc. assessee s bank accounts are maintaining huge balance, however after the payment to the aforesaid airlines the balance in assessee s accounts even goes down to negative balance. Thus, we agree with the submissions of the assessee that it needs funds for its working capital to run the business. Therefore, we find no merits in the findings of the AO on this issue. Thus as huge funds in assessee s bank account were required for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case, the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has erred in confirming the disallowance of Rs. 12,88,528/-being interest paid to related parties u/s 40 A (2) clause (b) of the Act on the ground that the appellant had the enough funds to pay the debts and the borrowings from the related parties were not necessary. 2. On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has erred in confirming the disallowance of Rs. 6,00,000/- on account of notional interest on Rs. 50,00,000/- as remaining idle with the appellant in their bank account. 3. On the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi has erred in confirming the disallowance of the Transpiration Charges of Rs. 4,35,081/-on the ground that the appellant has not deducted TDS thereon as applicable. 4. The issue arising in ground No. 1, raised in assessee s appeal, pertains to part disallowance of interest expenditure under section 40A(2)(b) of the Act. 5. The brief facts of the case pertaining to this issue, as ema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es irrespective of the fact whether the amount of freight charges has been realised or not. It is further submitted that in case a company fails on any occasion, it will lose recognition with IATA. Accordingly, the assessee has availed unsecured loans of Rs. 3,97,53,471 from its related persons and family members @18% per annum during the year under consideration. It is further the plea of the assessee that the loan from banks involves not only a lot of paperwork but also involves the securities to be placed against the loans besides obtaining the personal guarantees of the Directors. Further, the interest is payable to the bank every month, however, the payment of interest to the related parties is once a year and that too at the year end. Accordingly, as per the assessee, the payment of interest @18% is totally justified. 8. From the perusal of the record, it is discernible that there is no dispute regarding the fact that the parties to whom the assessee has paid interest are related parties within the meaning of section 40A(2)(b) of the Act. Further, as is evident from the record, the AO by considering the rate of interest @18% paid to related persons on unsecured loans as ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referring to the general ledger of interest received during the year, forming part of the paper book on page 17, submitted that the assessee has earned interest @18% per annum from Rajesh Estate and Nirman Ltd. Therefore, the prevailing market rate amongst the private parties is 18%, which justifies the payment of interest by the assessee to its related parties for availing of unsecured loans. We find that the aforesaid aspect has not been examined by the lower authorities. 11. Further, the learned CIT(A) seeks to place reliance upon the provisions of section 40(b)(iv) of the Act to support the conclusion of the AO in considering the rate of interest of 12% as reasonable. In the present case, it is pertinent to note that it is not anybody s case that the interest has been paid by the assessee to its partners and rather fact of the case is that the assessee has availed unsecured loans from its related persons at the interest rate of 18% per annum. Thus, we find no merits in the reliance placed by the learned CIT(A) on the aforesaid provision for justifying the rate of interest at 12%. 12. Since, in the present case, the relevant material for determining the fair market value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue. Being aggrieved, the assessee is in appeal before us. 15. We have considered the submissions of both sides and perused the material available on record. During the hearing, the learned AR by referring to the summary of the bank statement, in paper book-2, submitted that in the business of the assessee, it has to make payments to the airlines on the 15th and 30th of every month on account of freight charges. Accordingly, prior to the aforesaid dates, sufficient credit is maintained in the bank accounts to honour the commitments towards the airlines. From the perusal of the aforesaid summary, duly supported by the statements of the bank accounts of the assessee maintained with the Bank of Bahrain and Kuwait as well as HDFC Bank, we find that prior to the payment to various airlines such as Jet Airways, Global Aviation, Cathay Pacific, Air France, etc. assessee s bank accounts are maintaining huge balance, however after the payment to the aforesaid airlines the balance in assessee s accounts even goes down to negative balance. Thus, from the perusal of the above documents, we agree with the submissions of the assessee that it needs funds for its working capital to run t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 19,01,457. 19. The learned CIT(A), vide impugned order, granted partial relief to the assessee and restricted the disallowance to Rs. 4,35,081 in respect of transportation charges paid to Mr. Jitendra M. Pawaskar, to whom the payments made are more than Rs. 25,000 and the TDS has not been deducted. Being aggrieved, the assessee is in appeal before us. 20. We have considered the submissions of both sides and perused the material available on record. During the hearing, the learned AR by referring to the provisions of section 194C(6) of the Act submitted that TDS under this provision is not required to be deducted while crediting or paying a sum to the transporter upon the furnishing of PAN of the transporter to the person paying or crediting such sum. The learned AR submitted that the assessee must have provided the PAN to the AO during the assessment proceedings, however, there is no documentary evidence, at present, regarding the same. In the interest of justice, we grant one more opportunity to the assessee to provide the PAN of the transporter to AO in order to prove the compliance of provisions of section 194C(6) of the Act. Accordingly, this issue is restored to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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