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TMI Blog2000 (8) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of the AO be restored. 2. The assessee made an advance of Rs. 11,50,000 to M/s S.K. Fibres (P) Ltd, at interest of 12 per cent per annum in addition to amount given as share application money to the tune of Rs. 5,01,000. The AO has observed in the order that no interest has been charged on the share application money advanced. He, therefore, disallowed the proportionate interest on the said advance because the assessee has raised loan from sister concerns, namely, M/s Roshan Lal Pawan Kumar and M/s Roshan Lal Raj Kumar and consequently interest to the tune of Rs. 37,500 is disallowed by the AO. The AO further observed that neither any dividend nor any director fee, etc. was received from M/s S.K. Fibre (P) Ltd., Panipat. Aggrieved aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent, dealing in purchase and sale of Sarson, Binola, Khal, tea and other foodgrains products, etc. there was no evidence that during the year under consideration, they have changed the mode of business for purchase of shares. 4. The learned counsel of the assessee has filed a certificate from the director of M/s Ess Kay Fibres (P) Ltd., and a certificate of chartered accountants, M/s Pardeep Tayal Co. The certificate indicates that M/s S.K. Fibres (P) Ltd., Panipat, has received share application money for 5,000 equity shares of Rs. 100 each from M/s Ghmaba Mal Roop Chand, Mansa Mandi, Manda and the same amount was outstanding in share application money as on 31st March, 1991. The learned counsel also pleaded that only interest to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(Asr)/1992 6. In the cross-objection, the assessee has taken only ground which is as under: "That the learned CIT(A) is not justified to uphold the disallowance of Rs. 15,870 out of total interest paid at Rs. 48,480." 6.1. The issue involved in the C.O. relates to the disallowance of interest by the AO on the payments made to close relatives. The AO is of the opinion that 12 per cent is a market rate of interest because the same has been paid to M/s Roshan Lal Pawan Kumar, Bhikhi. He made disallowance amounting to Rs. 15,870 under s. 40A(2) of the IT Act, 1961. The matter was looked into by the learned CIT(A). The learned CIT(A) observed that the AO was justified in restricting the interest to family members at 12 per cent. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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