Case Law Details
CIT(A) found force in the submission of the assessee that the interest at the rate of 12% was also taken as reasonable in the Income Tax Act under the provisions of section 40A(b)(iv) for the purpose of calculating interest to the partners. The CIT(A) also followed the decision of the Tribunal in the case of ACIT Vs. M/s. Raj Steel Industries and Vipul Y. Mehta Vs. ACIT (supra) where the rate of interest at 18% to 24% was considered to be reasonable.
ITAT find no error in the order of the learned CIT(A) and in our considered opinion, section 40A(2)(b) empowers the AO to disallow expenditure paid to related parties only, when such payment is found in excess of the market rate. In our considered view, the learned CIT(A) was justified in holding that the rate of interest of 12% cannot be said to be unreasonable or excessive keeping in view the market rate and the rate of interest prescribed under the Income Tax Act itself.
ITAT AHMEDABAD, “C” BENCH
ITA No. 2579/Ahd/2012 – [Asstt.Year : 2009-2010]
DCIT Vs. M/s.Sarjan Realities Ltd.
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