TaxTMI 
TaxTMI 
2012 (10) TMI 532
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....eals) deleted a disallowance of Rs.16,58,713/- made by the A.O. against the claim of interest expenditure. Assessee in its cross-objection supports the order of CIT(Appeals). 2. Short facts apropos are that assessee, engaged in the business of computer peripheral trading, filed its return for the impugned assessment year on 14.9.2009, admitting an income of Rs.67,19,190/-. During the course of assessment proceedings, Assessing Officer noted that the assessee had claimed Rs.42,65,261/- as interest paid to loan creditors. As per the A.O., loan creditors were all relatives of the assessee and interests were paid at the rate of 18% per annum. Against this, loans were given by the assessee to certain parties who were not relatives, and it ....
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....vate parties. Again, according to assessee, Assessing Officer had not given any finding that the interest paid at 18% per annum was excessive when compared to fair market value. CIT(Appeals) was appreciative of these contention of the assessee. He deleted the disallowance making the following observations:- "6.1 The A.O. compared the interest payments made to the loan creditors and interest received from deposits with certain parties for the purposes of making disallowance as both are distinguishable. Loan creditors are existing more than 7 to 8 years and interest @ 18% p.a. is not paid but only credited to their accounts. Hence there is no cash outflow on interest payments. Further, these loans are not taken during the year but e....
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....t was charged by the assessee on mercantile system basis in its Profit & Loss account and therefore, to say that it could have been allowed since no cash payment was made, was not in accordance with law. According to him, simply based on the submissions of the assessee, the CIT(Appeals) had deleted the disallowance. 5. Per contra, learned A.R. submitted that there was no finding regarding any excessive interest paid by the assessee to its loan creditors. As per the learned A.R., interest at 18% per annum could in no way be considered as excessive. Assessing Officer in his scrutiny assessment order for assessment years 2007-08 and 2009- 10, had accepted such claim of interest payment on the same loans. The loans were from related parti....
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....id balance sheet, read as under:- CAPITAL ACCOUNT At Beginning At End 6,495,485 Mahaveerchand Bhandari 22,941,113.87 4,704,366 Naveen Bhandari 32,931,270.48 3,732,767 Nitesh Kumar 31,454,182.56 4,373,410 Milapchand Bhandari 27,949,000.29 4,124,245 Sandeep Kumar 39,923,103.59 2,34,30,273 15,51,98,670.79 Assessee had unsecured loans of Rs.2,87,81,863/- and secured loans of Rs.15,10,94,669/- as on 31.3.2008. Thus assessee had own funds as well as loan funds available with it for giving advances to its nonrelated parties. If we look at the bank balance of the assesseeas on 31.3.2008, it is Rs.2,34,44,934/-. So, there is considerable weight in the contention of the assessee that it had subst....