TaxTMI 
TaxTMI 
2016 (1) TMI 449
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....ee, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. First, we take up the Assessee's appeal in ITA No.2161/Ahd/2011 for AY 2008-09. The Assessee has raised the following grounds of appeal:- 1. The Ld.CIT Appeals VI Ahmedabad has erred in law and on facts in passing appellate order dated 20/06/2011 for A.Y. 2008-09 in the case of appellant by confirming disallowance of Rs. 18,77,302/- on account of interest expenses u/s.40A(2)(b) of the Act. 2. The Ld.CIT(A) has erred in law and on facts by confirming the disallowance of Rs. 15,29,863/- on account of business development expenses. 3. The appellant craves leave to add, alter, amend or withdraw any of the grounds of appe....
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.... drew our attention towards page No.28 of paper-book. The ld.counsel for the assessee submitted that the authorities below have failed to appreciate the fact that secured and unsecured loans cannot be placed on the same footing. He submitted that the loans taken from the related parties were unsecured, whereas the loan taken from banks carry security. He submitted that such huge amount of unsecured loans is not available from banks without any security and cost of mortgage and other document charges made secured loans more cumbersome. The ld.counsel for the assessee submitted that the normal rates interest charged by the NBFC were around 20 to 22% during that period for unsecured loans. He submitted that the payees were assessed to tax at t....
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....o Smithkline Asia (P) Ltd. reported at (2010) 236 CTR (SC) 113. He further relied on the judgement of Hon'ble High Court of Gujarat in the case of CIT vs. Laxmi Bidi Trading Co. in Tax Appeal Nos. 851 to 856 of 2014, dated 01/09/2014. 3.1. On the other hand, the ld.Sr.DR opposed the submissions of the assessee and submitted that the assessee has not demonstrated as to how the rate of interest paid is reasonable as also not demonstrated the commercial expediency for such unsecured loans at a higher rate of interest. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the decisions/judgement relied upon by the ld.counsel for the assessee. We fin....
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....o.1186/Ahd/2012(supra), the Coordinate Bench deleted the disallowance of interest expenditure. In that case, the interest was paid @24% to the related parties. The assessee has further relied on the decision of the Coordinate Bench in ITA Nos.414 to 417 & 1952/Ahd/2009 & 2491/Ahd/2010 in the case of ACIT vs. Sh.Laxmi Bidi Trading Co.(supra), wherein the Tribunal held that the Revenue has not brought any evidence as to what was the prevailing rate of interest in the market except the bank rate, therefore deleted the disallowance. In that case, the payment of interest was made at 18%. The Hon'ble High Court of Gujarat in the case of CIT vs. Aditya Medisales Ltd. in Tax Appeal No.559 of 2009, dated 04/05/2010(supra), the Hon'ble High C....
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....ed parties and 15% to unrelated parties. The contention of the assessee is that the interest paid at lesser rate was paid to the unrelated parties, in those cases, the unsecured loan was required to be paid on demand, but in the case of related parties there was no such condition. In the light of the various judicial pronouncements as discussed hereinabove, we are of the considered view that the interest @18% is reasonable, therefore we direct the AO to delete disallowance. Thus, ground No.1 of the Assessee's appeal is allowed. 5. Ground No.2 is against confirming the disallowance of Rs. 15,29,863/- made on account of business development expenses. The ld.Sr.DR pointed out the facts that a similar disallowance was made by the AO in the....
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....expenses were incurred wholly and exclusively for the purpose of the assessee's business. The Hon'ble Karnataka High Court in the case of Mac Explotee P. Ltd. Vs CIT (Kar), 286 ITR 378, the Hon'ble Madras High Court in the case of Silicon (India) Ltd. Vs DCIT (Mad), 295 ITR 422, the Hon'ble Bombay High Court in the case of Echjay Forgings Ltd. Vs ACIT (Bom), 328 ITR 286 and the Hon'ble Delhi High Court in the case of Enkay (India) Rubber Co. Pvt. Ltd. Vs CIT(Del), 263 1TR 521 held that education expenses of a son of the director was incurred for personal gain and not for the business purpose. Keeping in view of the factual position as well as legal position on this issue, we uphold the order of the learned CIT(A) and dis....