TaxTMI 
TaxTMI 
2016 (5) TMI 1287
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....ly issue in the appeal of the assessee against the order of the CIT(Appeals) confirming the disallowance of interest payment to family members by invoking provisions of section 40A(2)(b) of the Act amounting to Rs. 25,47,005/-. 3. Briefly stated, the facts are that the assessee is engaged in the business of trading in rubber, Rubber Chemicals, Solvents and general merchants. The Assessing Officer during the course of assessment proceedings noticed that the assessee has paid interest @18% on unsecured loans taken from family members. The Assessing Officer restricted the rate of interest paid to family members at 12%. For this he has also relied on ITAT order in assessee's own case for assessment year 2004-05. Aggrieved, assessee preferred a....
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....ther doubted by the lower authorities or ITAT in assessment year 2004-05. The only issue, according to Ld. Counsel for the assessee is that interest payment is excessive i.e.18% and Tribunal has restricted the same at 12%. However, Ld. Counsel for the assessee stated that in assessment year 2004-05 assessee's appeal is pending before the Hon'ble Bombay High Court, wherein the substantial question of law on this issues has been admitted by Hon'ble High Court. He also argued that the Tribunal has not considered the decision of Hon'ble Bombay High Court in the case of CIT vs. Indo Saudi Services (Travel) Pvt. Ltd. 310 ITR 306(Bom), wherein CBDT Circular No.6-P dated 06/07/1968 was considered, wherein the Board has taken categorical vie....
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....pective return of income. The details are filed at pages 23-24 of the assessee's paper book. We find that most of the payees are taxed in highest tax bracket and there is no attempt made by the assessee to evade tax by excessive payment to related parties. We find that the assessee has been paying such interest to some of the parties' right from the beginning and in the past no such disallowance was made by the Department i.e. the Assessing Officer while framing assessment under section 143(3) of the Act himself has allowed interest at 21% to the assessee for the assessment year 2001-02 and 2002-03, we are of the view that payment of interest to all the parties is purely out of business necessity and decision to pay interest @18% per annum ....
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....39;ble Bombay High Court in the case of Indo Saudi Services (Travel) Pvt. Ltd.(supra), wherein it is held as under:- "5. In view of the aforesaid admitted facts we are of the view that the Tribunal was correct in coming to the conclusion that the Commissioner Of Income Tax(Appeals) was wrong in disallowing half percent commission to the sister concern of the assessee during the assessment years 1991-92 and 1992-93. The learned advocate appearing for the appellant is also not in a position to point out how the assessee evaded payment of tax by the alleged payment of higher commission to its sister concern was also paying tax at a higher rate and copies of the payment orders of the sister concern were taken on record by the tribunal" Simi....