TaxTMI 
TaxTMI 
2017 (1) TMI 630
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....0A(2)(b) of the Income Tax Act, 1961 at the rate of 18% on the loan received from them. The ld.AO has disallowed interest payment over and above 12% per annum. On appeal, the ld.CIT(A) has confirmed the disallowance. The ld.counsel for the assessee at the very outset submitted that similar disallowance was made in the Asstt.Year 2005-06 to 2010-11 and the dispute travelled upto the Tribunal. The Tribunal has deleted the disallowance in IT(SS)A.No.24 to 29/Ahd/2014. The ld.DR on the other hand is unable to controvert this contention raised by the ld.counsel for the assessee. 4. I have duly considered rival contentions and gone though the record carefully. After perusal of the Tribunal's order dated 26.12.2016 passed for the Asstt.Year 2005-....
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....the loan was not available from the banks cannot be accepted" and that "it is the fact that no prudent businessman will allow interest at a very higher rate as it was not impossible to get such loan at lower rate. The Assessing Officer was of the view that the assessee was not able to give any justification for payment of excessive 18% when the bank rate is 12%. It was in this backdrop that the impugned disallowances of interest were made. 5. Aggrieved, the assessee carried the matter in appeal before the ld. CIT(A), but without any success. Ld. CIT(A) rejected the claim of the assessee that 18% per annum interest paid by the assessee is reasonable. When the assessee invited attention of the ld. CIT(A) to the decision of the Co-ordinate B....
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....t on identical facts it was held as under:- " 4. We have heard both the parties. At the time of hearing it was submitted that this Tribunal, in identical circumstances, has allowed the claim of the assessee in its order dated 25-4-2008 (A.Y. 2000- 01). The Tribunal has made the following observations in the aforesaid case: 5. Having considered the rival submissions and the facts and circumstances of the case, we are of the opinion that so far as payment of interest is concerned, it is to be paid as per mutual consent of the parties and the business exigency or expediency and, therefore, it is prerogative of the business man to see as to what rate the interest should be paid so that its business gets maximum benefit and the Revenue has....
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....ts in the present case are similar to these involved in the aforesaid case decided by this Tribunal. In this view of the matter, ground No.1 taken by the assessee is allowed and therefore, ground No.2 taken by the assessee does not require any adjudication by us." 7. Clearly, therefore, there is a Co-ordinate Bench decision holding that the payment of interest @ 18% cannot be said to be excessive or unreasonable for the purposes of Section 40A(2)(b) of the Act. In any event, the rate at which banks are lending advances to it borrowers cannot be treated as a benchmark for loans taken by the assessee from individuals who are not carrying on the business of banking. Essentially, a loan taken from the bank not only involves furnishing of secu....
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....act, and in the light of Hon'ble jurisdictional High Court's judgment in the case of PWS Engineers Limited vs. DCIT (Tax Appeal No.209 of 2015; judgment dated 06.06.2016), the disallowance under section 40A(2) cannot be made. In the said case, Their Lordships had, inter alia, observed as follows:- "6. We have heard learned counsel for the parties. The question of applicability of Section40A(2) of the Act to the restricted disallowance of Rs. 47,90,178/- is already concluded by this Court by the said order dated 31.3.2015. We may therefore, proceed on that basis. Despite this, the question that still survives is whether the Revenue can tax the same income in the hands of the company on which the Directors had already paid the tax at the s....