1989 (6) TMI 33

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....icant-assessee, the following questions of law have been referred to this court for opinion by the Income-tax Appellate Tribunal, Cochin Bench: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that section 40A(2) was attracted to the payment of interest by the assessee to the estate of late Smt. Taramathi S. Shah ? (2) Whether, on the facts a....

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....tners of the firm. The payment of interest at the rate of 24% was held by the Income-tax Officer to be excessive and invoking the provision of section 40A(2) of the Income-tax Act, he allowed interest only at 12% per annum and disallowed the balance. Similar action was taken in the original assessment for the year 1978-79. On appeals, the Commissioner of Income-tax, (Appeals) held that interest at....

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....er of the said Nilesh A. Shah and the husband of the said Smt. Sobha Shantilal are all partners of the firm. The said firm in which the father of one and the husband of the other are partners paid interest at 24% per annum. Section 40A(2)(a) provides that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person being a relative of a partner and ....

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....m. Interest is paid to Smt.Sobha Shantilal who is also a successor to the estate of Taramathi S. Shah. Therefore, the interest payments made to son and wife of two partners, respectively, are clearly hit by the provision of section 40A(2) of the Act. The interest paid is 24% per annum. The assessee, admittedly, paid interest only at 12% per annum on the amounts belonging to the manager. The sta....