2018 (4) TMI 1870

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....er referred to as "the Act") dated 14/03/2014 relevant to Assessment Year (AY) 2011-12. 2. The Revenue is aggrieved by the action of the CIT(A) in deleting the addition of Rs. 46,51,963/- made under s.40A(2)(b) of the Act. 3. Briefly stated, the assessee is engaged in ship breaking activities. The return of income of Rs. 2,55,34,607/- filed by the assessee (relevant to AY 2011-12) was subjected to scrutiny assessment. The AO noticed that the assessee inter alia paid interest to directors of the company at higher rate of 18% p.a. whereas the assessee has also paid interest on borrowed funds at lower rate of 11% - 13% to other parties. The AO accordingly held that nearly 5% has been paid to the directors in excess of fair market value o....

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....ted. 5.3 Having considered the facts of the matter, I am inclined to accept the contentions of the Ld. A.R. As held by various Tribunals interest upto 24% on unsecured loans was held to be reasonable [and not excessive within the meaning of section 40A(2)(b)]. It is also seen that interest @ 18% was paid to two other unrelated parties. I am of the view that interest paid @ 18% to the directors cannot be held to be excessive or unreasonable. Impugned disallowance is deleted. This ground of appeal is allowed." 5. Aggrieved, the Revenue is in appeal before the Tribunal. 6. We have heard both the parties. The limited issue for adjudication in the instant case is applicability of section 40A(2)(b) of the Act to the interest paid t....