2018 (6) TMI 1780

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....ion 40A(2)(b) of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee firm is a trader in sugar kandsari on whole-sale and semi-whole sale basis. It filed its return of income on 31.8.2011 declaring total income at Rs. 96,980/-. The case of the assessee was selected for scrutiny assessment and assessment was completed under section 143(3) on 22.2.2014 determining total income at Rs. 1,02,080/-. Subsequently, it was noticed by the AO that assessee has paid excess interest payment to the persons covered under section40A(2)(b) of the Act, and accordingly case of the assessee was reopened under section 147 by issuing notice under section 148 of the Act. The assessee was asked to show cause as to why payment of interest pa....

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....paid to Kalpur Commercial Co-op bank was at 15%, which was the rate prevalent at the time. The assessee has also shown a statement showing the rate of interest received by the assessee from related and unrelated parties at 15%. It is prayed that since interest paid to the related persons is little higher and in commensurate with the market rate, it cannot be viewed as excessive or reasonable so as to attract provisions of section 40A(2)(b) of the Income Tax. The ld.DR, on the other hand, relied upon the orders of the Revenue authorities, and submitted that when the assessee is able to get loan at lower rate from the outsiders, then there is no justification to pay higher rate of interest to the relatives covered under section 40A(2)(b) of t....