2011 (2) TMI 1602

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....ep Kumar Mitra, Sr. DR ORDER PER R. C. SHARMA, A.M. This is an appeal filed by the assessee against the order of CIT(A) dated 16.9.2009 for the assessment year 2006-07 in the matter of order passed u/s 143(3) of the Income-tax Act, 1961. 2. The only grievance of the assessee relates to disallowance of interest by invoking the provisions of Section 40A(2)(b) of the Income-tax Act, 1961.....

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....We have carefully considered the rival contentions and found that the assessee was engaged in manufacturing of Dal. During the year, it has achieved production and sale target of Rs. 17 crores out of his own capital of Rs. 12 lakhs and bank loan of Rs. 60 lakhs. In terms of its requirement of working capital of Rs. 250 lakhs, since the Bank has only sanctioned Rs. 60 lakhs, the assessee has arrang....

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....documentation and stamp duty expenses for carrying on process of documentation and stamp duty expenses for mortgage and hypothecation works out at 1 %. Further finance consultant's fee and administrative expenses for sanction of loan works out to be earning 1.5 %. Thus, the effective rate of interest from Bank is calculated at 18.35 %. Merely because basic rate of bank interest was 13.25%, the hid....

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....ons specified u/s 40A(2) to the extent of 18 % only. We also found that the assessee has also availed loan from National Agriculture Coop. Marketing Federation, which is a Government of India Enterprise @ 18%, which has been duly noted by the ld. CIT(A). Accordingly, there is no justification or reasonableness for reaching to the conclusion that interest paid by the assessee to relatives and frien....