TaxTMI 
TaxTMI 
2022 (5) TMI 605
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....id to persons covered u/s. 40A(2)(b) of the Income Tax Act. 2. That the Ld. CIT(A) has erred in confirming the disallowance of Car lease of Rs. 36,000/- paid to persons covered u/s. 40A(2)(b) of the Income Tax Act. 3. That the Ld. CIT(A) has erred in wrongly calculation the rate of interest at which short term loans were advanced. 4. That the Ld. CIT(A) has erred in ignoring the rate of interest being paid to the bank by the appellant which is 11.65% on monthly basis. 5. That the appellant craves leave to add, amend or delete any of the grounds of appeal. 3. Vide ground Nos. 1, 3 & 4 the grievance of the assessee relates to the ad hoc disallowance made out of the interest paid by the assessee. 4. Fa....
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....ings. Against that, assessee had advanced an amount of Rs. 1.90 crore as Short-Term loans and advances. He further observed that the assessee incurred finance finance cost of Rs. 65,32,988/- and had offered interest income only of Rs. 11.14 lakhs. The Ld. CIT(A) also observed that the assessee had submitted that it was paying interest at the rate of 12% per annum (p.a.) on the loans obtained from the related parties. However, interest charged on the loans advanced as short term loans mentioned under the head 'Current Assets' (schedule 13) in the balance sheet was only at the rate of 6.86%, which shows that there was a diversion of borrowed funds for the purposes other than business. The Ld. CIT(A) sustained the disallowance made by ....
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....o the market rate. It was further submitted that the interest paid at the same rate had been accepted by the department in the preceding years while framing the assessments u/s. 143(3) of the Act. Our attention was drawn to page Nos. 11 to 17 of assessee's compilation, which are the copies of assessment orders for the A.Ys. 2014-15, 2013-14 and 2012-13. The Ld. Counsel for the assessee also drew our attention towards page Nos. 23 & 24 of the assessee's compilation, which is the copy of letter dt. 18-05-2021 written to the CIT(A), National Faceless Appeal Centre (NFAC), wherein the aforesaid explanation on payment of interest has been mentioned at page No. 24. A reference was also made to page No. 28 of the assessee's compilation....
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.... 12% to the relatives. Therefore, the disallowance made by the AO and sustained by the Ld. CIT(A) was justified. 9. We have considered the rival submissions of both the parties and perused the material available on record. It is noticed that the assessee paid the interest to the relatives and family members of the directors @ 12%. In the preceding years also the interest was paid at the same rate, which had been accepted by the department while framing the assessments u/s. 143(3) of the Act for the A.Ys. 2012-13 to 2014-15. Copies of the assessment orders are placed at page Nos. 11 to 17 of the assessee's compilation. It is also noticed that the Ld. CIT(A) had not given any calculation for working out interest @ 6.86% on the loan giv....
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....15,000/- p.m. was paid to Shri Deepak Gupta for the use of Innova Car, as lease rent, which cannot be termed as unreasonable and that had the assessee purchased the car of its own, then the interest and depreciation burden would have been much more. However, the Ld. CIT(A) did not find any merit in the submissions of the assessee and sustained the disallowance made by the AO. Now, the assessee is in appeal. 12. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that no comparable case was cited by the AO while making the disallowance u/s. 40A(2)(b) of the Act. It was further submitted that in the preceding year similar payment on account of lease rent of the car was acce....