2016 (4) TMI 1428

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....f 18% to the persons specified u/s 40A(2)(b) of the IT Act." 2. Briefly the facts of the case are that the assessee company has paid interest at the rate of 21% on unsecured loans to the persons specified u/s 40A(2)(b). The AO has found the same to be excessive and has disallowed interest paid in excess of 18% and made an addition of Rs. 2,26,176/- in the hands of the appellant. 2.1 Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who has sustained the addition and his findings are reproduced as under: "I have carefully examined the facts of the case and find that AO has been fair and just in considering the interest rate of 18% in the case of specified persons as against the interest rate of 14....

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....he decision of Hon'ble Punjab and Haryana High Court in case of Ramesh Chand(HUF) V. CIT 217 Taxman 75. 2.4 We have gone through the rival submissions and the perused the material on record. It is noted that disallowance of Rs. 2,26,176/- has been made by the AO on account of excessive interest @ 21% paid to the persons specified u/s 40A(2)(b) of the IT Act. The AO thereafter gave a show cause notice to the appellant as to why the interest payment made to specified persons on unsecured loans be not restricted to 18% and the excessive payment of 3% interest be disallowed. It is thus noted that the AO at the time of issuance of show-cause has not brought on record any basis or justification for suggesting rate of interest @ 18% as reasonab....