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refunds. As per provisions of the Act, the rate of interest on partners fund was 12%, hence, the Assessing Officer held the interest @ 12% was reasonable which was allowed as deduction and the balance interest @ 6% was held to be not allowable under section 40A(2)(b) of the Act, resulting in addition of Rs.22,20,958/-.

5. The second disallowance made in the hands of assessee was on account of Directors remuneration, wherein the explanation of assessee was that the said remuneration was being paid to the founder Director, Chairman and other Directors since past several years, was not accepted since there was decrease in the turnover of assessee company and also net profit before tax on percentage basis had gone down. The Assessing Officer was of the view that the remuneration of Directors should be restricted to Rs.15 lakhs and the balance of Rs.15 lakhs was disallowed and added to the income of assessee.