Priya Blue Industries Pvt. Ltd.,, ... vs The Asstt. Commissioner Of Income Tax, ... on 26 February, 2020
12. In the above submissions to learned CIT(A), the assessee has brought into his
kind attention that the finding of AO that assessee had paid interest ranging from 11 to
13% to unrelated parties was not correct and had invited attention to page no.75 of
paper book wherein the appellant had paid interest @ 15% to unrelated party as well. It
was also submitted that applying Section 40A(2)(b) of the Act without determining the
market value of goods/services provided, the disallowance cannot be sustained and
reliance was also placed on the two judgments of Hon'ble Gujarat High Court. It was
also submitted that loans granted by such Directors to the appellant were unsecured in
nature and nationalized or private banks while granting loans in such categories charged
interest @ 24% to 40%. It was further submitted to him that various Tribunals have
concluded that rate of 24% is fair so far as to market value of such services are
concerned and in this respect and order of Ahmedabad Tribunal in the case of Omkarmal
Gaurishanker Vs. ITO, 92 TTJ (Ahd) 223 was also relied. However, the learned CIT(A) has
totally ignored these submissions which were quite relevant as the funds obtained from
related parties are generally without any security and such funds are not repayable in
near future and therefore these loans fall in the high risk category and therefore carry
higher rate of interest. Further, we find that the authorities below have not commented
on the reasonableness of the expenditure. Therefore, keeping in view the above facts
and circumstances and in view of the fact that AO did not independently determine the
reasonableness of interest paid to Directors and following judicial precedents in the case
of assessee itself, this addition is also deleted.