07 December 2009
can assessing officer apply sec 40(b) viz-a-viz sec 40A(2).....
if partner is given 12% interest on capital ...& firm also having loans of outsider with interest rate of 10% ....
den can assessing officer treat such 2% excess payment to partner in form interst as dissallowed considering it as payment to relative as partner of the firm is also considered as relative of firm ...??
07 December 2009
The provisions of section 40A(2)(a) cannot be construed so as to read that the deductions which are made impermissible under section 40(b) should be read as permissible under section 40A.
It is clear that the payment made to a partner which are covered by section 40A(2)(a) are of the nature other than those which are prohibited by section 40(b).
In other words, it is in cases where payments other than those which are covered by section 40(b) are made to the partner that the question of excessive or unreasonableness of payments may arise which would be governed by the provisions of section 40A(2)(a).
CIT v. Yoganand Textiles (1993) 202 ITR 869m 884-85 (Guj.)
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