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TMI Blog2018 (6) TMI 1780X X X X Extracts X X X X X X X X Extracts X X X X ..... of formalities. We are of the view that the payment of interest at a little higher rate to the persons even if covered under section 40A(2)(b) cannot be termed as exorbitant when the prevalent market rate of interest is being looked into, and there is no question of undue benefit being given to the related persons. We find no justifiable reasons to restrict the interest rate at 12% by the Revenue authorities. Accordingly, disallowance made by the Revenue is deleted, and the ground of appeal of the assessee is allowed. - ITA. No. 89/Ahd/2017 - - - Dated:- 4-6-2018 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER For the Assessee : Shri Bhadresh C.G. For the Revenue : Shri Saurabh Singh, Sr.DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial Co-op Bank, which was the rate prevalent at the time. Besides that the assessee has also collected interest at the rate of 15% from the persons covered under section 40A(2)(b). In other words, the assessee-firm has paid interest at the rate of 15% and has recovered interest at the rate of 15% which indicated that prevailing market rate was 15%, and therefore, there was no question of excess and unreasonable payment of interest. This submission of the assessee did not convince the AO and therefore, AO restricted the rate of interest at the rate of 12%. The aggrieved assessee went in appeal before the ld.CIT(A) who confirmed the action of the AO. 4. The assessee is now before the Tribunal. Before us the ld.counsel reiterated the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be allowed to the assessee as deduction. In other words, if service is being availed by an assessee from the person falling under section 40A(2)(b), and the similar service was availed from open market on a lesser rate, then, the difference between those rates could not be allowed to the assessee as deduction. In the instant case, according to the AO, the assessee has paid interest at the rate of 15% to the related parties and 12% to the unrelated parties, and so the difference of 3% is to be treated as unreasonable and excessive within the meaning of section 40A(2)(b) of the Act. In other words, according to the AO, the assessee ought to have paid interest at the rate of 12% and not 15%. We are not convinced with this observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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