2020 (2) TMI 1617

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..... HELD THAT:- We find that there is no indication by any of the authorities below to the effect as to on what basis the market rate of interest has been ascertained. We have also noted that the loans are fully unsecured and on demand. Under these circumstances, and in the absence of any material to indicate that the interest rate paid by the assessee is excessive or unreasonable, we are of the consi .....

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..... ctness of the learned CIT(A) s order dated 4th June, 2018, in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2013-14. 2. Grievances raised by the appellant are as follows: 1.01 The Learned CIT(A) has failed to appreciate that the learned AO has disallowed the interest expenses u/s. 37(1) of the Act considering that the said expense was not .....

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..... of which was submitted to the learned CIT(A) in the paper book submitted to her. Without Prejudice to the above ground : 2.01 The learned CIT(A) erred in law as well as in fact in disallowing interest paid to parties covered u/s. 40A(2)(b) of the Act of ₹ 7,31,537/- as excessive interest without considering the fact that the Appellant and its sister firms were borrowing secured funds from .....

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..... persons specified under section 40A(2)(b). These loans were admittedly unsecured loans, without any security whatsoever, and the assessee s claim is that the interest paid is as prevalent market rate. The Assessing Officer was, however, of the view that this rate of interest is excessive and unreasonable. He, accordingly, disallowed interest paid in excess of 12% p.a. 4. Aggrieved, the assesse .....

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..... the interest paid by the assessee is not hit by the provisions of section 40A(2)(b). In any event, the unsecured loans on demand being taken at interest @ 18%, or even @ 21%, are quite in consonance with the ground realities in business. It is also an undisputed position that the assessee had borrowed secured loans from banks @ 17% p.a. The impugned payments cannot therefore be said to be excessi .....

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