https://www.taxtmi.com/caselaws?id=462646 ITAT Bangalore allowed the appeal and deleted the disallowance of Rs. 11,27,328/- under section 40A(2)(b). The assessee paid 18% interest on unsecured loans from directors and relatives, which the AO restricted to 14% (secured loan rate). The Tribunal held that unsecured loans naturally carry higher interest rates than secured loans due to different risk profiles. The 18% rate was reasonable and aligned with market rates for unsecured business loans (18-22% from private banks). Section 40A(2)(b) requires proof of excessiveness and unreasonableness, which the Revenue failed to establish. The commercial realities and statutory borrowing restrictions justified the higher interest rate on related-party unsecured loans. en-us Fri, 30 Nov 2012 00:00:00 +0530 Mon, 07 Jul 2025 17:35:05 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=462646 ITAT Bangalore allowed the appeal and deleted the disallowance of Rs. 11,27,328/- under section 40A(2)(b). The assessee paid 18% interest on unsecured loans from directors and relatives, which the AO restricted to 14% (secured loan rate). The Tribunal held that unsecured loans naturally carry higher interest rates than secured loans due to different risk profiles. The 18% rate was reasonable and aligned with market rates for unsecured business loans (18-22% from private banks). Section 40A(2)(b) requires proof of excessiveness and unreasonableness, which the Revenue failed to establish. The commercial realities and statutory borrowing restrictions justified the higher interest rate on related-party unsecured loans. Case-Laws Income Tax Fri, 30 Nov 2012 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=462646