2022 (4) TMI 579

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....ment year 2014-15. Before us the assessee has assailed the impugned order on the following grounds of appeal: "1. That learned CIT Appeal erred in confirming of disallowance of interest from 3% to 2% i.e. accepted 16% interest paid to unsecured loan against 18% paid by appellant since past so many years and accepted by department which learned AO also accepted in order. a) That we rely on 29 ITJ 89 (Jabalpur Tribunal) in Raj Traders ITO which accepted that AO has not given any evidence of lower interest rate so allowed interest paid @ 18%, 19% & 20.52%. b) That TDS by appellant firm has been made for unsecured creditors on interest paid @ 18% & they are already taxed, so disallowing here is a double taxation. ....

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....d the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. Before adverting any further, we think it apt to cull out Section 40A(2)(a) of the Act, which reads as under: "40A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head "Profits and gains of business or profession". (2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section,....

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.... we find that the Assessing Officer had in his attempt to point out that the interest paid by the assessee i.e. @ 18% p.a. on the unsecured loans that was raised from related parties was excessive or unreasonable, had compared the same with the rate of interest at which loans could have been raised from a bank i.e. @ 15%. The aforesaid basis adopted by the Assessing Officer is clearly fallacious. In our considered view, the Assessing Officer, while adopting the bank lending rate had lost sight of the fact that the loans from the bank would have required providing of security, incurring of certain hidden charges, as well as satisfaction of number of other formalities; unlike the raising of unsecured loans by the assessee from its related par....