2019 (6) TMI 1739

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....law and on facts in deleting the disallowance of interest u/s 40A(2)(b) of the Act ofRs.1,12,77,760/ -. (2) The appellant craves, to leave, to amend and/or to alter any ground or add a new ground which may be necessary. 2. The facts of the case are that During the year the company has paid interest @18% p. a. on unsecured loan/deposits obtained from all parties covered u/s 40A(2)(b) aggregating to Rs. 3, 23,58,5457-, as per the mutual agreed terms of the unsecured loan availed from the said parties. There is no discrimination or differences in the rate of interest in respect of unsecured loan parties to whom interest is paid. In previous year also the company has paid interest @ 18% p. a. on unsecured loans/deposits. The justification fo....

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....ue loss. iii) Payment of interest @18% to the parties covered u/s 40A(2)(b) of the Act is not excessive and un-reasonable because the company has paid interest @18% due to business expediency as it was not possible for the appellant to borrow the fund from the bank or any other persons and if the company had not borrowed the fund @18%, from parties covered u/s 40A(2)(b) of the Act, then it is difficult to carry on the business and thus for the requirement of carrying on the business the appellant company has borrowed the fund @18% and has earned profit in the business and offered for taxation, it is not a case where the company has incurred interest cost and has shown business loss. 3. But ld. A.O. was not agree with the contention of th....

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....aterial on record. Therefore in the absence of any material by which the AO treated the interest paid by the assessee is unreasonable/excessive, we are not impressed with the finding of the AO. ITA no.3454/AHD/2016 Asstt. Year 2012-13 8.2 There is no dispute about the use of fund borrowed by the assessee at the rate of 18% per annum. Thus it is transpired that the assessee has used the borrowed fund for its business. Accordingly, we are of the view that it is the assessee who knows its business affairs the best than any other person. Accordingly, the assessee can only decide the need for the borrowing from the related parties including the rate of interest. As such the AO is not expected to direct/advice to the assessee to borrow the mone....

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....e was rightly disallowed under section 40A(2)(b). However, it is required to be noted that except aforesaid there was no basis for the Assessing Officer to come to the conclusion that amount of interest paid at the rate of 12 per cent would relate to the concerned parties was otherwise excessive and/or unreasonable. It is not the case on behalf of the revenue that considering the market rate the: aforesaid interest paid at the rate of 12 percent can be said to be excessive and/or unreasonable. Under the circumstances, solely because the assesses for whatever reasons/consideration paid the, interest at different rates by that itself cannot be a ground to come to the conclusion that paying of ITA no.3454/AHD/2016 Asstt. Year 2012-13 interest ....