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| The Tax Publishers2019 TaxPub(DT) 6611 (Mum-Trib) : (2019) 178 ITD 0710 INCOME TAX ACT, 1961
Section 40A(2)
Even though assessee had made payments to related parties, yet in view of fact that there was no material on record to demonstrate that payment made was excessive and unreasonable having regard to market rate, disallowance made under section 40A(2) by AO was to be deleted.
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Business disallowance under section 40A(2) - Excessive or unreasonable payment - Payment to related parties - No material on record to demonstrate that payment made was excessive and unreasonable
Assessee-firm was engaged in business of trading in iron and steel, tubes and pipes. AO alleged that assessee had paid interest @15 per cent of loans availed of from HUF of partners who were related parties. AO alleged that reasonable rate of interest which should have been paid on unsecured loans was at 12 per cent and restricted assessee's claim with regard to interest expenditure on unsecured loans to 12 per cent per annum by invoking provisions of section 40A(2)(b). Held: Even though assessee had made payments to related parties, yet in view of fact that there was no material on record to demonstrate that payment made was excessive and unreasonable having regard to market rate, disallowance made under section 40A(2) by AO was to be deleted.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13 to 2014-15
INCOME TAX ACT, 1961
Section 37(1)
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