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| The Tax Publishers2020 TaxPub(DT) 4731 (Ahd-Trib) INCOME TAX ACT, 1961
Section 40A(2)(b)
Since money was borrowed from related parties in earlier years and interest paid to them was accepted in those years, therefore, AO was not justified in making disallowance of interest for the year under consideration on money borrowed in earlier year and that too without bringing any comparable cases based on cogent material.
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Business disallowance under section 40A(2)(b) - Excessive or unreasonable payment - Interest paid to related party on loan taken in earlier years - No dispute as regards interest payments made in earlier years
Assessee claimed deduction of interest paid @ 24% on loan taken from related parties AO considered 18% interest rate as reasonable and thus, made disallowance under section 40A(2)(b).Held: Money was borrowed from related parties in earlier years and interest paid to them was accepted in those years. Accordingly, there could not be any disallowance for the year under consideration on money borrowed in earlier year and that too without bringing any comparable cases based on cogent material.
Supported by:CIT v. Sridev Enterprise (1991) 192 ITR 165 (Karn) : 1991 TaxPub(DT) 1071 (Karn-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2013-14
INCOME TAX ACT, 1961
Section 14A
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