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2010 (5) TMI 715 - AT - Income TaxDisallowance u/s 40A(2)(b) - assessee has paid interest to relatives at the rate of 24 percent whereas interest is allowed to the outsiders at 12 percent HELD THAT:- When the income-tax authorities have found that the borrowing transactions were not illusory or colourable and that the capital was borrowed by the assessee for the purpose of business and the amount of interest was paid, they have no jurisdiction to determine whether the rate of interest agreed to pay was reasonable or not and to disallow a portion of the interest which has been paid. As in the case of Omkarmal Gaurishankar [1990 (9) TMI 123 - ITAT AHMEDABAD-C] held that the rate of 24 percent cannot be treated as unreasonable or excessive and therefore, directed allowance of the entire interest. Further, it is held that deposits being old, interest thereupon was never disallowed in the past, no disallowance in respect of interest is validly being made. In this case also, interest has been paid in the past at the rate of 24 percent In view of the above, it is held that funds being used for business purposes coming over from the preceding assessment years, in the past years it having been allowed at the rate of 24 per cent., interest of 24 percent being not excessive or unreasonable in view of the factum that the assessee did not have to pledge any title deeds or security for obtaining loan as against banking formalities which being cumber some and lot of compliances, the funds being like a deposit in the account of the assessee, the disallowance being unjustified and deserves to be deleted. Thus the same is deleted and the appeal of the assessee is allowed.
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