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2013 (11) TMI 357 - AT - Income TaxDisallowance of interest paid on loans taken from family members u/s.40A(2) of the I.T. Act, 1961 - The assessee has taken the loans amounting to Rs.57.92 lakhs from his wife, sons and from his own HUF and is paying interest at the rate of 18% on the same. The loans were taken in the earlier years and no similar disallowance was made by the department – Held that:- The decisive factor for the applicability of section 40A(2) of the Act is whether the payment made by the assessee is excessive or unreasonable considering the prevailing market conditions during the relevant period - Interest paid at the rate of 18% per annum on unsecured loans during the relevant period cannot be said to be excessive or unreasonable - Revenue could not cite any instance wherein the assessee on unsecured loan account, other than his relatives account, has paid interest at less than 18% per annum – Decided against the Revenue.
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