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2014 (4) TMI 106 - AT - Income TaxDisallowance of interest being prior period - for the earlier year assessee has not debited the interest on unsecured loan in the profit and loss account even though it follows mercantile system of accounting - Held that:- The argument that even if the interest would have been debited to the profit and loss account in those years the same would have still been disallowed since the assessee was not in a position to deduct and pay the TDS and the same would have been allowed in the impugned assessment year after payment of the TDS in our opinion is without any force. It is not the case of assessee that he was not aware of rate of interest and amount involved - Since assessee follows mercantile system of accounting and accounts are audited as per Companies Act as well as under provisions of Income Tax Act - Therefore, assessee was duty bound to prepare its accounts properly and not in casual manner like it has maintained by not debiting interest expenditure relating to concerned assessment year - Under these circumstances and in view of detailed order passed by Ld.CIT(A), no infirmity in same and same is upheld – Decided against Assessee. Disallowance u/s 40A(2) – excessive interest in excess of 12% - Held that:- since company had stopped it operation at Chipri no banker would have financed its business for which borrowing from Directors were inevitable and loans have been taken during impugned assessment year - Loans have been obtained without pledging of any title deed or security and without going through any cumbersome process which is otherwise applicable to loans obtained from banks and other financial institutions - Payment of interest @15% p.a. under facts and circumstances of case cannot be considered as excessive or unreasonable – Decided against Revenue.
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