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2020 (2) TMI 1617 - ITAT MUMBAIDisallowance of interest expenses u/s. 37(1) OR u/s. 40A(2)(b) - during the course of scrutiny assessment proceedings AO noticed that the assessee has paid interest @ 18% and in one case even 21%, to the persons specified u/s 40A(2)(b) - CIT(A) restricted the disallowance to interest payment in excess of 15% - HELD THAT:- We find that there is no indication by any of the authorities below to the effect as to on what basis the market rate of interest has been ascertained. We have also noted that the loans are fully unsecured and on demand. Under these circumstances, and in the absence of any material to indicate that the interest rate paid by the assessee is excessive or unreasonable, we are of the considered view that the interest paid by the assessee is not hit by the provisions of section 40A(2)(b). In any event, the unsecured loans on demand being taken at interest @ 18%, or even @ 21%, are quite in consonance with the ground realities in business. It is also an undisputed position that the assessee had borrowed secured loans from banks @ 17% p.a. The impugned payments cannot therefore be said to be excessive - We direct the Assessing Officer to delete the impugned disallowance.
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