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2016 (7) TMI 1657 - AT - Income TaxDisallowance on account of interest on unsecured loans paid in excess of 18% to the persons specified u/s 40A(2)(b) - Whether AO is empowered to make disallowance by invoking the provisions of section 40A(2)( b)? - HELD THAT:- There is no dispute with regard to the fact that the amount was borrowed for the purpose of business and the assessee has claimed payment of interest @ 24% p.a. - AO considering the same as unreasonable and excessive, restricted @ 18%. The revenue has not placed any material under the identical facts and circumstances that the fair market rate of interest is lower than what the assessee has claimed. As per section 40A(2)(b) AO has to give a finding having regard to the fair market rate. In the present case, no such finding is given. The assessee has placed reliance on the two decisions of the Coordinate Bench of the Tribunal rendered in the case of Ram Avtar Garg [2010 (5) TMI 715 - ITAT JAIPUR] pertaining to A.Y. 2005-06 and in assessee’s own case in pertaining to A.Y. 2010-11 wherein the Coordinate Benches have allowed the interest @ 24% being fair market rate. The facts of the present case are identical. The revenue has not brought any contrary material on record suggesting that the rate so claimed by the assessee is excessive of the fair market rate as prevalent during the year under appeal. Therefore, we hereby direct the AO to delete the disallowance made on account of interest on fair market rate paid in excess of 18% to the persons specified under section 40A(2)( b) - Appeal of assessee allowed.
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