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2017 (1) TMI 55 - AT - Income TaxAddition u/s 40A(2)(b) - interest payments to related parties over and above 13.2% - Held that:- the assessee has paid similar rate of interest to non-related parties. When the assessee is having no control over non-related parties and rate of interest is common in both the cases, payment of interest to non-related parties cannot be considered as not prevailing in the open market during such period. Since, the rate of interest paid to related parties is on par with the rate of interest paid to non-related parties, the A.O. was erred in applying the provisions of section 40A(2)(b) of the Act, to hold that interest payment made to relatives is excessive or unreasonable. The CIT(A) without appreciating the facts simply, followed adhoc rate of interest of 15% to restrict the disallowance made by the A.O. towards interest payments to related parties. Therefore, we are of the view that the A.O. was erred in disallowing interest payments to related parties over and above 13.2%. - Decided in favour of assessee.
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