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2022 (10) TMI 561 - AT - Income TaxDisallowance u/s 57(iii) - AO observed that while giving interest the assessee has consistently paid the interest @12% per annum in majority of the cases, whereas while charging interest, the maximum rate of 9% per annum has been charged by the assessee - AO held that interest expenses claimed by the assessee under Section 57(iii) are not allowable to the extent they are attributable to the lower interest charged by the assessee i.e. lesser than 12% per annum on the advanced made - HELD THAT:- CIT(A) has taken a reasonable approach by disallowing 1/4th of interest expenses in the instant facts. The assessee has not brought on record any commercial expediency why the assessee took loans at such high interest rates from related parties to give loans. Notably, the assessee has consistently taken loans at the interest rate of 12% per annum in the majority of the cases, whereas while charging interest, maximum rate of 9% per annum has been charged. The assessee has paid interest at the rate of 12% per annum to a son’s HUF but has not charged any interest from the son in his individual capacity against whom there was a closing balance of ₹ 3, 94, 82,000/-. In the instant facts, the assessee took unsecured loans from several parties at rates ranging from 6%, 8%, 8.5% and 12% (totaling to rupees 22,67,99,016/-) and the assessee gave loans amounting to ₹ 22,48,00,614/- at rates ranging from 8-9%. In the instant facts, the assessee has not been able to establish the commercial expediency for taking loans at higher rates and giving the same at lower rates. Accordingly, CIT(A) has not erred in facts and in law in restricting the disallowance to 1/4th of such interest paid at the rate of 12% as being excessive and unreasonable under section 58(2) rws 40 A (2) of the Act. Appeal of the assessee is dismissed.
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