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2017 (1) TMI 683 - ITAT AHMEDABADAddition u/s 40A - interest paid @ 18% in relation to the borrowing made from the persons specified u/s 40A(2)(b) - unreasonable and excessive expenditure - disallowing the interest paid in excess of 12% - Held that:- There is a Co-ordinate Bench decision in ACIT vs. M/s. Navjivan Roller Flour & Pulse Mills P. Ltd [2011 (5) TMI 1049 - ITAT AHMEDABAD] holding that the payment of interest @ 18% cannot be said to be excessive or unreasonable for the purposes of Section 40A(2)(b) of the Act. In any event, the rate at which banks are lending advances to it borrowers cannot be treated as a benchmark for loans taken by the assessee from individuals who are not carrying on the business of banking. Essentially, a loan taken from the bank not only involves furnishing of securities and documentation but also is advanced after safeguarding the interest of the lenders in a robust manner. Quite unlike such transactions/borrowings from individuals are much less organized and without the cumbersome requirements of documentation and collateral securities etc. In our considered view, the very action of the Assessing Officer in holding that the borrowings from the specified persons at a rate higher than the rate at which bank would lend its loans to the borrowers, would be excessive and unreasonable and the disallowance made by the Assessing Officer was, therefore, devoid of legally sustainable basis. Once there was categorical findings by the Tribunal that 18% per annum interest was reasonable the CIT(A) ought to have followed the same. Thus we are of the considered view that the impugned disallowance u/s 40A(2)(b) in respect of interest paid in excess to 12% per annum deserves to be deleted - Decided in favour of assessee
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