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2022 (4) TMI 579 - ITAT RAIPURDisallowance of interest expenses made u/s. 40A(2)(a) - disallowance of interest from 3% to 2% i.e. accepted 16% interest paid to unsecured loan against 18% paid by appellant since past so many years - assessee had claimed deduction of interest expenses @ 18% on the old unsecured loans that were raised by it from its related parties - HELD THAT:- AO, while adopting the bank lending rate had lost sight of the fact that the loans from the bank would have required providing of security, incurring of certain hidden charges, as well as satisfaction of number of other formalities; unlike the raising of unsecured loans by the assessee from its related parties. Backed by our aforesaid observations, we are unable to find favour with the incomparable basis that had been adopted by the Assessing Officer for triggering the provisions of section 40A(2)(a) of the Act. Apart from that, we find, that as brought to our notice by the Ld. AR, the assessee in the immediately preceding year i.e. A.Y. 2013-14 had paid interest on the unsecured loans in question @ 18% and the same had been accepted by the Assessing Officer vide his order passed u/s. 143(3) for the said year. We are of a strong conviction that not only the basis adopted by the Assessing Officer for triggering the provision of section 40A(2)(a) of the Act is fallacious, but the same also militates against the fact that the interest paid by the assessee on the said unsecured loans @ 18% had been accepted by the department while framing the regular assessment in its case for the immediately preceding year i.e. A.Y. 2013-14. We, thus, in terms of our aforesaid deliberations, are unable to persuade ourselves to concur with the view taken by the lower authorities. Accordingly, we set-aside the order of the CIT(Appeals) and vacate the disallowance u/s. 40A(2)(a) of the Act to the extent the same had been sustained by him. Appeal of assessee allowed.
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