TMI Blog2021 (2) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... availed loan from banks and financial institutions, apart from paying higher rate of interest it would have paid additional cost by way of processing charges and would also have been required to furnish collaterals to secure the loan. Whereas, while availing loan from the related parties, which are stated to be long term loans, the assessee neither has to pay any additional cost nor has to furnish any collaterals. Thus, the assessee is rather in an advantageous position as the related parties always run the risk of not being able to recover the loan in case of default. Considering the aforesaid factors, interest paid by the assessee @15% to the related parties cannot be said to be excessive or unreasonable having regard to the fair marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g interest @15% p.a. to related parties. Noticing this, the Assessing Officer called upon the assessee to explain the reason for paying higher rate of interest to related parties and also to explain why excess interest paid should not be disallowed. Though, the assessee justified the payment of interest at higher rate to the related parties; however, the Assessing Officer held that interest paid @15% p.a. to family members and related parties is unreasonable and excessive in comparison to interest paid to non related parties at 11% to 12% p.a. Therefore, he proceeded to disallow the excess 3% interest paid by the assessee which worked out to ₹ 7,05,410/-. The assessee contested the aforesaid disallowance before the first appellate aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s:- 1. Motilal Laxmichand Sanghavi vs ACIT (2019) 178 ITD 710 (Mum) 2. PCIT vs Cama Hotels Ltd (2016) 240 Taxman 770 (Guj) 3. CIT vs Sarjan Realities Ltd (2014) 227 Taxman 225 (Guj) 4. CIT vs Shiv Kumar (2013) 217 Taxman 73 (Del) 5. R.N. Gupta Co. Ltd vs ACIT (2016) 69 taxmann.com 291(Chd) 6. DCIT vs Shiv Kumar (ITA No.3247/Del/2010) 5. Strongly relying upon the observations of the Assessing Officer and learned Commissioner (Appeals), the learned Departmental Representative submitted, when the assessee has paid interest at a rate more than what is paid to unrelated parties, provisions of section 40A(2)(b) are clearly attracted. Thus, she submitted, the disallowance sustained by learned Commissioner ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher rate of interest it would have paid additional cost by way of processing charges and would also have been required to furnish collaterals to secure the loan. Whereas, while availing loan from the related parties, which are stated to be long term loans, the assessee neither has to pay any additional cost nor has to furnish any collaterals. Thus, the assessee is rather in an advantageous position as the related parties always run the risk of not being able to recover the loan in case of default. Considering the aforesaid factors, interest paid by the assessee @15% to the related parties cannot be said to be excessive or unreasonable having regard to the fair market value of the goods, services or facility for which the payment is made, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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