Case Law Details
Heena Parag Chheda Vs ACIT (ITAT Mumbai)
It is settled proposition of law that in order to make a disallowance u/s 40A(2)(b), the AO has to first determine the fair market value/price and then compare the same with the actual expenditure incurred and payment made by the assessee to the specified person. In case, the payment made by the assessee to the specified person is excessive and unreasonable having regard to the fair market value/price, the amount found to be excess or unreasonable is liable to be disallowed u/s 40A(2) of the Income-tax Act. Therefore it is precondition for making the disallowance u/s 40A (2) that the AO has to arrive to the conclusion that the amount paid by the assessee is excessive or unreasonable in comparison to the fair market value/price. In the case in hand, the AO has not carried out such exercise to first determine the fair value of interest rate in question by bringing any comparable instance/case So, naturally and undisputedly it would be for the business purpose only. Therefore, in our considered opinion that lower interest received on loan given to related party for business purpose cannot be subjected to provisions of section 40A(2)(b) of the Act.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been filed by the assessee against the order dated 05/08/2019 passed by the Commissioner of Income-tax (Appeals)-33, Mumbai for the assessment year 2014-15.
2. The only ground of appeal raised by the assessee is that the Ld.CIT (A) has erred in confirming the disallowance of Rs.19, 06,456/- made by the assessing officer.
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