Case Law Details
R R M Trading Co. Vs ACIT (ITAT Delhi)
ITAT find that AO has restricted the payment of interest to the related parties @ 18% to 12% on the ground that it is excessive and unreasonable looking to the fact that assessee has paid interest to the partners @ 12% which is in accordance with the Partnership deed. However, nowhere AO has tried to establish that having regard to the fair market value, such an interest payment is excessive or unreasonable without bringing any comparable instances that unsecured loan in the market are less. Apart from that, we agree with the submission of the ld. Counsel for the assessee that bank rates may be 12%, however such bank loans are subject to hypothecation of goods, collateral security, mortgage and guarantor and various other paper formalities. Since bank loans are secured loan, that is why it is always less than the unsecured loans in the open market. Without there being any adverse material on record that the interest rate paid by the assessee are not in consonance with the fair market value in the open market, we do not find any justification for making such disallowance because onus is on the AO u/s 40A(2)(a) with regard to interest paid to four related parties being excessive and unreasonable having regard to the fair market value in the open market. Accordingly, disallowance sustained by the ld. CIT (A) of Rs.8,25,723/- is deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
The aforesaid appeal has been filed by the assessee against the impugned order dated 31.08.2018 passed by the ld. CIT(A)-20, New Delhi for the quantum of assessment passed under section 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) for the assessment year 2015-16.
2. The grounds of appeal raised by the assessee read as under :-
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