ACIT 2(1) Vs Surajbhan Agrawal (ITAT Indore)
ITAT Indore held that rate of interest on secured loan from banks cannot be compared with the rate of interest on unsecured loan. Accordingly, disallowance of interest u/s. 40A(2)(b) of the Income Tax Act deleted.
Facts- Assessee made payment of interest to the tune of Rs. 10,99,117/-. The observation of the Assessing Officer is that such payment was made to the persons covered u/s 40A(2)(b) at the rate of 15% which is on higher side. AO worked out the figure at Rs.2,74,779/- as excessive, consequently disallowed. CIT(A) allowed the appeal. Being aggrieved, the present appeal is filed by the revenue.
Conclusion- Held that there is uncontroverted finding in the impugned order that the same rate of interest was paid by the assessee in last year and no such disallowance was made. Even otherwise, unless and until corroborative material is brought on record, it is not expected from the Assessing Officer to conclude that the interest rate of 15% was too high. At the same time, the interest rate on secured loan from banks cannot be compared with interest rate on unsecured loan. The businessman knows his interest best. The Assessing Officer is not expected to sit in the chair of the businessman and decide the reasonableness of rate of interest that too without bringing any corroborative material on record. In view of these facts, on this ground also we find no justification to interfere with the conclusion drawn by the learned CIT(A) and uphold the same.
