Case Law Details
Issue – The assessee claimed that the assessee borrowed unsecured loan @ 18% from related as well as unrelated parties. Therefore, the rate of 18% cannot be said to be excessive. Reliance was placed upon the decision in the case of Balkrishna Goyal vs. DCIT, I.T.A. No. 590/Ind/2009, wherein it was held that 18 % interest from the related party is not excessive or unreasonable. On the other hand, the ld. Sr. DR defended the addition by contending that from the bank loan is available at the lesser rate.
The facts in brief are that the assessee declared income of Rs. 48,13,806/- on 30.09.2008. The assessee obtained total loan funds amounting to Rs. 5,63,54,055/- as on 31.3.2008 consisting of secured loan of Rs. 1,72,72,838/- and unsecured loan of Rs. 3,87,81,217/-.
The secured loan mainly consisted of Bank O.D. Limit availed from State Bank of India. Against mortgage of immovable properties of the firm where as unsecured loan are mainly taken from friends and relatives without any security and on fixed repayment terms.
The assessee firm was also having funds amounting to Rs. 2,47,81,199/- in the form of partners’ capital.
The Assessing Officer asked the assessee to furnish interest details on unsecured loans. The ld. Assessing Officer compared the rate of interest with rate of 15% collected by the assessee on loan given by it and, therefore, he disallowed interest of Rs. 7,92,321/-.
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