Jasibai Dayaram Amlani Vs DCIT (ITAT Nagpur)
Secured Bank Rate Is Not the Ceiling for Unsecured Loans—Interest at 18% Allowed After Counting the Hidden Cost of Bank Finance
Summary: The Nagpur Bench of the ITAT has held that interest paid at 18% on unsecured business loans cannot be restricted merely because banks charged nominal interest ranging from 14.75% to 15.25%. The real comparison must account for stamp duty, processing fees, inspection charges, bank commission, transaction charges and other costs attached to secured finance. The Tribunal also deleted additions concerning rental income and salary paid to the assessee’s son by following its decision in the assessee’s own case for the succeeding year.
The assessee, Jasibai Dayaram Amlani, was an individual carrying on business under the name Naresh Steel Company. She filed her return for AY 2013-14 declaring income of ₹21,30,600. The case was selected for scrutiny through CASS, and an assessment was completed u/sec. 143(3).
Three disputes arose from the assessment. The AO made an addition of ₹1.80 lakh concerning rental income from a property let out by the assessee, disallowed salary expenditure of ₹2.50 lakh paid to her son, Naresh D. Amlani, and restricted interest paid on unsecured loans from 18% to 16%, resulting in a disallowance of ₹4,07,709.
