Section 40A(2)(b) not applies to loan given at lower interest rate for business purpose to related parties

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. There

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