AO Fails To Examine Relevant Material For Determining FMV Of Interest Rate For Availing Unsecured Loans: Mumbai ITAT Remits Matter
9 months, 1 week ago

AO Fails To Examine Relevant Material For Determining FMV Of Interest Rate For Availing Unsecured Loans: Mumbai ITAT Remits Matter

Live Law  

Observing that the relevant material for determining the fair market value of the interest rate for availing unsecured loans has not been examined, the Mumbai ITAT restored the issue of disallowance of excessive interest payment on unsecured loans to the file of AO for de novo adjudication. The AO however held that the average bank rates are 12% and therefore, rate of interest @18% paid by assessee to the related persons is unreasonable. The Bench accepted that the parties to whom assessee has paid interest are related parties within the meaning of section 40A, and the AO by considering the rate of interest @18% paid to related persons on unsecured loans as excessive, disallowed the interest paid in excess of 12%. In the present case, the Bench found that the AO by considering the average interest rates charged by the banks @12% treated the rate of interest @18% paid by the assessee to related persons as excessive and unreasonable u/s 40A of the Act.

Loans Rate Bench Interest Rate Itat Related Assessee Unsecured Loans Relevant Material Paid 18 Excessive Interest Related Persons  related  relevant  loans  payment  matter  ao  rate  material  itat  mumbai  assessee  paid  18  remits  unsecured  excessive  interest

History of this topic

Arbitral Tribunal Imposing Exorbitant Interest Not Violative Of Fundamental Policy Of Indian Laws: Delhi High Court
1 month ago

Arbitral Tribunal Imposing Exorbitant Interest Not Violative Of Fundamental Policy Of Indian Laws: Delhi High Court

Live Law  

The Delhi High Court bench of Justice Yashwant Varma and Justice Dharmesh Sharma, while hearing a review petition of an appeal filed by the appellant u/s 37 of the A&C Act read with Section 13 of the Commercial Court Act observed that the exuberant interest rate charged in the commercial world depends upon the transparency of the terms and conditions …

Once Cash Deposits In Bank A/C Of Lender Firm Is Accepted As Coming From Explained Sources, No addition Is Permitted U/s 68 As Unsecured Loan: Delhi ITAT
7 months ago

Once Cash Deposits In Bank A/C Of Lender Firm Is Accepted As Coming From Explained Sources, No addition Is Permitted U/s 68 As Unsecured Loan: Delhi ITAT

Live Law  

The Delhi ITAT deleted the addition made u/s 68 being unsecured loan obtained from a firm by the Assessee for further investment in a company on the ground that the identity, creditworthiness, and genuineness of the transaction stands proved. Finding that lender firm's AO did not find anything alarming with regard to cash deposits made in its bank account and …

Non-Existence Of Parties Who Gave Loan To Assessee Is Indication Of Its Prima Facie Bogus Nature: ITAT
2 years, 4 months ago

Non-Existence Of Parties Who Gave Loan To Assessee Is Indication Of Its Prima Facie Bogus Nature: ITAT

Live Law  

The Delhi Bench of the Income Tax Appellate Tribunal has held that the non-existence of the parties who have given loans to the assessee is a clear indication of their nature being prima facie bogus. The Assessing Officer issued summons to several parties at the address provided by the assessee requesting their personal deposition and information. During the analysis of …

Rate Of Interest In A Contract May Be Modified By The Court On Equitable Grounds: Andhra Pradesh High Court
2 years, 8 months ago

Rate Of Interest In A Contract May Be Modified By The Court On Equitable Grounds: Andhra Pradesh High Court

Live Law  

The Andhra Pradesh High Court recently ruled that where the rate of interest is fixed in the contract, it would be open to the Court to vary the rate of interest from the date of the suit till the date of recovery of the amount on equitable grounds, if the amount of interest is exorbitant. Issue of law The only …

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