AROMATICS INDIA PRIVATE LIMITED,NEW DELHI vs. ACIT, CIRCLE-3(1), NEW DELHI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the difference between interest rates on secured bank loans and unsecured loans from private parties can be an acceptable range. Therefore, the addition made by the AO is deleted.
What were the facts?
The assessee paid interest at 1.75% on unsecured loans from group companies, while bank lending rates were 13.25%. The AO made an addition of Rs. 362,482 based on this difference, which was confirmed by the CIT(A).
What were the issues?
Whether the addition on account of excessive interest paid on unsecured loans is justified when there is a difference in interest rates between secured bank loans and unsecured group company loans.
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHIBENCH ‘A’, NEW DELHI
Before: Sh. C. M. GargDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by assessee against the order of the ld CIT(A)-32, New Delhi dated 19.01.2018.
The assessee has raised ground No. 2 with regard to confirmation of addition of Rs. 362482/- on account of excessive interest paid on unsecured loan, this addition being arbitrary and contrary to the facts and provisions of law and is liable to be deleted.
Aggrieved with addition of Rs. 362482/- made by the AO as confirmed by the ld CIT(A), the assessee filed appeal before the Tribunal. On going through the record we find that the addition has been made on account of the difference between the lending rate of the banks of 13.25% and payment of interest @1.75% on the loan received from the group companies. We find that the difference of 1.75 % interest rate on secured loans from the banks and the unsecured loans from the private parties can be an acceptable range, and hence, the addition made is hereby deleted.
Order Pronounced in the Open Court on 14/02/2023.
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