The Tribunal held that the assessee paid interest at 18% to relatives as well as to non-relatives. There was bound to be a difference between the interest charged by the bank and the interest charged by a private lender as for obtaining loans from bank, the assessee needed to maintain a margin and there were other expenses charged by the bank in the form of bank charges, penalty, etc. Therefore, the basis for disallowance made by the authorities was not correct. The assessee had made payments of interest after deducting tax at source and it was not the case of the authorities that the loans were not utilised for business purposes. Therefore, disallowance deleted. (AY.2014-15)
Anurag Rastogi v. ITO (2019) 75 ITR 8 (Luck)(Trib.)
S. 36(1)(iii) : Interest on borrowed capital-Interest paid to relatives and non-relatives-Difference between rate of interest charged by private money-lender and that charged by bank bound to exist-Assessee paying interest after deducting tax at source-AO failed to show that assessee utilised loan for purpose other than business-Interest expenses is held to be allowable.