Case Law Analysis
|Income Tax Appellate Tribunal
Section 68 IT Act | Ad Hoc 10% Disallowance on Loans Unlawful Without Verification of Lender’s Identity & Creditworthiness : ITAT Mumbai
The ITAT Mumbai has struck down the practice of imposing automatic 10% disallowance on short-term borrowings under Section 68, ruling that tax authorities must conduct a substantive verification of the lender’s identity, genuineness, and creditworthiness. This sets a critical precedent for businesses relying on third-party loans, ensuring assessments are grounded in evidence, not arbitrary percentages.