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2013 (9) TMI 377 - ITAT HYDERABADDisallowance of interest - Disallowance of ex gartia interest - CIT(A) made an observation that the claim made under ex-gratia may not be covered under section 43B - However, confirmed the disallowance on the ground that the same was not paid before the due date for furnishing the return - Held that:- CIT(A) having held that ex-gratia is not covered by section 43B, is not justified in upholding the disallowance relying on the decision of Hon'ble Madras High Court in the case of CIT vs. Mettur Chemicals & Industrial Corporation Ltd. (1998 (3) TMI 69 - MADRAS High Court) as the amount of ex-gratia cannot be regarded as bonus and requirements of section 37 are fully satisfied - Decided in favour of Revenue. Disallowance of interest - Diversion of funds - Held that:- issue should be remitted back to the file of the Assessing Officer with a direction to verify whether the investments made by the assessee is out of its own funds or from the borrowed funds. In case the investments are found to have been made from out of non-interest bearing own funds, there is no justification for any disallowance of interest in relation to such investment. Only in case it is found that the assessee does not have non-interest bearing funds of its own, disallowance out of interest claimed has to be worked out and made accordingly. We accordingly set aside the impugned order of the CIT(A) on this issue and restore the matter to the file of the Assessing Officer. The Assessing Officer shall re-decide the issue in the light of our above observations and in accordance with law, after giving due opportunity of being heard to the assessee - Decided in favour of Revenue.
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