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2017 (1) TMI 897 - ITAT MUMBAIDisallowance of interest paid on money borrowed at higher rate of interest - Held that:- From the record we found that assessee was having sufficient interest free funds in the nature of shares capital, reserve and surplus and advances for sale of flats. Substantial portion of the advances and deposits were given purely for business purpose for having property on development on which no interest can be charged. From the record, we also found that following advances and deposit were given purely for business of property development and thus no interest can be charged on the same. We also found that the Assessing Officer has wrongly in calculating average rate of interest on the balance amount outstanding as at 31.03.2010 instead of taking average balance during the year. This would have clearly shown that the average rate of interest on loan taken is same as that of average rate of interest on loan given. We attach herewith a statement showing average rate of interest on of loan taken and given. As per this statement the average rate of interest on loan taken is 11.28% and average rate of interest on loan given is 11.20%. Thus advances were given out of owned funds and for business purposes, therefore, no disallowance can be made in respect of advances given for the purpose of business. - Decided in favour of assessee
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