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2018 (12) TMI 638 - ITAT MUMBAIAddition on account of interest u/s 36(1)(iii) - deposits given by the assessee so as to acquire the right to collect the maintenance charges from various licensees and the same were inextricably linked with the contractual terms entered into by the assessee - Held that:- The quantum as well as periodicity of deposits was provided by the contractual terms and the terms also provided for refund of the same in certain eventuality. AO has disallowed the interest on the premise that the deposit was excessive in nature keeping in view the deposits sought by other entities under similar circumstances. AO was not justified in sitting on the armchair of a businessman so as to adjudge the sufficiency of the deposits given by the assessee which was duly authorized by the contractual terms. This is further fortified by the fact that deposits were given by the assessee out of commercial expediency so as to get the right to collect the maintenance charges from the licensees which generated business income for the assessee. The same was inextricably linked with contract generating business income for the assessee - tax planning is legitimate provided it fell within the four corners of law and it is permissible under the law provided the same is not a colorable device and not done so as to merely defraud the exchequer - no such attempt by the assessee in the present case - the genuineness of the unsecured loans or interest expenditure was not under doubt. The only condition envisaged by Section 36(1)(iii) to grant deduction of interest expenditure is that the funds were used by the assessee for the purpose of business and nothing more - no infirmity in the stand of first appellate authority. Our view is fully supported by the analogy of the decision rendered in S.A.Builders Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] - Decided in favour of assessee.
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