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2011 (4) TMI 1343 - AT - Income TaxUnaccounted expenditure - receipt of ‘on money’ - In the present case assessee is dealing in several immovable property i.e. flats and shops which he has constructed. A single flat is a capital asset for the purchaser but for the assessee all the flats together constitute stock-in-trade. HELD THAT:- it is undisputed position that out of this on money assessee has incurred various expenditure/investment. Therefore, ‘on money’ as such and as a whole cannot be taxed over and above the income accruing on the basis of entries recorded in the books of account. on the basis of decision held in E.D. Sassoon & Co.Ltd. & Ors. vs. CIT [1954 (5) TMI 2 - SUPREME COURT] we hold that advance money received either by way of cheque or by way of cash will partake the character of taxable income when registered sale deed of the flats is executed in subsequent years. As a result, the sum of ₹ 10 crores will not taxable in Asst. Year 2008-09. The appeal of assessee is accordingly allowed. Regarding interest bearing fund - If assessee is able to show the nexus that interest bearing funds or part thereof was given as advance on which assessee has earned interest, to that extent netting can be allowed. If assessee is not able to establish such nexus of interest bearing funds and advances on which assessee has earned interest netting will not be allowed and interest income to that extent would be taxed separately. This ground of assessee is, therefore, allowed but for statistical purposes. Regarding interest free advances - In our considered view this issue is also required to be examined afresh from the point of view of nexus. AO has to show that interest bearing funds were advanced as interest free to these partners. If it is so then rather taxing interest income, part of interest expenditure can be disallowed. But where assessee has sufficient personal capital or interest free funds then no such addition can be made. With these observations we restore this issue also to the file of AO. As a result, appeal filed by the assessee is partly allowed and partly allowed for statistical purposes.
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