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2012 (1) TMI 224 - AT - Income TaxDisallowance of interest under section 36(1)(i) - Held that:- Under the provisions of section 36(1)(iii), any interest on borrowings made for acquisition of assets for extension of existing business is required to be capitalized till the asset is first put to use. In this case, assessee had made total advance payments of ₹ 1,53,25,5000/- for acquisition of two new premises out of payment made during the year was ₹ 10,06,000/- and balance payment had been made in the earlier years. Authorities below have proceeded with the presumption that the assets had been acquired from borrowed funds. However, no basis for such finding has been given. The assessee has pointed out that most of the payments had been made in earlier years in which year there was no disallowance of interest. Therefore, in the earlier years, the payments were made from own funds. During the year, payment was only ₹ 10.06 lacs. Assessee had own funds of ₹ 3.95 crores and interest free borrowing of ₹ 7.92 crores. In addition, current year profit was itself ₹ 96.00 lacs. Considering these facts in our view source of current payment is easily explained from own funds. Therefore, when the payment for acquisition of assets have been made from own funds, there cannot be any case of disallowance of interest. We, therefore, set aside the order of CIT(A) and delete the addition made.
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