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2016 (2) TMI 909 - AT - Income TaxAddition of interest made an account of interest free advances given - Held that:- Impugned advance made to Deepak Infrastructure was from the interest free funds of the assessee firm more particularly out of the interest free capital of the partner Mr. Deepak Kumar and therefore no disallowance u/s 36(1)(iii) could be made in the present case. We therefore, find no infirmity in the order of ld. CIT(A) in this regard and concur which the finding of the Ld. CIT(A) directing the deletion of disallowance of interest - Decided in favour of assessee Disallowance of interest u/s 36(1)(iii) on interest free advances made by the assesee to certain person - Held that:- At the impugned advance have been made out of interest free funds available with the assessee and thus there was no occasion what so ever of disallowing interest u/s 36(1)(iii) of the Income Tax Act, 1961. Reliance placed by the Ld. DR on the jurisdictional High Court decision in the case of Abhishek Industries [2006 (8) TMI 123 - PUNJAB AND HARYANA High Court] is misplaced since the same has been overruled by subsequent decision of the the Apex Court in Hero Cycle Ltd. The argument of the Ld. DR that the advance were for non business purpose, we find has merit since no evidence was brought on record by the assessee before us or before the lower authorities to substantiate its arguments, but having said so no disallowance u/s 36(1)(iii) can still be made in the present case as we have held that there were sufficient interest free funds available with the assessee to make the impugned advance and the presumption in the such cases is that they are made out of the interest free funds available and not the interest bearing funds. In view of the above we hold that the disallowance of interest u/s 36(1)(iii) pertaining to the Miss. Anjali Dhand, Mr. Akash Singhal and Mr. Virender Kumar upheld by the Ld. CIT(A) be deleted. - Decided in favour of assessee
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