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2012 (5) TMI 233 - AT - Income TaxDisallowance u/s 40A(3) - 20% of the expenditure made in cash - AO alleged that since the assessee was engaged in the business of purchase and sale of land, the payment made towards advance should be treated as payment made towards purchase of land - Held that:- The disallowance under s. 40A(3) can be made where the assessee Incurs any expenditure. In the instant case, the assessee has not claimed the expenditure in respect of purchase of land. The Revenue has not collected any material to suggest that what is apparent is not real. The assessee has filed the copy of the cancellation of the sale agreement by the assessee - Decided in favor of the assessee Interest free advances / loans - held htat:- The assessee is having sufficient capital. If there are mixed funds then non-interest-bearing funds are to be considered as utilized for non-interest-bearing advances. It is the assessee who has to take a business decision. Fees is generally received at the beginning and surpluses are used for making fixed deposits as receipts are in advances while expenses are spread out throughout the year. Since interest-free advances are less than the capital and the AO has not brought on record any nexus of interest-bearing loans used the AO could not have disallowed the interest. - There is no onus on the assessee to establish that interest-free advances are out of interest-bearing advances if non-interest-bearing funds are more. - Decided in favor of the assessee
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