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2014 (12) TMI 1068 - GUJARAT HIGH COURTInterest paid on borrowings - Whether the Tribunal is right in deleting the addition u/s 36(1)(iii) being the amount of interest paid by the assessee on the borrowing which amounts the assessee lent to another party with whom the assessee had business dealings – Held that:- The Tribunal was rightly of the view that the assessee is having business dealing with GMMSS Ltd. - assessee could sell its goods to the extent of ₹ 157 lakhs during the year to GMSS Ltd. - assessee company also earned ₹ 4.04 Lakhs GMMSS Ltd. - assessee company could also earn 45% gross profit out of the sale made to GMMSS Ltd. - it cannot be said that the interest free advances were made without business consideration - the funds have been borrowed by the assessee company - the transactions are genuine and they are also not entered into with any malafide intention to deprive the Department from lawful revenue, which is otherwise payable by the assessee - The dominant intention of these transactions was for ultimate benefit of the assessee and, thus, the same was entered into with business considerations - as decided in S.A.Builders Ltd. Vs. Commissioner of Income Tax (Appeals) and Another, [2006 (12) TMI 82 - SUPREME COURT] - assessee borrowed the funds, such funds have been borrowed for the purpose of business, the assessee has also paid interest on such funds, the case of the assessee is also not covered under the provisions of Section 40A(2) - the interest is allowable under the provisions of Section 36(1)(iii) – the order of the Tribunal is upheld – Decided against revenue.
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