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2015 (1) TMI 909 - AT - Income TaxDisallowance of interest - inter corporate deposits - assessee company was engaged in the business of financing and investment activities - Held that:- In the present case it is an admitted fact that the assessee was a Non-Banking Financial Company and its Memorandum of Association and Articles of Association authorized it to do the business of Financing and Investment. The assessee in the preceding year received unsecured loans of ₹ 5,50,00,000/- which were initially utilized for giving Inter Corporate Deposits. In the instant case it is an admitted fact that the AO allowed the claim of the assessee regarding interest on borrowed capital in the preceding year i.e. the assessment year 2006-07 and there is no change in the facts for the year under consideration vis-à-vis the preceding year, moreover, the loan received in the year under consideration was utilized for making the repayment of the old loans. Therefore, no disallowance was called for in the year under consideration even by keeping view the principles of consistency. In the present case also the assessee made the investment in share application money for a sum of ₹ 4,25,00,000/- whereas the Share Capital alongwith Reserve & Surplus was amounting to ₹ 5,60,39,195/-(Rs. 2,25,00,000/- + ₹ 3,65,39,195/-) which clearly established that interest-free funds available with the assessee were more than the investments made in share application money. Therefore, the disallowance made by the AO on account of notional interest was not justified and the ld. CIT(A) arbitrarily confirmed the same. We, therefore, delete the disallowance made by the AO and sustained by the ld. CIT(A). - Decided in favour of assessee.
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