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2015 (10) TMI 1491 - AT - Income TaxDisallowance of interest expenditure under section 36(1)(iii) - AO made disallowance on account of diversion of interest-bearing borrowed funds to group companies - CIT(A) allowed the claim - Held that:- Assessee has established that interest-bearing term loan was directly utilised for acquisition of land and meeting the cost of construction. Assessing Officer has failed to establish that the loan amount advanced to sister concerns is out of interest-bearing funds only. The assessee has given the details of the borrowings and utilisation of the same. The assessee has also furnished the details of interest-free funds available with the assessee during the relevant period.A perusal of the same shows that a sum of ₹ 17 crores sanctioned as term loan was directly disbursed by the bank on behalf of the assessee to M/s. Sai Enterprises on different dates for purchase of land. Another sum of ₹ 2,54,00,000 was disbursed by the bank as term loan, that was utilised by the assessee for making payments to M/s. Soorya Developers (Rs.1,48,46,000) and M/s. Meghana Developers (Rs. 1,06,04,000) for development and construction of villas. The assessee has been able to explain utilisation of the entire secured loan of ₹ 20 crores for business purposes. The assessee has also given the details of interest-free funds, amounting to ₹ 82.47 crores. The details of interest-free funds and utilisation of the entire borrowed funds for business of the assessee have not been controverted by the Revenue. As far as, the argument of the Revenue with respect to utilisation of own funds for the repayment of loan instead of advancing to group companies is concerned, we are of the considered opinion that the Revenue should not step into the shoes of the assessee. The Revenue cannot dictate the assessee to conduct its business affairs in a particular manner. As long as the assessee is conducting its business affairs within the legal framework, it is at liberty to manage and utilise its resources according to its own prudence and skill. We find no infirmity in the impugned order. The order of the Commissioner of Income-tax (Appeals) is confirmed and the appeal of the Revenue is dismissed being devoid of merit. - Decided in favour of assessee.
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