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2018 (3) TMI 1998 - AT - Income TaxDisallowance of Interest - borrowed funds were utilized for the purpose other than business activities or not - HELD THAT:- According to the balance sheet of the assessee, the unsecured loans of Rs.6.05 crores are available to the assessee and as per contention of the Ld. Counsel for the assessee, the interest free advance of Rs.5.48 crores are available to the assessee which exceeded the loan amount of Rs.4.36 crores. Therefore, the assessee had sufficient funds other than borrowed funds for giving the amount in question as loan to others and such findings of fact have not been rebutted by the Revenue authorities. Thus, the conditions of section 36(1)(iii) of the Act have been complied with in this case. Further, the assessee specifically pleaded before Ld.CIT(A) that borrowed funds of the assessee are for a sum of Rs. 5.15 crores and utilization of the borrowed funds are of Rs.5.22 crores in making deposit with the bank, cash in hand and fixed assets which also tally with the balance sheet of the assessee. Therefore, Ld. Counsel for the assessee rightly contended that the amount of loans on which interest has been paid, has been used for the purpose of business. In the case of COMMISSIONER OF INCOME-TAX AND ANOTHER VERSUS RADICO KHAITAN LTD. [2004 (9) TMI 37 - ALLAHABAD HIGH COURT], Hon’ble Allahabad High Court decided the issue in favour of the assessee in which the finding recorded by the Tribunal was that “the assessee company had sufficient funds other than the borrowed money for giving the amount in question as loan to its sister concern, which finding had not been specifically challenged in the present appeal, the conditions of section 36(1)(iii) of the Act had been complied with and, therefore, the assessee company was entitled to full allowance of the amount of the interests paid by it on borrowed capital.” The assessee, therefore, proved that borrowed funds have been used for the purpose of business, therefore, no disallowance u/s 36(1)(iii) of the Act could be made - Appeal of assessee allowed.
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