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2018 (8) TMI 2116 - AT - Income TaxAddition u/s 36(1)(iii) - Non-charging of interest on loans from the related parties - as per AO Assessee has diverted its interest bearing funds as loans and advances to sister concerns and others without charging of any interest - HELD THAT:- It is an admitted fact that nothing has been brought on record that any specific interest bearing borrowed funds has been diverted by the assessee to the related parties from whom no interest has been charged. Since the net owned funds of the assessee company in the instant case is much more than the interest free advances given to related parties and since the Revenue has not brought on record any specific instance of interest bearing borrowed funds being diverted to the related parties free of interest, thus no disallowance u/s 36(1)(iii) is called for. As in the case of CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that if there are funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest free funds generated or available with the assessee company, if the interest free funds were sufficient to meet the investment. Appeal filed by the assessee is allowed.
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