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2023 (5) TMI 1278 - AT - Income TaxDisallowance of interest expenditure u/s 36(1)(iii) - advances to sister concerns - AO observed that the advance paid to sister concern was capital in nature, because the loan advanced to it was for purchase of land and it was not put to use during the impugned assessment year, therefore the interest expenditure should be capitalized instead of claiming it as revenue expenditure - AR strongly submitted that proviso to section 36(1)(iii) is not applicable in the present facts of the case and submitted that assessee had sufficient internal accruals during the impugned assessment year which is evident from the cash flow statements which is part & parcel of the financial statements - HELD THAT:- On going through the ledger account of sister concern in the books of the assessee company, it is noticed that the interest free funds have been given on various dates on piece-meal basis and the amount has also been received back from the sister concern on different dates, but no interest has been charged on the advances. We further note since the internal cash accruals from operations are more than the interest free funds advanced to the sister concern for business purposes, it cannot be said that the interest bearing loan funds had been utilized by the assessee for the purpose of giving interest free advances over the years to its sister concern - In view of this factual finding and relying on the judgment of Munjal Sales Corporation v. CIT [2008 (2) TMI 19 - SUPREME COURT] we hold that proviso to section 36(1)(iii) is not applicable in the present case. Accordingly, we set aside the order of the CIT(Appeals) and delete the addition. Decided in favour of assessee.
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