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2016 (4) TMI 564 - AT - Income TaxDisallowance u/s.36(1)(iii) - Held that:- Amount borrowed for the purpose of business was partly disallowed by the AO on the plea that interest cannot be allowed to the extent of interest free advances/loans. As per the details furnished before the lower authorities, we found that advances were made in the regular course of business for purchase of property, which cannot be treated as not related to the business. Further we found that the reserve and surplus of assessee company was much more higher than the alleged advances on which the AO has disallowed the interest. In view of the jurisdictional High Court decision in the case of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ), wherein it was held that where the assessee has own and borrowed funds, a presumption can be made that advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. Applying the proposition of law laid down by the jurisdictional High Court, we do not find any merit in the disallowance so made by the AO u/s.36(1)(iii) of the I.T.Act, where reserves and surplus of assessee was much more than the advances. - Decided in favour of assessee.
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