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2016 (4) TMI 734 - AT - Income TaxDisallowance on Account of Interest - loan to sister concern, a sick unit, fee of Interest - Held that:- No interest has been charged by the assessee firm from the said sister concern. The assessee firm has not been able to show that the loan amount has been advanced by the assessee firm from the partner’s capital account. The case laws relied upon by the assessee firm are clearly distinguishable as in the instant case, the assessee firm is not able to demonstrate that the said loans were granted for business of the assessee firm due to commercial expediency. However, the assessee firm has brought on record that the total interest amount paid by the assessee firm is ₹ 10,85,011/- which include the interest paid for car loan for which there is a specific and dedicated borrowings for buying a car. The assessee firm has taken a plea that the sister concern has become a sick company , however, no such evidence/cogent material to this effect has been brought on record. In our considered view and in the interest of justice, the matter needs to be set aside to the file of A.O. for re-determination of the issue de-novo after considering the cogent material/evidences of the assessee firm to be brought on record by the AO to prove its contentions that the interest free funds have been advanced by the assessee firm to the sister concern of the assessee firm and to that extent the assessee firm will be entitled for relief. Further, the A.O. shall also consider the plea of the assessee firm that the interest have been paid on specific and dedicated borrowings such as for acquiring car etc. on which in our considered view, no disallowance of interest paid on dedicated and specific borrowings is warranted. Needless to say that the AO shall give proper and adequate opportunity of being heard in accordance with principles of natural justice in accordance with law
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