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2016 (10) TMI 594 - AT - Income TaxAddition u/s 36(1)(iii) - investment in AOP - whether interest bearing funds were diverted as advances to the sister concern, friends and family members without any business expediency and that too without charging any interest? - Held that:- The impugned amounts were invested in earlier years and not in the current year. It is also noted that no evidence has been produced by the Revenue evidencing that the funds were diverted without commercial exigencies. So far as, making investment is concerned, it is the businessman who is to make the investment protecting his business interest. The Assessing Officer cannot be expected to sit in the chare of the assessee and decide in which manner the investment has to be made. Action can only be taken or disallowance can be made only in a situation when it is found that the investment or granting loans is contrary to the provisions of the Act. Compensation received for cancellation of development agreement - contractual receipt or short term capital gain - Held that:- CIT(A) has observed that, AO has developed a misplaced understanding of the nature of the transaction by treating it as capital receipt. It is clear that the assessee has carried out the expenditure towards the performance of the development agreement. - Therefore CIT(A) directed the AO to treat ₹ 50,00,000/- as contractual receipt. - order of CIT(A) is not erroneous. Decided against the revenue.
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