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2017 (5) TMI 1154 - AT - Income TaxInterest earned on loans and advances given to parties / concerns - income from the business activity of the assessee or it is case of simple diversion of fund for non-business activity - Held that:- We find that there is merit in the finding of the A.O. that the loan advanced for more than three/four years to M/s. Vijay Parikh & Associates, Arpit Samani, Parikh Granito, M/s. Nisha Enterprise cannot be treated as a temporary investment of the borrowed funds. Even the loan provided to M/s. Shri Shankar Sanitation, Shubh Hotel P. Ltd. and Shub Builders P. Ltd. has crossed the limit of more than two years. Thus there is merit in the finding of the A.O. that “AS-16: Borrowing Costs” is not applicable in the present case. The issue of netting off of interest income against interest expenditure shall arise when the interest earned by the assessee emanate from its business activity and there is relationship between the two. The above issue shall not arise if there is diversion of fund for nonbusiness activity. These aspects have not been examined either by the A.O. or the learned CIT(A). In view of the above, we set aside the order of the learned CIT(A) and restore the matter to the file of the A.O. to examine the above and pass an order after giving reasonable opportunity of being heard to the assessee. The assessee is also directed to file the relevant details before the A.O.
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