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2017 (8) TMI 950 - ITAT MUMBAIInterest on borrowed capital - making advances for purchase of fixed assets cannot be allowed u/s 37(1) or 36(1){iii) - whether these advances sought to be made to equipment suppliers were genuine or were these colorable devices adopted by the assessee to evade taxes and were part of sham transactions? - Held that:- The onus is on the assessee to prove the genuineness of the said transaction of granting advances to equipment suppliers. The assessee is also directed to produce the details/project report of various machinery/equipment required for the upgradation/improvement in quality of services as approved by ITI Limited, which ultimately did not materialized and got cancelled and the amount was refunded by the supplier parties. Thus, for proper verification and enquiry and establishing genuineness of the said transactions, the matter is set aside to the file of the A.O. and assessee is directed to produce all cogent evidences as detailed above before the A.O. to establish the genuineness of the transaction in context of the claim of the assessee for upgradation of the quality of service w.r.t. data center entered set up by the assessee in JV with ITI Limited. The onus is on the assessee to prove that these interest expenses are allowable in accordance with the provisions of the 1961 Act. The assessee shall be allowed by the AO to file all relevant evidences/ explanations in its defense, which shall be admitted by the AO in the interest of justice. Needless to say that the A.O. shall provide adequate and sufficient opportunity to the assessee of being heard in accordance with principles of natural justice in accordance with law.
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