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2017 (10) TMI 164 - AT - Income TaxLevy of penalty u/s 271(1)(c) - denial of deduction under section 10B on interest income - Held that:- We find that the assessee has claimed deduction under section 10B of the act on interest amount of loans and advances and AO brought to tax the excess claim of deduction of ₹ 7,26,926/- under the head income from other sources. The assessee claimed that admissibility of deduction u/s. 10B on the component of interest receipt was from funds advanced that were used in the business Since the funds were temporarily available out of business, the same were deployed as a matter of prudence in order not to keep the funds idle. It was brought to notice of the AO that assessee did not have surplus funds that were deployed to earn interest and thus the funds were business funds only and income there from constituted profits and gains of business. It was also explained to the AO that, the assessee paid interest of ₹ 140,526/- on funds borrowed and this was allowed by the AO as business expenditure. To reduce this interest burden, the assessee deployed funds available on a temporary basis for fruitful purposes rather than keeping the funds idle. - Decided in favour of assessee.
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