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2017 (11) TMI 855 - AT - Income TaxDisallowance of interest on borrowed money - proof of money unitized for business purposes - purchase of plots - Held that:- The assessee has achieved the turnover of ₹ 10,08,23,511/- and the declared the gross profit rate @ 5.96%, which is higher than the immediate preceding year when it was 3.15% only. The purchase of the plot was to expand the business of the assessee to make go-down as the assessee was paying rent on the go-downs. Thus, there was a direct nexus of this expenditure with the business of the assessee. Since this expenditure was directly related to the business of the assessee, the interest paid on the borrowed money cannot be disallowed. CIT(A)’s observation that these plots were not utilized for the purpose of business is misplaced. The P&L account of assessee shows that the assessee was paying go-down rent of ₹ 6,90,366/- for the year under consideration F.Y 2012-13. Subsequently it was reduced to ₹ 3,29,264/- (F.Y 2013-14), which is evident from page No. 13 and 15 of the paper book respectively. Further the fixed assets schedule also shows that the assessee has spent on construction ₹ 16,01,000/- on these plots during the year under consideration. These plots are being utilized for the business purposes. The disallowance of interest on borrowed money was not justified as the money was utilized for business purposes only. - Decided in favour of assessee.
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