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2018 (1) TMI 281 - AT - Income TaxReopening of assessment - Addition on a/c of non-capitalization of Interest - Held that:- The assessment order says that the AO has not been able to substantiate any nexus between the funds utilized in the construction of flat and the interest debited to the profit and loss account for treating it as capital in nature. It is not the case of the Assessing Officer that the amount utilized in the construction represented interest bearing borrowed funds of the assessee. Per contra, there is no material on record to disbelieve the contention of the assessee that he had sufficient surplus funds which was utilized in the construction. Unless a nexus between the interest debited and the funds utilized is proved, the stand taken by the department regarding capitalization of interest, in our opinion, cannot be accepted. Therefore, the addition made by the authorities below in this head by way of impugned reassessment proceedings, deserves to be deleted. In respect of exhibition expenses paid to M/s. Mullar & Phipps India Ltd., there is no rebuttal of the contention of the assessee made before us that this point was raised by the Assessing Officer in the original assessment proceedings. The assessee had filed its reply, which stood accepted by the Assessing Officer with due application of mind. In these circumstances, the addition made by the authorities below on this account by reopening the assessment u/s. 147/148, in our considered opinion, is not tenable and stands deleted as also held in several decisions - Decided in favour of assessee.
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