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2018 (6) TMI 420 - AT - Income TaxDisallowance of the interest - payment of excessive interest on unsecured loan - arbitrary interest rate application on advances - Held that:- No justification for the A.O. to make notional disallowance of ₹ 4,80,000/- by applying arbitrary interest rate of 12% on advances of ₹ 40 lakhs. Since the explanation given by the assessee in the written submissions reproduced above, have not been rebutted by the Revenue through any evidence or material on record, therefore, the calculation given by assessee for capitalizing interest in various projects is just and proper which is supported by book entries. The assessee availed balance amount in business and rightly claimed it to be revenue expenditure because all the amounts are coming-up in the mixed bank accounts maintained by assessee. Therefore, separate bifurcation would not be possible for the assessee. No disallowance to be made - Decided in favour of assessee Disallowance on account of interest on unsecured loans - Held that:- The explanation of assessee have not been rejected by the authorities below. Therefore, considering the totality of the facts and circumstances of the case and that similar issue have been considered in A.Y. 2012-2013 above, the facts in this assessment year are on better footing, therefore, authorities below were not justified in disallowing the interest incurred by assessee wholly and exclusively for the purpose of business. The A.O. also has not brought any evidence on record if borrowed funds have been used for non-business purposes ? No nexus have been pointed-out between borrowed funds and non-business activities of the assessee or if borrowed funds have been used for the projects pending completion. In this view of the matter, we set aside the orders of the authorities below and delete the entire addition. - Decided in favour of assessee
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