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2018 (10) TMI 932 - AT - Income TaxDisallowance on account of pro-rate interest on loan u/s 36(i)(iii) - Held that:- Hon'ble Supreme Court in the case of CIT vs. Munjal Sales Corporation [2008 (2) TMI 19 - SUPREME COURT], wherein held that if assessee has huge interest free funds including the profit earned by the assessee during the year which is sufficient to cover the advancement of loan, then no interest should be disallowed. The assessee has demonstrated that the huge amount of money was lying in the capital of the partners and the profit earned during the relevant assessment year itself was approximately ₹ 1.19 crores. Therefore, such an availability of funds interest free is sufficient to cover up a small interest free loan of ₹ 16 lacs given to sister concern. Additions for the business purpose relating to furniture and fixtures and commercial expediencies - Held that:- Assessing Officer also ignored the loans and advances given to the sister concern. Therefore, this needs to be verified and therefore, we remand back this issue to the file of the Assessing Officer to adjudicate upon it as per the evidence produced before the Assessing Officer by the assessee. Needless to say, the assessee be given opportunity of hearing by following principals of natural justice. AO as well as the CIT(A) has not taken the cognizance of the evidence produced before the Assessing Officer more particularly that of balance sheet and its profit. Therefore, this issue also needs to be remanded back to the file of the Assessing Officer. Needless to say, the assessee be given opportunity of hearing by following principals of natural justice. Ground No. 4 is partly allowed for statistical purpose.
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