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2019 (7) TMI 921 - AT - Income TaxDisallowance of interest - whether the appellant had sufficient non-interest bearing funds to give the advances? - HELD THAT:- The perusal of financial statements as placed on record reveal that the assessee’s free funds in the shape of Share Capital and Reserves far exceeds the interest free deposits granted by the assessee. Another feature to be noted is that there is very minor increase in the deposits during the impugned AY. Therefore, a presumption was to be drawn in assessee’s favor that the stated deposits were made out of free funds available with the assessee unless the nexus of borrowed funds visà- vis interest free deposits granted by the assessee could be proved by the revenue. The said proposition is in line with the recent decision of Hon’ble Supreme Court rendered in CIT Vs Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] . Respectfully following the same, we delete disallowance u/s 36(1)(iii) made by Ld. AO. AO is directed to nullify the adjustment of the same from WIP. Ground No. A stands allowed. Taxability of Rent received from tenant and tenancy transfer fees - adjustment and reduction from WIP - in the opinion of Ld. AO, was assessable as Income from other sources - both received in respect of project of assessee - incoming tenants has agreed to obtain tenancy rights from outgoing tenants for a certain lump sum consideration and landlord, as a consenting party, received of a sum of ₹ 5 Lacs - HELD THAT:- It also emanates from the record that the assessee was pursuing only one project which was at the above stated site. All costs under the project have been capitalized by the assessee under the head stock-in-process following project completion method of accounting. No expenditure has been claimed in the Profit & Loss Account during impugned AY. The perusal of Schedule 13 – Other Expenses reveal that the assessee has paid compensation of ₹ 3 Lacs to tenants which has also been capitalized under the same head and not claimed as an expenditure. The aforesaid factors would reveal that all the activities & transactions being carried out by the assessee, in unison, were in furtherance of carrying out the stated project only and part and parcel of the unified construction activity. This being so, the action of the assessee in reducing the stated amounts from WIP was justified. Therefore, by reversing the stand of lower authorities, we direct Ld. AO to delete the stated additions and reduce WIP by corresponding amount. Ground Nos. B & D stands allowed. Ground No. C, being without prejudice ground, becomes infructuous.
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