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2019 (11) TMI 354 - AT - Income TaxDisallowance of interest u/s 36(1)(iii) on a proportionate basis - preliminary argument made by AR is that no disallowance of interest could be made on the funds borrowed in the earlier years and lying in opening balance as on 1.4.2009 when the said borrowings and utilization thereon were accepted as meant for business purposes in earlier years - HELD THAT:- In the instant case, even after framing the assessment for the AY 2010-11 wherein the interest was disallowed in respect of borrowings made in earlier years, the revenue had not resorted to reopen the earlier years or revise the assessments for the earlier years in the manner known to law. We are equally afraid as to whether the ld DR would advance the same argument in the issue of reopening of assessments for those earlier years where return has been processed u/s 143(1) after due application of mind by the AOs’ at that relevant point of time. Hence we are not inclined to accept the arguments of the ld DR in this regard. We find that the ld AR submitted that the amounts advanced to Neeta M Mehta alone had increased during the year. We find that with regard to amounts advanced to all other parties except Neeta M Mehta, the closing balance had only reduced when compared to the opening balance and hence there cannot be any disallowance of interest on the opening balance of loans advanced to parties - See VIRENDRA R. GANDHI VERSUS A.C.I.T [2014 (11) TMI 1081 - GUJARAT HIGH COURT] With regard to loan given to Neeta M Mehta during the year, we find that during the year , the assessee had advanced only a sum to the said party and we find that assessee is having sufficient own funds during the year in the form of current year profits before depreciation to the tune of ₹ 4.24 crores. Hence it could be reasonably presumed that the amounts to Neeta M Mehta were advanced interest free out of own funds available with the assessee in the form of current year profits itself. Hence there cannot be any disallowance of interest u/s 36(1)(iii) on a proportionate basis even for the same. We direct the ld AO to delete the disallowance of interest u/s 36(1)(iii) - Decided in favour of assessee
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