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2020 (9) TMI 863 - AT - Income TaxExcess interest over and above the receipts of interest - addition has been made exclusively on the basis that the assessee has made interest free advances to its sister concern whereas this money was advanced for business purposes - HELD THAT:- Assessee was required to pay interest free refundable security deposit of ₹ 56,00,000/- to the owner of the land in lieu of the owner granting license for carrying out the development project. Thus, the advance made by the assessee was wholly and exclusively for the purposes of business. In view of these facts the A.O. was not justified in making any disallowance out of interest payment. Development Agreement with Kalyan Gems Export Ltd. has been executed on 03.09.2011. As per terms of this agreement, copy of which is available on paper book as cited supra the assessee agreed to develop a plot of land measuring 2994.62 sq. meter situated at K. No. 184 & 185/685, Village Manoharpura, Tehsil Sanganer, Jaipur the agreement that assessee was to act as a developer and was required to develop a project comprising of multi-storied commercial and residential complex. It was under this agreement that assessee paid a sum of ₹ 2,21,00,000/- Lacs to Shri Kalyan Realty Ltd on 03.09.2011 as a security deposit. This was done in compliance of terms at para 4.1 of the development agreement. As per this para the assessee was required to pay interest free refundable security deposit of ₹ 2,21,00,000/- to the owner of the land in lieu of the owner granting license for carrying out the development project. Thus, the advance made by the assessee was wholly and exclusively for the purposes of business. The development agreements establish beyond doubt that the amount advanced to both the concerns was under business agreements, therefore there is no occasion for making any disallowance of interest. No merit in the disallowance so made by the A.O. - Decided in favour of assessee.
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