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2021 (5) TMI 508 - AT - Income TaxAddition u/s 36(1)(iii) - deduction towards interest paid on loans borrowed for business purposes - HELD THAT:- There is no merit in the findings of the AO, because the assessee has filed rental agreement copy to prove that it has taken premises on rent by paying lease rental deposit to Mr. G.Ramesh on a monthly rental of ₹ 75,000/- and such rent shall commence from 01.04.2013. The assessee has also produced necessary evidence to prove that it has started paying rental for the premises from next financial year. Assessing Officer has not disputed rental agreement entered into between the assessee and Mr. G.Ramesh, but he has disallowed interest only on the ground that although, rental agreement has been entered into by paying deposit, but no rental payment has been made for the current financial year. We find that reasons given by the AO to disbelieve rental agreement between the parties is not on sound footing, because it is for the parties to decide from which date rental payment shall commence. Merely for the reason that there is no rental payment for current financial year, genuine rental agreement and consequent rent advance paid cannot be considered as diversion of funds for non-business purposes so as to disallow interest expenses paid on loan borrowed for the purpose of business. But, the learned CIT(A) without appreciating the facts simply confirmed additions made towards disallowance of interest expenses. We set aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete additions made towards disallowance of proportionate interest u/s.36(1)((iii) - Appeal filed by the assessee is allowed.
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