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2021 (8) TMI 126 - AT - Income TaxDisallowance u/s 36(1)(iii) - assessee has paid interest on secured loan more whereas it has given interest free advance less - HELD THAT:- AO, in the instant case, without considering the interest earned by the assessee, has disallowed an amount of ₹ 13,41,068/- being the proportionate interest on interest free advances of ₹ 1,12,03,500/-. In the instant case, disallowance, if any, can be made on the interest free advances of ₹ 17,40,000/- given to Mr. Nazuk Jindal since the same is admittedly for non-business purposes - while computing the proportionate disallowance of interest free advances, the AO has to consider the interest earned on government securities and short-term deposits which was shown separately by the assessee as ‘Income from other sources’ from the total interest deposited in the Profit & Loss Account to the tune of ₹ 27,11,471/-. For computing the proportionate disallowance of interest on the interest free non-business advance of ₹ 17,40,000/-, the AO is directed to set off the interest income of ₹ 9,15,626/- and, thereafter compute the proportionate disallowance. To this extent, the order of the CIT(A) is modified and the ground raised by the assessee is partly allowed. Appeal filed by the assessee is partly allowed.
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