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2022 (4) TMI 1318 - AT - Income TaxDisallowance of interest u/s 36(1)(iii) - assessee has submitted that the aforesaid sale got forfeited since Kadam did not pay the balance amount and the property in question was later sold to third party - Whether amount due from Kadamb was not outstanding sale price but loans & advances so that interest was incurred for non-business purposes and as such it was not admissible? - HELD THAT:- The assessee has not placed on record any ‘agreement for sale’ entered with Kadam or any further correspondences in support of his averments. While, in principle, we are in agreement with Ld. Counsel for the assessee that if no amount has been advanced to Kadam, then merely on basis of mistakenly showing the above sum under the head “loans and advances” instead of “trade receivables” section 36(1)(iii) of the Act cannot be invoked. In absence of supporting documents, we are inclined, in the interests of justice, to restore the file to AO to verify whether in the present case, the assessee has in fact, not advanced any money to Kadam as asserted and the sum merely represents a mere journal entry, which has been incorrectly reflected under the head “loan and advances”, while it should have been accounted for as “Trade Receivables”. And if that be the case, then in our view, no disallowance of interest u/s 36(1)(iii) of the Act is called for, merely on account of mistaken accounting treatment, when on facts, no advance has been given. Appeal of assessee allowed.
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