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2022 (6) TMI 335 - AT - Income TaxAssessment u/s 153A - incriminating material seized for the purpose of framing assessment or not? - HELD THAT:- Additions made by the AO dehors any reference to or foundation in any incriminating seized materials are not sustainable for any of the assessment year under appeal, therefore, he deleted the impugned additions/disallowance - See KABUL CHAWLA [2015 (9) TMI 80 - DELHI HIGH COURT]. Addition made on account of Scrap Handling charges - HELD THAT:- As it is not the case of the Department that the assessee has not paid the rent but paid on the last day of the first year. The ld. AO could not prove this as bogus expenditure, whereas the assessee has proved that it required open yard to place the imported goods of its customers for a period of 30 days, which is already collected from its customers as handling charges. In the facts of the above circumstances of the case, we do not find any infirmity in the order passed by the ld. CIT(A) and therefore confirm the same and dismiss the Ground No. 1 raised by the Revenue. Disallowance of interest u/s. 36(1)(iii) - assessee had made interest free advances out of interest bearing funds - Proof of business expediency - HELD THAT:- CIT(A) correctly held that it was clearly noticeable from the balance-sheet extracted for all the assessment years under appeal that thematic average of interest free advance was far less than the available interest free funds, and the borrowed funds also appeared to have been deployed in closing stock, trade receivables and business assets for which primarily the funds have been borrowed. CIT(A) held that the advances prima facie appeared to have been made out of interest free funds available with the assessee; secondly, the AO has not discharged onus of establishing clear cut and direct nexus between the interest bearing loans and interest free advances so as to justify disallowance in the light of the ratio laid down in the case of Reliance Utility [2009 (1) TMI 4 - BOMBAY HIGH COURT] and Hero Cycles [2015 (11) TMI 1314 - SUPREME COURT] and no examination of the accounts of the recipients could yield such nexus, and therefore, as a matter fact, it was to be held that such a nexus did not exist warranting any disallowance under section 36(1)(iii) of the Act; thirdly, there was clear and self-evident mutuality and business expediency in sizable inter-se transactions between the assessee and recipients of funds, and further that there did not appear any noticeable personal or non-business use by recipients of the funds received interest free and thus, on fact of the case as also in view of the law as explained by the Supreme Court in SA Builders and Hero Cycles (supra), there was no case to invoke the provisions of section 36(1)(iii) of the Act for making any disallowance - Decided in favour of assessee.
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