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2022 (7) TMI 57 - AT - Income TaxProportionate disallowance of interest on ad hoc basis after noting that assessee had both interest bearing funds and interest free funds at his disposal - HELD THAT:- We note that the disallowance has been made on ad hoc basis on the plank that interest bearing funds have been diverted. This was done by the AO despite noting that assessee had interest bearing funds as well as interest free funds. It is settled law that if assessee has sufficient interest free funds the right of attribution lies with the assessee and AO cannot insist upon one to one nexus between the funds. This view is duly corroborated by Hon’ble Mumbai High Court in the case of CIT vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. This aspect needs to be considered by the AO in making the disallowance which has not been done. Authorities below have shown that there is abnormal increase in sale to related parties, hence the debt is not normal. In our considered opinion, this plank is not acceptable as Revenue authorities are accepting the sales and no disallowance has ever been done in this regard. Moreover, the genuineness of the debtors cannot be doubted without any enquiry in this regard. In this view of the matter, in our considered opinion, the matter needs to be remitted back to AO. AO is directed to decide the issue afresh in the light of our observation herein above. Appeal of the assessee is allowed for statistical purposes.
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