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2022 (8) TMI 243 - AT - Income TaxDisallowance u/s 36(1)(iii) - proportionate interest for fund utilized for business purpose - HELD THAT:- As investment made in debt mutual fund was part of business activity because funds being ideal for invested for earning income, the argument of counsel does not in any manner establish that investment in mutual fund is part of the business activity of the assessee. The assessee has clearly admitted that it was engaged in advancing loan to corporate and bill discounting. In the profit loss account, the assessee has shown interest income from advancing loan only and this activity of investment in mutual fund is not the business activity irrespective of the fact that ideal funds have been invested. The funds have not been invested due to business or commercial expediency, and same have been invested for earning income on ideal funds. Therefore, interest corresponding to borrowed money utilized in said investment is disallowed. The ground No. 1 of the appeal of the assessee accordingly is dismissed. Calculation of the funds utilised for business purpose - HELD THAT:- The amount of interest allowable was required to be considered after including above two amounts. Accordingly, we accept this contention of the assessee. We set aside the order of the Ld. CIT(A) on the issue in dispute and restore the matter to the file of the AO for re-computation of the amount of the interest allowable in terms of section 36(1)(iii) in view of the plea of including the amount representing doubtful debt and representing as amount lying in bank account for funds utilized for business purposes. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. In the result, the ground No. 2 of the appeal is partly allowed for statistical purposes. Capitalization of the amount of interest disallowed u/s 36(1)(iii) - HELD THAT:- Here the assessee is claiming that if interest corresponding to investment in mutual funds is not allowed as revenue expenditure, then same should be treated as cost of acquisition of the said mutual fund. We are of the opinion that the issue of claim of the interest amount as cost of acquisition will arise at the time of the sale of the said mutual funds and therefore issue is premature at this stage, therefore, we are not adjudicating upon the said issue. The ground No. 3 of the appeal is accordingly dismissed.
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