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2022 (9) TMI 1137 - AT - Income TaxDisallowance of interest expenditure - diversion of funds for non-business purpose - CIT(A) deleted the disallowance - HELD THAT:- It is clear that the assessee obtained loan from Saraswat Co-operative Bank, part of which paid towards purchase of shares of its ONP, having purely business purpose to save the assessee’s interest from outside private entities. It is also observed that the purchase of shares of its sister concern was only for saving of assessee’s own business, as a result the assessee took over the entire shareholding of ONP which is its sister concern and avoided interference from third party business operations. In order to examine the allowability of interest expenditure on funds borrowed, when the part of such borrowed funds utilized for purchasing of shares in ONP, the interest paid by the assessee on the amount borrowed for purchasing of such shares of its managed company, in our opinion, is allowable deduction. The funds borrowed by the assessee from the Saraswat Cooperative Bank were utilized for the purpose of business and the interest paid thereon would constitute an allowable deduction. There is no diversion of funds for non-business purpose and no finding or allegation from assessing officer to that effect. Assessee utilized borrowed funds for its own business, therefore, assessee is entitled to claim deduction on account of interest expenditure and we find no infirmity in the order of CIT(A) in deleting the disallowance made by the AO on account of interest expenditure.The order of CIT(A) is justified. Ground No. 1 raised by the appellant-revenue is dismissed. Addition made on account of processing fee paid to banking institutions - CIT(A) deleted the said addition by recording its reasons taking into consideration the relief granted to the assessee on account of interest payment - HELD THAT:- In view of our decision on ground No. 1, where we confirmed the order of CIT-A in holding the expenditure on account of interest payment on loans availed from bank for business purpose is allowable deduction, therefore, we find no infirmity in the order of CIT(A) in holding the assessee is entitled to claim deduction on account of processing fees. Thus, we agree with the reasons recorded by the CIT(A) in impugned order and it is justified. Thus, ground No. 2 raised by the appellant revenue is dismissed.
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