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2022 (10) TMI 1026 - ITAT CHANDIGARHDisallowance u/s 36(1)(iii) - amount advanced by the assessee on which no interest has been charged by the assessee - DR submitted that the amount has been advanced from the assessee’s cash credit bank account and it is thus evident that there is a direct nexus between interest bearing funds - HELD THAT:- Where the deposits are more than the withdrawals on a given day and such excess deposits are utilised by the assessee for the purpose of making any loans and advances, no interest would be charged by the bank as the assessee would in effect be using its own funds at the given point of time - nature of deposits in such cash credit account needs to be examined as to whether the deposits are from business operations or there are also deposits by way of fund transfer from other bank accounts and the nature of such funds from other bank accounts in the nature of borrowings or from business operations. In case of borrowed funds have been transferred to this particular cash credit account and such funds are then utilized in giving loans and advances, again a nexus is established between the borrowed funds and the loans/advances. In our view, this particular aspect of the matter in terms of nature and movement of funds in the cash credit account through which the advances have been given to M/s Mirage Infrastructure Private Limited has not been examined by either of the lower authorities. Merely because the advances were given from assessee’s cash credit account, a simplistic presumption cannot be drawn that advances were from borrowed funds given that the cash credit account is likely to have credits/deposits from assessee’s business operations and/or other bank accounts. The credits and withdrawals in such cash credit account need to be examined and a clear nexus is required to be established between the borrowed funds and making of loans/advances to M/s Mirage Infrastructure Private Limited. On the same footing, the argument of the assessee regarding availability of its own funds need to be tested and examined after analyzing the nature and position of funds at the relevant point of time of making such advances. We, therefore, deem it appropriate to remand the matter to the file of the AO to examine this matter afresh in light of above discussions. AO shall provide reasonable opportunity to the assessee and the latter shall submit the desired information/documentation as so desired by the AO. Ground of appeal is allowed for statistical purposes.
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