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2022 (12) TMI 179 - AT - Income TaxDisallowance of interest expenses as well as disallowance of proportionate interest rate on the interest free loan given - AO made disallowance of interest expenses by taking a view that the assessee could furnish copy of ledger and bank statement to prove that the transactions were genuine - HELD THAT:- Once the transaction of loan is considered as genuine, the interest on such loan cannot be disallowed. CIT(A) further held that P.K. Enterprises was not part of 19 parties and the assessee had explained the genuineness of said loan during the assessment. Thus, the interest cannot be disallowed. Considering the facts that on similar interest disallowance in A.Y. 2017-18 and similar deletion of interest disallowance was upheld by this Bench in A.Y. 2017-18 - Therefore, we do not find any illegality or irregularity in the order passed by the ld. CIT(A) which we affirm the same qua the issue under consideration. Disallowance of interest expenses paid on unsecured loan - AO disallowed the interest expenses by taking a view that the lender parties have not responded to the notice u/s 133(6) - HELD THAT:- We find that no finding was given by Assessing Officer on various documentary evidences furnished by assessee, which consists of confirmation of parties, return of income of lender parties, ledger account of assessee and parties’ books of account, bank statement of parties and financial statement of lenders. The assessee has also filed copies of reply in response to notice u/s 133(6) - We find that the ld. CIT(A) allowed relief to the assessee by clearly holding that the reply of lender party in response to notice under Section 133(6) is seen on ITBA Website. Similar interest expenses were allowed in earlier assessment years and was never disallowed. We find that the ld. CIT(A) granted relief on appreciation of fact that the assessee made compliance. As earlier noted that tao has not given any finding on the various documentary evidences to substantiate the genuineness of interest expenses. Assessing Officer has not controverted the fact that in earlier years, similar interest expenses were allowed. In view of the aforesaid factual discussion, we do not find any merit in the grounds of appeal raised by the Revenue and we delete the same. Accordingly, grounds No. 2 and 3 of the appeal are dismissed. Addition of notional interest - nexus between the interest bearing loan and loan advanced - assessee borrowed interest bearing funds and on the other hand, the assessee was providing interest free loans to its group concerned - AO Disallowed and added 6% interest on such loan paid to group concerns - HELD THAT:- As there is no direct nexus between the interest bearing loan and loan advanced by assessee. Most of the interest free advances were made prior to 2010-11. The interest bearing loan was given by assessee after that period. Moreover, the interest free reserve and surplus are in far excess, which is not controverted by the ld Sr DR for the revenue. Therefore, we do not find any illegality or irregularity in the order passed by the ld. CIT(A) which we affirm the same qua the issue under consideration. Hence, this ground of appeal of the revenue is also dismissed.
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