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2023 (10) TMI 1032 - AT - Income TaxDisallowance of interest u/s. 36(1)(iii) - whether the interest-bearing funds had been diverted/utilized by the assessee for making gifts to his nephews? - As argued assessee had sufficient self-owned/interest-free funds available with him - HELD THAT:- We are of the considered view that as the self-owned funds available with the assessee as the “opening balance” of his capital on 01.04.2009, along with the “net profit” earned by him during the year under consideration was much higher which, therein, was sufficient to source the gifts to the aforesaid donee’s, therefore, it can safely be presumed that the said self-owned funds/ profit generated during the year by the assessee was utilized for making gifts under consideration and no part of the interest-bearing funds were diverted for the said purpose. Unable to concur with the view taken disallowing claim for deduction of interest expenditure on the presumption that the interest-bearing funds were utilized by the assessee for making gifts to his nephews, and, thus, vacate the said disallowance so made/sustained by them u/s. 36(1)(iii) of the Act. Decided in favour of assessee.
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