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2015 (9) TMI 70 - AT - Income TaxDisallowance of interest on borrowed funds - Held that:- The assessee was having sufficient interest-free funds at the time of advances made to its sister-concerns can be verified from its records. The ld.Sr.DR has no objection to this proposal. Therefore, after taking into consideration and looking to the totality of the facts of the case we hereby set aside the orders of the authorities below and restore the issue back to the file of the AO for limited purpose of verification. The AO would verify from the records placed before him that the fact of availability of interest-free funds for the purpose of making advances to its sister-concerns. In case, the AO finds that the assessee was having sufficient interest-free funds available for making advances to its sister-concerns, the AO would delete the disallowance. However, the AO would also verify whether the borrowed funds had been utilized for business purposes or not. In the event of the mixed funds, if at the time of making advances the assessee had both the borrowed funds as wells as the interest-free funds, the AO would verify the quantum of advances made by the assessee. If the AO finds that the amount of interest-free funds was higher than the advances made, in that event, the AO would delete the addition made on account of disallowance of interest on borrowed funds - Decided in favour of assessee for statistical purposes. Disallowance u/s.36(i)(iii) - advances given to sister concern - assessee submitted that these loans are not liable for tax even u/s.41(1) - Held that:- CIT(A) has followed the judgement of Hon’ble Apex Court rendered in the case of CIT vs. T.V.Sundaram Iyengar & Sons Ltd. reported at (1996 (9) TMI 1 - SUPREME Court ). The contention of the ld.counsel for the assessee is that the facts are distinguishable in the present case as in that case it was trading a receipt, but in the present case these are the loans by the sister-concerns being capital in nature. Since the evidence in support of this contention was not furnished before the AO, therefore, it would be appropriate that the issue be restored to the file of AO for verifying the claim of the assessee that the impugned amount was not a trading receipt. The AO would verify the nature of amount and in case it is found that it was not a trading advance, then the AO would delete the same - Decided in favour of assessee for statistical purposes.
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