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2015 (10) TMI 70 - AT - Income TaxDisallowance under section 40A(3) - payments made against purchase of traded goods exceeding ₹ 20,000 - Held that:- Assessee's claim is not covered by any of the exceptions provided under rule 6DD. However, the first proviso below section 40A(3) clearly takes into consideration the nature of expenses, banking facilities, consideration of business expediency and other relevant factors. Rule 6DD in intent and purpose takes into consideration all these aspects for prescribing various exceptional circumstances. Therefore, rule 6DD cannot be mechanically applied and we have to consider the overall explanation of the assessee having regard to the business consideration (the assessee's explanation is that the assessee had no bank account at Cuttack and seller was insisting for cash payments. The payments had been made to the seller because of that reason. The genuineness of the purchases had not been doubted by the Assessing Officer. Under such circumstances, we are of the opinion that the disallowance of these expenses by applying to section 40A(3) would not be justified. - Decided in favour of assessee. Charge of interest on interest-free loan to another business concern - Held that:- If the assessee is able to substantiate its claim, that the advance was given out of its own funds, then no addition is called for. It is well-settled law that if the assessee has advanced interest-free loan out of its own funds, then no disallowance can be made under section 36(1)(iii) of the Act. We find this aspect has not been examined by the lower revenue authorities and, therefore, we restore the matter to the file of the Assessing Officer to decide the issue de novo in the light of our observations. - Decided in favour of assessee for statistical purposes.
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