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2020 (8) TMI 94 - AT - Income TaxAddition u/s 56(2)(vii) - difference between the purchase price shown by the assessee and the DLC rate of the land in the area - HELD THAT:- When the properties in question are undisputedly shown in the books of account of the assessee as stock-in-trade and part of the closing stock, then the same would not fall in the ambit of the property as defined in explanation to section 56(2)(vii) and consequently the provisions of section 56(2)(vii) will not be applicable in the case of the assessee. Hence we do not find any error or illegality in the impugned order of the ld. LD. CIT (A). As regards the contention of the CIT D/R this is only a paper transaction, we note that the AO has not doubted the transaction either during the course of assessment proceedings or during the course of remand proceedings. Therefore, such a plea cannot be considered or accepted which is contrary to the stand of the AO. Even otherwise, the LD. CIT D/R can only support the order of the AO and cannot improve the same. Further, if the transaction itself is not a genuine transaction, then the question of applying the provisions of section 56(2)(vii) does not arise. Addition u/s 40A - disallowance of interest on account of diversion of interest bearing funds to the related party - HELD THAT:- Without going into the controversy of commercial transaction as well as the related party transaction, at the outset we note that the interest expenditure debited by the assessee in the Profit & Loss account is towards the secured loans and, therefore, it is unlikely to use the secured loans other than the purposes for which the loan was taken. Further, as per the Balance Sheet, assessee is having ₹ 7.66 crores as interest free loans under the head Unsecured Loan from the Karta of the HUF and member of the HUF. Once the unsecured interest free loan amount is more than the alleged amount of advance given to these parties, then the disallowance of interest is not justified. Disallowance confirmed by the LD. CIT (A) on account of interest expenditure is deleted. - Decided in favour of assessee.
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