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2022 (11) TMI 1297 - AT - Income TaxAddition of interest expenditure u/s 36(1)(iii) - lending business - non-charging interest or interest free loans given - AO held that the interest expenses incurred on loans obtained cannot be treated as business expenditure u/s 57 and the same cannot be allowable out of the income derived from partnership firm as there is no nexus between additions, in income and expenditures as no loans have been invested into a partnership firm as capital as stated by the assessee - HELD THAT:- CIT(A) has taken charging interest at 4.36% as compared to the interest charged at 6% on loans to friends and families but the assessee before us has demonstrated that rate of interest earned at 6% per annum for the time period of loans and advances is for particular set up of loans and advances. Similarly borrowed loan at 6% was also there in the relevant A.Y. There was 0% return of income on borrowing of unsecured loan and the same was detailed before the AO as well as CIT(A). There was not a single case of non-charging interest or interest free loans while giving the loans by the assessee. Therefore, AO as well as the CIT(A) has made the addition on presumptive and assumptive percentage of charging of interest. The expenditure incurred was wholly and exclusively for the purpose of business of land trading and the same was also explained by the assessee in respect of lands sold reflected in the opening stock and land which was not sold at the closing stock and various unsecured loans borrowed were utilised during the course of normal business of land trading and financial business. Thus, AO and the CIT(A) was not right in disallowing the interest and has not taken proper cognisance of the provisions of Section 36(1)(iii) - Decided in favour of assessee.
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