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2015 (4) TMI 103 - ALLAHABAD HIGH COURT

2015 (4) TMI 103 - ALLAHABAD HIGH COURT - TMI - Closure of business - disallowance of interest paid for only one year - waiver of interest for the remaining four years as per the settlement - Held that:- In the instant case, the borrowed funds were utilized exclusively for the purpose of business and interest was capitalized thereupon and it was the business liability of the assessee to pay the same. The assessee, being the prudent businessman, has entered into settlement to clear the debt by pa .....

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Income Tax Appeal Defective No. -3 of 2007 - Dated:- 11-3-2015 - Hon'ble Tarun Agarwala And Hon'ble Dr. Satish Chandra,JJ. For the Appellant : Rakesh Ranjan Agrawal, Suyash Agarwal For the Respondent : A. N. Mahajan, S.C., B. J. Agarwal ORDER (Per Hon'ble Dr. Satish Chandra, J) The present appeal is filed by the assessee against the impugned order dated 16th September 2005 passed by the Income Tax Appellate Tribunal, Delhi in ITA No. 36942/Del/2004 for the assessment year 1998-1999. .....

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he assessment year under consideration, the assessee did not file any return of income, so the proceedings were started under Sections 148/147 of the Act, and the assessee had filed a return of negative income, but the A.O. has found that the assessee had paid the interest amounting to ₹ 1,22,134/- to various depositors from whom the assessee had borrowed the fund. As no business was done by the assessee, so the A.O. disallowed the said amount and made the addition. But the CIT(A) has dele .....

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pugned order passed by the Tribunal. We heard both the parties at length and gone through the materials available on record. From the record, it appears that the assessee had started the crushing business, which was closed in the financial year 1992-93, and since then no business was done by the assessee, but the liability of the borrowed fund was continued. No interest was paid to the depositors up to the assessment year 1997-98 and 1998-99, but on a settlement between the depositors and firm, .....

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exclusively used for the purpose of the business. The interest was paid on the amount of the borrowed funds. Funds were utilized exclusively for the purpose of business and the same were utilized not only in day to day running of the business, but also in the rationalisation of the administration of funds as per ratio laid down in the case of Bralco Matel Industries Private Limited vs. CIT (1994) 206 ITR 477 & 482 (Bom.). The interest accrued on the borrowed money will have to be capitalize .....

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