TMI Blog2018 (8) TMI 2084X X X X Extracts X X X X X X X X Extracts X X X X ..... taken these advances for business purposes. We find that once the AO has allowed part of interest for particular year, the genuineness is established. Secondly, even the purpose is also established. For this, the assessee has produced the resolution passed by Board of Directors of assessee company dated 26.092.2010, which clearly states that these loans secured or unsecured are for the purpose of the business. The copy of resolution was placed on record. Hence, the purpose is established. Even otherwise, we are of the view that the AO did not even dispute the upfront payment interest in the part of the year and once this is the position, the interest cannot be disallowed. We allow the claim of the assessee and this issue is accordingly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appellant's claim of funds being acquired for business purpose were produced. 3. Briefly stated facts are that the assessee is a private limited company engaged in the business of land development and construction of buildings. The assessee filed its return of income for the relevant AY 2011-12 on 30.09.2011, declaring business loss of ₹ 26,13,632/-. The AO during the course of proceedings noticed that the assessee has claimed interest expenses of ₹ 1,67,04.690/- on loan obtained from Macro Tech Construction Pvt. Ltd. The assessee has also earned interest income of ₹ 1,41,11,634/-. The assessee claimed the differential amount of ₹ 25,93,054/- as loss after reducing the interest income earned and interest p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e IT Act is not round to be justified Therefore, the disallowance of net interest expenditure of Rs 25,93,056/- made by the A 0 is found to be in order. Accordingly, the disallowance of Rs.2593056/- is upheld and ground nos 1 and 2 are dismissed. Ground nos 3 4 are against initiating penalty proceedings uls.271(1)(c), 271D and 271E of the IT Act. Since penalty proceedings has only being initiated, these grounds are found to be premature and are accordingly dismissed. Aggrieved, now assessee is in second appeal before Tribunal. 4. We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee stated that the assessee is engaged in the business of land de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Macro Tech Construction Private Limited 113,33,33,221 20,00,00,000 93,33,33,221 1,67,04,690 Suryodaya Buildwell Farms Pvt. Ltd 38,06,52,838 346650695 34002143 Total 171,39,86,059 54,66,50,695 116,73,35,364 1,67,04,690 5. The learned Counsel for the assessee stated that as and when the assessee realized that nothing is being materialized on account of purchase of suitable land, he advanced this amount on interest to group concerns at the rate of 12%. The learned Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch interest, the assessee would be entitled to deduction of full amount in the assessment year in which it is paid. While examining the allowability of deduction of this nature, the AO is to consider the genuineness of business borrowing and that the borrowing was for the purpose of business and not an illusionary and colourable transaction. Once the genuineness is proved and the interest is paid on the borrowing, it is not within the powers of the AO to disallow the deduction either on the ground that rate of interest is unreasonably high or that the assessee had himself charged a lower rate of interest on the monies which he lent. In the instant case, the AO did not dispute that the non-convertible debentures were issued and money raised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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