The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that Interest free advances given by the assessee were made in the course of business of the assessee.
The assessee was found making huge advances by the Assessing Officer (AO) on which no interest wascharged, and at the same time, he found that the assessee had incurred interest expenses also on loans taken. Accordingly, he disallowed interest paid by the assessee.
The Commissioner of Income-tax (Appeals) (CIT(A)) deleted the same noting that the AO has not appreciated the contention of the assessee that all the advances were made for business purpose for purchase of land in the business of land development carried out bythe assessee, and further that, there was no finding by the AO that loans on which interests were paid were not utilized for the business purpose of the assessee.
The tribunal’s attention was drawn to the submissions made by the assessee before the CIT(A) that all the advances were given for purchase of land for the said business of the assessee, and therefore also there was no occasion to make any addition of interest expenditure on making such interest free advances.
After hearing both the parties the tribunal saw no reason to interfere in the order of the CIT(A) who has deleted the disallowance of interest under section 36(1)(iii) of the Act giving factual finding, which have remained uncontroverted by the Revenue as under:
The two member bench consisting of Suchitra R Kamble (Judicial member) and Annapurna Gupta (Accountant member) upheld the order of the CIT(A) deleting the addition of interest under section 36(1)(iii) of the Act. Thus the appeal was dismissed.
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