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TMI Blog2025 (2) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... 018. Since common issues are involved in these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity. 2. Facts of the case, in brief, are that the assessee is a private limited company engaged in the business of construction and sale of residential and commercial plots. The assessee has filed its return of income for the assessment year 2016-17 on 13.10.2016 admitting total income of Rs. 77,51,330/-. The Assessing Officer determined the total income of the assessee at Rs. 51,28,612/- as per sec.36(1)(iii) of the Act. While completing the assessment, the Assessing Officer worked out the interest paid for non-business activity @ 12% and accordingly, out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue to the file of AO for verification. The assessee filed an appeal before the Hon'ble High Court of Telangana against the common order passed by the Tribunal and contested that the Tribunal can decide only those issues which are subject to appeal before the Tribunal, and the issues already decided by the ld. CIT(A) and not challenged by the Department cannot be decided, nor can the appeal be set aside in total. The Hon'ble High Court of Telangana vide its order dated 02.02.2023, set aside the common order of the Tribunal passed on 21.03.2022, and directed the Tribunal to hear the appeals before it on the limited grounds urged by the appellant, namely, disallowance of finance charges under Section 36(1)(iii) of the Act to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by paying the balance 20% of the consideration before the advance PUT option period ended. If the potential customer withdraws the advance amount earlier to advance PUT option, he will be given much lesser interest than the promised interest. The AO observed that the assessee has interest free funds of Rs. 4,11,56,889/- and the value of non-current investment remains at Rs. 8,38,95,323/-. Therefore, the Assessing Officer was of the view that interest bearing funds have been diverted for the non-business purpose to the tune of Rs. 4,27,38,434/- and worked out the interest paid for the non-business activity @ 12% of Rs. 51,28,612/- without considering the submissions of the assessee to the effect that since the customer has paid an advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the authorities below. He submitted that in absence of supporting documentary evidences, the AO, was not convinced with the explanation furnished by the assessee. According to the AO, although the assessee has furnished general reply regarding the purpose of the funds received as an advance for the purchase of office space, but failed to explain the utility of the advances for the purpose of the business of the assessee. The AO further observed that the appellant has diverted advances received from customers to various non-business purposes. Therefore, the AO opined that the interest paid can not be justified just because TDS has been deducted on the said interest. Accordingly, the AO disallowed the interest debited under finance cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has paid interest in case of delay in delivery of flats. The assessee had also proved that the funds received from the customers in the form of advances have been utilized for the purpose of business of the assessee. In fact, it is not a case of the AO that the assessee had diverted funds for non-business purposes. Assuming for a moment that loans and advances given to group concerns are diversion of interest-bearing funds, the fact remains that, as the AO himself noted, the group companies of the assessee are also engaged in the business of real estate development and there is a business nexus between the appellant and the group concerns and thus, in our considered opinion, loans and advances given to other group companies can be said to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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