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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 ..... mers 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 be in the normal course of the business of the assessee and thus, there is a commercial expediency. AO erred in disallowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing funds is worked out at Rs. 51,28,612/- vide order dated 30.03.2022 passed u/sec.147 of the Act. 3. On being aggrieved, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) after examining the submissions of the assessee confirmed the order of the Assessing Officer in absence of any supporting documents and evidences placed before him. 4. Aggrieved by the order of the learned CIT(A), the assessee carried the matter in appeal before the Tribunal and has raised the following grounds : 1) "The order of the learned CIT (A) is erroneous both on facts and in law; 2) The learned CIT (A) erred in confirming the addition made by the Assessing Officer of Rs. 51,28,612/-. 3) The learned CIT (A) erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity of the reassessment proceedings. 6. The solitary issue that came up for our consideration in the instant assessee's appeal is the disallowance of finance charges of Rs. 51,28,612/- made by the AO under Section 36(1)(iii) of the Income Tax Act, 1961. During the course of the assessment proceedings, the AO noticed that as on 31.03.2016 the assessee company has interest free funds at Rs. 4,11,56,889/- and the value of non-current investment remains at Rs. 8,38,95,323/-. Therefore, the Assessing Officer noted that interest bearing funds have been diverted to non-business purpose to the tune of Rs. 4,27,38,434/-. The Assessing Officer also further noted that the assessee paid interest on sales advances ranging from 10 to 14% and such i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomers, the appellant had paid interest ranging from 10% to 14% for a period of 1 year to 4 years. Therefore, the assessee submitted that interest paid on customer advances was wholly and exclusively for the purpose of the business of the assessee and thus, allowable as a deduction. The Learned Counsel for the assessee, further submitted that the ld. CIT(A) is erred in sustaining the addition made by the AO towards disallowance of finance charges on altogether a different ground, even though, the AO disallowed interest on the ground that the appellant has not established utilization of advances from customers for the purpose of business of the assessee. The learned counsel for the assessee further submitted that the assessee is into the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- under Section 36(1)(iii) of the Income Tax Act, 1961. The said observations of the Assessing Officer were confirmed by the learned CIT(A) in absence of supporting documentary evidences. The learned DR accordingly submitted that the order of the learned CIT(A) be confirmed. 9. We have heard the rival submissions and perused the material on record and gone through the orders of the authorities below. The fact borne out from the record indicates that the assessee being in the business of real estate development, has collected advances from customers for sale of flats/commercial complexes, plots in terms of MOU. As per the terms of MOU between the appellant and the customers, there is a provision for payment of interest ranging from 10% to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a commercial expediency. Therefore, we are of the considered view that the AO erred in disallowing finance charges being interest paid on customers' advances without any valid reasons. The ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the AO. Thus, we set aside the order of the ld. CIT(A) and direct the AO to delete the addition made towards disallowance of finance charges amounting to Rs. 51,28,612/- for the A.Y. 2016-2017 and Rs. 75,14,898/- for the A.Y. 2017- 2018 on identical facts and grounds raised before the Tribunal. Accordingly, the grounds raised by the assessee in appeals ITA.Nos.1218 & 1219/Hyd./2024 are allowed. 10. In the result, appeals ITA.Nos.1218 & 1219/Hyd./ 2024 of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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