Interest expenditure accepted as genuine where borrowed funds were earlier recognised and no incriminating material was found.

Interest paid on borrowed funds was treated as allowable where the loans and advances had already been accepted by the Revenue, the interest rate was undisputed, and search proceedings yielded no incriminating material against the expenditure for the year under appeal. On those facts, the interest payment to the lender could not be characterised as non-genuine, and the addition was deleted.

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Issues: Whether the addition made on account of interest on loan paid to M/s Chordia Trade Credits Private Limited was sustainable.

Analysis: The assessee had borrowed funds in earlier years, the loans and advances had already been accepted by the Revenue, and the rate of interest was not disputed. The search proceedings did not yield any incriminating material relating to this interest expenditure. In these circumstances, the disputed interest payment could not be treated as non-genuine for the year under appeal.

Conclusion: The addition was deleted and the assessee succeeded on the issue.

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