2020 (7) TMI 764

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....ing the interest of Rs. 5,61,702/- without appreciating the facts of the case." 3. The issue raised by the assessee is against confirmation of disallowance of interest of Rs. 5,61,702/- by ld. CIT(A). The facts in brief are that assessee has charged to Profit & Loss Account, Interest and Finance cost of Rs. 2,86,58,298/- excluding vehicle interest cost. The Assessing Officer noted during the course of assessment proceedings that assessee has given advance of Rs. 49,63,131/- for booking of bungalow at Nagpur on 28.01.2014 and accordingly, issued show cause notice to assessee as to why proportionate interest under Section 36(1)(iii) of the Act should not be disallowed as there seems to be no business connection between the advance paid....

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.... disallowance of Rs. 5,61,702/- u/s 36(1)(iii). The assessing officer relied on the decision of Hon'ble Bombay High Court in the case of M/s Phalton Sugar Works Ltd. Vs. CIT reported at 208 ITR 969. 3.2.3 I tend to agree with the AO. The appellant is missing a crucial point. The issue here is not of availability of interest-free funds or not, with the appellant company. The question is whether the expenditure is for business purposes or not. The appellant miserably fails on this. The business purpose of buying a bungalow at Nagpur has not been explained. Not only has the appellant to explain the business purposes of an expenditure, it has to further explain whether it is for the existing business or not. The appellant cannot say that....