Mahadev Infracon Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad Deletes 36(1)(iii) Disallowance — Assessee proved Mutual Fund Investment from Interest-Free Funds
Assessee, a partnership firm engaged in real estate development, filed its return declaring ₹1.98 crore income. During assessment, AO disallowed ₹10.39 lakh u/s 36(1)(iii), alleging diversion of borrowed funds towards a mutual fund investment of ₹5 crore made in January 2017 & redeemed in March & May 2017. Assessee explained that the investment was made entirely from interest-free funds, that no new unsecured loans were taken during the year, & that loans of ₹7.15 crore were repaid.
CIT(A) confirmed the disallowance without examining the balance sheet details. Before Tribunal, Assessee demonstrated that the loan repayment & interest details were duly reflected in the accounts & that the investment had generated short-term capital gains duly offered to tax. ITAT held that both AO & CIT(A) ignored these facts & that there was no evidence of borrowed funds being used for investment.
Held: Disallowance u/s 36(1)(iii) of ₹10.39 lakh deleted — investment made from own funds; appeal allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This is an appeal filed against the order dated 31-12- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.
