The DCIT, Circle-10, Ahmedabad V. Shri Dhiren H.Vora, Ahmedabad

ITA 3765/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8622 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 18-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Business expenditure; Source of fund
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.3765/AHD/2008 A. Y.: 2004-05 THE A. C. I. T., CIRCLE-10, 1 ST FLOOR, NARAYAN CHAMBERS, ASHRAM ROAD, AHMEDABAD VS SHRI DHIREN H. VORA, 304, ANAND CHAMBERS, NR. HIGH COURT RAILWAY CROSSING, AHMEDABAD PA NO. AAWPV 2756 N (APPELLANT) (RESPONDENT) APPELLANT BY SHRI GOVIND SINGHAL, DR RESPONDENT BY SHRI VIJAY RANJAN, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XVI, AHMEDABAD DATE D 17-09-2008 FOR ASSESSMENT YEAR 2004-05 ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT (A) ERRED ALLOWING INTEREST U/S . 36(1) (III) OF THE I. T. ACT. THE ASSESSEE HAS PAID LOAN OUT OF INTEREST BEARING LOANS RECEIVED FROM SHRI H. N. VOR A. THUS THE ASSESSEE HAS PAID OF LOAN WHICH IS NOT BEI NG FOR PURPOSE OF BUSINESS TO BE DISALLOWED. 2. THAT THE INVESTMENT IN SHARES OF M/S. H. NYALCHAND FINANCE SERVICES LTD. AND PARKLIGHT SECURITIES LTD. ARE LONG TERM INVESTMENT. IN THESE OUT OF BORROWED FUND WHICH MIGHT HAVE BEEN PURCHASED OUT OF INTEREST BEARING FUND OF THE ASSESSEE FIRM. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIALS AVAILABLE ON RECORD. 3. FACTS OF THE CASE ARE THAT THE AO NOTED THAT DUR ING THE RELEVANT FINANCIAL YEAR THE ASSESSEE HAS SHOWN TOTAL RECEIPT S FROM TRADING OF ITA NO.3765/AHD/2008 SHRI DHIREN H. VORA 2 SHARES TO THE TUNE OF RS.76,61,815/-. ON VERIFICATI ON OF THE DETAILS REGARDING SHARES SOLD AND PURCHASED, THE AO OBSERVE D THAT DURING THE YEAR, THE ASSESSEE HAS ONLY DEALT IN SHARES AND NOT IN MUTUAL FUNDS. HE FURTHER NOTED THAT DURING THE YEAR THE ASSESSEE DEB ITED AN AMOUNT OF RS.21,11,803/- AS INTEREST EXPENDITURE ON BORROWED FUNDS. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY SAID INTEREST PAYMEN T SHOULD NOT BE DISALLOWED. THE ASSESSEE EXPLAINED THE ISSUE BEFORE THE AO. THE AO HOWEVER, AGAIN REQUESTED THE ASSESSEE TO SUBMIT FLO W OF CHART OF FUNDS BORROWED FROM SHRI H. N. VORA, HUF TO WHICH THE ASS ESSEE ALSO FILED DETAILED ACCOUNT OF SHRI H. N. VORA, HUF AND STATED THAT FUNDS BORROWED WERE UTILIZED FOR THE PURPOSE OF BUSINESS, THEREFOR E, NO DISALLOWANCE OF INTEREST IS CALLED FOR. THE AO HOWEVER, CONSIDERING SCHEDULE II OF UNSECURED LOANS IN RESPECT OF SHRI DHIRUBHAI K. PAT EL, SHRI R. K. PATEL AND SHRI SONAL D. VORA NOTED THAT THE ASSESSEE HAS MADE REPAYMENT OF OUTSTANDING LOANS IN RESPECT OF ABOVE PERSONS TO T HE TUNE OF RS.9,30,000/-, RS.87,80,000/- AND RS.16,91,000/-. T HE AO FURTHER NOTED THAT THE ASSESSEE HAS NOT EARNED THIS MUCH AM OUNT DURING THE YEAR UNDER CONSIDERATION AND FROM THE DETAILS FILED IT APPEARS THAT REPAYMENT OF LOANS TO THE ABOVE PERSONS WAS MADE OU T OF THE BORROWED FUNDS ON WHICH THE ASSESSEE HAD PAID INTEREST DURIN G THE FINANCIAL YEAR. SINCE THE ASSESSEE HAS DIVERTED ITS INTEREST BEARIN G FUNDS FOR REPAYMENT OF LOANS AND NO INTEREST WAS EARNED OUT OF IT, THER EFORE, INTEREST ATTRIBUTABLE TO THE FUNDS WHICH WERE UTILIZED FOR R EPAYMENT OF LOANS IS TO BE CONSIDERED AS NON-BUSINESS PURPOSES. THE SAME WE RE ACCORDINGLY LIABLE TO BE DISALLOWED. THE AO FURTHER NOTED THAT THE ASSESSEE HAD MADE INVESTMENTS IN SHARES OF M/S. H. N. FINANCIAL SERVI CES LTD. AMOUNTING TO RS.3,49,00,000/- AND SHARES OF PARKLIGHT SECURITIES LTD. AMOUNTING TO RS.20,00,000/-. THESE INVESTMENTS WERE IN THE NATUR E OF LONG TERM AND NOT AS STOCK IN TRADE. THE AO NOTED THAT IN THE PAS T THE ASSESSEE MUST HAVE MADE INVESTMENTS IN THE ABOVE SHARES AS INVEST MENTS OUT OF BORROWED FUNDS. SINCE THE FUNDS BORROWED FROM SHRI H. N. VORA, HUF ITA NO.3765/AHD/2008 SHRI DHIREN H. VORA 3 HAS BEEN USED FOR REPAYMENT OF LOANS AND THE ASSESS EE HAS NOT EARNED ANY INCOME, THEREFORE, INTEREST IS ATTRIBUTABLE TO SUCH REPAYMENT IS NOT ALLOWABLE AS BUSINESS EXPENDITURE UNDER THE PROVISI ONS OF SECTION 36(1) (III) OF THE IT ACT. THE AO ACCORDINGLY, DISALLOWED INTEREST OF RS.7,58,940/- OUT OF TOTAL INTEREST PAID TO SHRI H. N. VORA, HUF IN A SUM OF RS.13,87,197/-. THE ADDITION WAS CHALLENGED BEFO RE THE LEARNED CIT(A) AND IT WAS SUBMITTED THAT THE AO HAS NOT QUOTED ANY CIRCULAR ETC. WHICH STATES TO THE EFFECT THAT ANY REPAYMENT OF ANY LOAN S BY THE ASSESSEE IS PERMITTED ONLY IF THE INCOME EARNED BY THE ASSESSEE IS MORE THAN THE QUANTUM OF REPAYMENT OF LOAN. THERE IS NO SUCH PROH IBITION UNDER THE LAW. THE AO HAS NOWHERE ESTABLISHED LINKING EVEN ON E SINGLE ENTRY ETC. WITH ANY PARTICULAR AMOUNT OF INTEREST FREE AMOUNT AVAILABLE WITH THE ASSESSEE FOR HIS BUSINESS WAS DIVERTED. THE REPAYME NT OF LOAN IS ALSO FOR THE PURPOSE OF BUSINESS. IT WAS FURTHER SUBMITTED T HAT BORROWED FUNDS WERE USED ONLY FOR THE PURPOSE OF BUSINESS AND THE AO HAS NOT ESTABLISHED AS TO WHICH INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR NON- BUSINESS PURPOSES. SEVERAL DECISIONS IN SUPPORT OF THE CONTENTIONS WERE RELIED UPON THAT WHEN INTEREST IS PAID FOR UTILIZAT ION OF BORROWED FUNDS, THE SAME IS ALLOWABLE DEDUCTION. IT WAS SUBMITTED T HAT THERE WERE NUMBERS OF TRANSACTIONS CARRIED OUT WITH SHRI H. N. VORA, HUF AND WHENEVER THE ASSESSEE WAS TO MAKE PAYMENT FUNDS HAV E BEEN BORROWED. OTHER FUNDS WERE AVAILABLE WITH THE ASSESSEE ON WHI CH NO INTEREST IS PAID. THE AO HAS, THEREFORE, FAILED TO MAKE OUT ANY CASE OF DISALLOWANCE OF INTEREST. THE DETAILS SUBMISSIONS OF THE ASSESSE E HAVE BEEN RECORDED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER. THE AS SESSEE ALSO EXPLAINED THAT A COMBINED READING OF THE SCHEDULE SATISFIES T HE ASSESSEES ARGUMENTS TO THE EFFECT THAT LONG TERM INVESTMENTS WAS DONE FROM INTEREST FREE LOANS AND CAPITAL TO THE EXTENT OF RS .4,24,28,000/-. THEREFORE, INTEREST BEARING FUNDS WERE NOT EVEN PAR TIALLY DIVERTED AND UTILIZED FOR NON-BUSINESS PURPOSES. THE LEARNED CIT (A) CONSIDERING THE ITA NO.3765/AHD/2008 SHRI DHIREN H. VORA 4 EXPLANATIONS OF THE ASSESSEE AND DETAILS AND MATERI ALS ON RECORD DELETED THE ADDITION. HIS FINDINGS ARE REPRODUCED AS UNDER: 2.6 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS THE REASONING GIVEN BY THE ASSESSING OFFICE R. 2.6.1 THE BASIC REASON FOR DISALLOWING THE INTEREST OF RS.7,58,940/- U/S. 36(1) (III) OF THE I. T. ACT IS THAT INTEREST BEARING LOAN RECEIVED FROM H. N. VORA, HUF HAVE BEEN UTILIZED FOR REPAYME NT OF LOANS BY THE APPELLANT. IT HAS BEEN MENTIONED BY THE APPELLA NT THAT THE LOANS WHICH WERE REPAID WERE TAKEN BY APPELLANT FOR THE P URPOSE OF BUSINESS. THE LOANS REPAID WERE TO DHIRUBHAI K. PAT EL, R. K. PATEL AND SONAL VORA AS PER THE CHART SUBMITTED BY THE AP PELLANT. RECEIPT PAYMENT DATE NAME AMOUNT DATE NAME AMOUNT 16.06.2000 DHIRUBHAI K PATEL 3163349 16.06.2000 VORA ASSOCIATE 2263349 16.06.2000 CASH BOOK 900000 TOTAL 3163349 6163349 24.01.2003 R.K. PATEL 10000000 24.01.2003 SHARE PUR. 10000000 27.01.2003 R. K. PATEL 20954000 27.01.2003 H. N. VORA, HUF 20954000 03.02.2003 R.K. PATEL 110000 03.02.2003 H. N. VORA, HUF 110000 29.03.2003 R.K.PATEL 900000 29.03.2003 H. N. VORA, HUF 540000 29.03.2003 S. D. VORA 360000 TOTAL 31964000 31964000 18.01.2003 S. D. VORA 1911000 18.01.2003 H. N.VORA, HUF 1911000 TOTAL 1911000 1911000 THE APPELLANT HAS MENTIONED THAT THESE LOANS WERE T AKEN FROM ABOVE 3 PERSONS FOR THE PURPOSE OF BUSINESS IN THE F. Y. 2000-01, 2001-02 AND 2002-03 RESPECTIVELY AS SEEN FROM THE C HART ABOVE AND APPELLANT HAS EXPLAINED THAT THESE FUNDS WERE UTILI ZED FOR THE PURPOSE OF BUSINESS VIDE HIS LETTER DATED 18.8.2008 . THERE IS NO FINDING TO THE EFFECT THAT THESE FUNDS WERE NOT UTI LIZED BY THE APPELLANT FOR THE BUSINESS PURPOSE AS PER THE ASSES SMENT ORDER. 26.2 THE A. O. HAS NOTED HAT THE ASSESSEE HAS NOT E ARNED THE INCOME TO THE EXTENT OF REPAYMENT OF LOANS. IN THIS REGARD, IT IS SUFFICIENT TO MENTION THAT IF THE LOANS HAVE BEEN U TILIZED FOR THE PURPOSE OF REPAYMENT OF EARLIER LOANS USED FOR BUSI NESS, THEN INTEREST IS ALLOWABLE. IT IS NOT NECESSARY THAT ASS ESSEE CAN REPAY ONLY OUT OF INCOME EARNED DURING THE YEAR. 2.6.3 AS REGARDING THE INVESTMENT IN SHARES OF M/S. H. NYALCHAND FINANCIAL SERVICES LTD. AND PARKLIGHT SECURITIES LT D., A. O. HAS HELD ITA NO.3765/AHD/2008 SHRI DHIREN H. VORA 5 THAT THEY ARE LONG TERM INVESTMENT AND NOT STOCK-IN -TRADE AND APPELLANT MUST HAVE IN THE PAST MADE INVESTMENT IN THESE OUT OF BORROWED FUNDS. APPELLANT HAS MENTIONED THAT THESE SHARES WERE ACQUIRED OUT OF INTEREST FREE FUNDS AVAILABLE WITH APPELLANT AND NOTHING HAS BEEN ESTABLISHED TO THE CONTRARY AS PER ASSESSMENT ORDER AND THESE FUNDS DO NOT RELATE TO PERIOD UNDER DISPUTE AND EVEN PROVISO TO SEC. 36(1) (III) DOES NOT APPLY IN THIS CASE. LEARNED CIT(A)-XVI, AHMEDABAD VIDE HIS ORDER DATED 19.5.200 6 FOR IMMEDIATELY PRECEDING YEAR HAS ALLOWED SIMILAR INTE REST EXPENSES. APPELLANT HAS SUBMITTED THE DETAILS OF SOURCE OF TH E ABOVE SHARES PURCHASED IN EARLIER YEARS AS UNDER: SHARE PURCHAE ACCOUNT H. NYALCHAND FIN. SER LTD. RECEIPT PAYMENT DATE NAME AMOUNT DATE NAME AMOUNT 01.04.99` DHIREN H.VORA CAPITAL 2582645 01.04.99 SHARE A/C. H. NYALCHAND 2582645 DHIREN H. VORA, CAPITAL 469100 SHARE A/C. H. NYALCHAND 469100 03.05.99 VORA ASSOCIATES 4346700 03.05.99 SHARE A/C. H. NYALCHAND 4346700 05.02.00 VORA ASSOCIATES 1000000 05.02.00 SHARE A/C. H. NYALCHAND 1000000 31.03.00 VORA ASSOCIATES 125000 31.03.00 SHARE A/C. H. NYALCHAND 125000 31.03.00 PARKLIGHT INV. 7520600 31.03.00 SHARE A/C. H. NYALCHAND 7520600 26.09.02 H. N. VORA HUF 9900000 26.09.02 SHARE A/C. H.NYALCHAND 9900000 TOTAL 34944045 24944045 SHARE PURCHASE ACCOUNT- PARKLIGHT SEC. LTD. RECEIPT PAYMENT DATE NAME AMOUNT DATE NAME AMOUNT 01.04.99 CASH BOOK 1000 01.04.99 SHARE A/C. PARKLIGHT SEC. 1000 21.12.99 VORA ASSOCIATES 2000000 21.12.99 SHARE A/C. PARKLIGHT SEC. 2000000 TOTAL 2001000 TOTAL 2001000 FROM ABOVE CHART IT CAN BE SEEN THAT THESE SHARES W ERE PURCHASED IN EARLIER YEARS STARTING FROM 1.4.99 TO 26.9.2002. THE APPELLANT HAS MAKE IT CLEAR THAT SOURCE OF FUNDS FOR ABOVE PURCHA SES WERE INTEREST FREE FUNDS FROM OWN CAPITAL ACCOUNT OF VORA ASSOCIA TES, PARKLIGHT SECURITIES AND H. N. VORA, HUF. SO ALL THESE SECURI TIES WERE ACQUIRED OUT OF OWN FUNDS & NON INTEREST BEARING FUNDS. ITA NO.3765/AHD/2008 SHRI DHIREN H. VORA 6 2.6.4 APPELLANT HAS FURTHER EXPLAINED THAT INTEREST FREE FUNDS ALONG WITH OWN CAPITAL AVAILABLE TO APPELLANT AS ON 31.3. 2004 WAS RS.4.24 CRORES AGAINST WHICH INVESTMENT IN ABOVE SE CURITIES WAS ONLY RS.3.69 CRORES AND STILL RS.54.83 LAKHS WERE A VAILABLE WITH APPELLANT. SIMILARLY, FOR FINANCIAL YEAR ENDING MAR CH, 2003, CAPITAL AND INTEREST FREE FUNDS WERE RS.5.15 CRORES OUT OF WHICH RS.4.70 CRORES ONLY WERE INVESTED IN ABOVE SECURITIES. THER E WAS NO INCREASE IN INVESTMENT DURING THE YEAR IN ABOVE SECURITIES. IT HAS BEEN MENTIONED THAT THERE IS NO OPENING BORROWING FROM H . N. VORA (HUF) AND IN EARLIER YEARS NO INTEREST HAS BEEN PAID TO F OR ACQUISITION OF ABOVE SECURITIES. 2.6.5 FROM ABOVE 2 PARAS, IT IS CLEAR THAT INTEREST PAYMENT TO H. N.VORA (HUF) IS NOT FOR ACQUISITION OF ABOVE SECURI TIES AND A. O. HAS ALSO POINTED OUT SUCH CORRELATION. 2.6.6 APPELLANT HAS POINT4ED OUT THAT DURING A. Y. 2003-04 ALSO IT HAS BEEN HELD BY LD. CIT(A) IN PARA 3.3. (IV) THAT WHERE --- SHARES ARE HELD AS INVESTMENT PORTFOLIO, AS AN INTEGRAL PA RT OF BUSINESS, INTEREST IS ALLOWABLE U/S. 36(1) (III) OF THE I.T. ACT RELYING UPON VARIOUS DECISIONS OF JURISDICTIONAL HIGH COURT AND DECISION OF HONBLE SUPREME COURT IN CASE OF MADAV PRASAD (1979) 118 IT R 200 AS MENTIONED IN PARA 3.3(V) OF ABOVE DECISION FOR A. Y . 2003-04. 2.6.7 FROM ALL THE ABOVE DISCUSSION, IT IS CLEAR TH AT APPELLANT HAS UTILIZED THE AMOUNT FROM H. N.VORA (HUF) FOR THE PU RPOSE OF BUSINESS WHICH IS ALLOWABLE U9/S.36(1) (III) OF I.T. ACT. AC CORDINGLY, ADDITION ON ACCOUNT OF INTEREST OF RS.7,58,940/- IS DELETED. 4. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT SINCE INTEREST BEARING FUNDS WERE DIVERTED FOR REPA YMENT OF LOANS WHICH WERE USED FOR INVESTMENTS IN PURCHASE OF SHARES AND ON THAT NO INCOME IS EARNED, THEREFORE, THE AO WAS JUSTIFIED IN DISAL LOWING INTEREST. LEARNED DR SUBMITTED THAT EVEN SECTION 14A OF THE IT ACT WO ULD APPLY IN SUCH A SITUATION. ON THE OTHER HAND, THE LEARNED COUNSEL F OR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND ALSO FILED WRITTEN SUBMISSIONS ON THE FACTS SUPPORTED BY MATERIAL ON RECORD AND SUBMITTED THAT NEITHER THE AO NOR THE LEARNED C IT(A) HAS DECIDED THE ISSUE IN REFERENCE TO SECTION 14A OF THE IT ACT . THE LEARNED DR COULD ITA NO.3765/AHD/2008 SHRI DHIREN H. VORA 7 NOT CONTEND THAT THE PROVISIONS OF SECTION 14A OF T HE I.T. ACT WOULD APPLY TO THE CASE OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. THE AO HAS NOWHERE POINTED OUT PROVISIONS OF SECTIO N 14A OF THE IT ACT WHILE MAKING THE DISALLOWANCE OUT OF INTEREST. THE AO DISALLOWED THE INTEREST U/S 36(1) (III) OF THE IT ACT ONLY. THE LE ARNED DR, THEREFORE, CANNOT MAKE OUT A CASE U/S 14A OF THE IT ACT WHICH IS NOT MADE OUT BY THE AO AT THE ASSESSMENT STAGE. MOREOVER, THE LEARN ED CIT(A) HAS NOT DECIDED THIS ISSUE FROM THAT POINT OF VIEW AND EVEN NO SPECIFIC GROUND OF APPEAL IS TAKEN BEFORE THE TRIBUNAL. THEREFORE, CON TENTION OF THE LEARNED DR IS REJECTED. THE ASSESSEE EXPLAINED THAT LOANS W HICH WERE REPAID WERE TAKEN BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. THE LOANS REPAID WERE TO SHRI DHIRUBHAI K. PATEL, SHRI R. K. PATEL AND SH RI SONAL VORA, DETAILS OF WHICH ARE NOTED BY THE LEARNED CIT(A) IN HIS FIN DINGS. NO FINDING HAS BEEN GIVEN BY THE AO TO THE EFFECT THAT THESE FUNDS WERE NOT UTILIZED BY THE ASSESSEE FOR BUSINESS PURPOSES. ONCE, THE LOANS HAVE BEEN UTILIZED FOR THE PURPOSE OF REPAYMENT OF EARLIER LOANS USED FOR THE PURPOSE OF BUSINESS, INTEREST WOULD BE ALLOWED AND IT IS NOT N ECESSARY THAT THE ASSESSEE CAN REPAY ONLY OUT OF THE INCOME EARNED DU RING THE YEAR. AS REGARDS INVESTMENTS MADE IN THE SHARES THE ASSESSEE HAS MENTIONED THAT THESE SHARES WERE ACQUIRED OUT OF INTEREST FREE FUN DS AVAILABLE WITH THE ASSESSEE AND THE AO HAS FAILED TO RECONCILE THE SAM E WITH THAT OF INTEREST BEARING FUNDS. THE DETAILS OF PURCHASES OF SHARES I N THE TWO COMPANIES ARE ALSO INCORPORATED IN THE FINDINGS GIVEN BY THE LEARNED CIT(A) WHICH WOULD CLEARLY SUGGEST THAT THESE SHARES WERE PURCHA SED IN EARLIER YEARS FROM 01-04-1999 TO 26-09-2002. ACCORDING TO THE ASS ESSEE, THESE WERE OBTAINED OUT OF INTEREST FREE FUNDS FROM OWN CAPITA L ACCOUNT AND H. N. VORA, HUF IN EARLIER YEARS. THERE WAS NO INCREASE I N THE INVESTMENTS DURING THE YEAR IN THE ABOVE SECURITIES. IN THE EAR LIER YEAR I.E. 2003-04, THE LEARNED CIT(A) ALSO DELETED THE ADDITION IN THE CASE OF THE ASSESSEE ITA NO.3765/AHD/2008 SHRI DHIREN H. VORA 8 WHICH IS ALSO CONFIRMED BY THE TRIBUNAL. THE LEARNE D CIT(A) GAVE SPECIFIC FINDINGS THAT LOANS EARLIER TAKEN FROM THREE PERSON S ARE USED FOR BUSINESS PURPOSES AND SHARES SO PURCHASED ARE OUT O F OWN FUNDS OF THE ASSESSEE AND INTEREST FREE FUNDS AVAILABLE WITH ASS ESSEE. THE FINDING OF FACT RECORDED BY THE LEARNED CIT(A) HAS NOT BEEN CO NTROVERTED BY THE LEARNED DR THROUGH ANY EVIDENCE OR MATERIAL. CONSI DERING THE FACTS AND CIRCUMSTANCES NOTED ABOVE, IT IS CLEAR THAT BORROWE D FUNDS HAVE BEEN USED FOR THE PURPOSE OF BUSINESS, THEREFORE, INTERE ST IS ALLOWABLE U/S 36(1) (III) OF THE IT ACT. THE LEARNED CIT(A) WAS, THEREFORE, JUSTIFIED IN DELETING THE ENTIRE ADDITION. AS A RESULT, WE CONFI RM THE FINDINGS OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENU E. 6. AS A RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 12-03-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 12-03-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD