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36. In the aforesai d ground the assessee has chal l enged the acti on of the Ld.CI T( Appeal s) i n confi rmi ng the addi ti on made of Rs.17,89,573/- u/s 36( 1) ( i i i ) of the Act.

37. The facts rel eva nt to the i ssue are that duri ng assessment proceedi ngs the Assessi ng Offi cer found that the assessee had gi ven i nterest free l oans amounti ng to Rs.2,08,06,400/- to vari ous persons. The Assessi ng Offi cer al so found that t he assessee had pai d i nterest on borro wi ngs amounti ng to Rs.17,89,573/-. On bei ng asked, to substanti ate busi ness purpose for advanci ng i nterest free amounts, the a ssessee fi l ed co pi es of account of some l oanees. The A ssessi ng Offi cer hel d that there was no busi ness purpose i n advanci ng the sai d amounts. Thereafter rel yi ng upon the deci si on rendered by the juri sdi cti onal Hi gh Court i n the case of CI T Vs. Abhi shek I ndustri es Ltd., 286 I TR 1, the Assessi ng Offi cer hel d that si nce the assessee had fai l ed to di scha rge i ts obl i gati on to prove that the l oans rai sed from fi nanci al i nsti tuti on were uti l i zed for busi ness purpose onl y and there was no justi fi cati on and reasonabl eness to advance i nterest free funds for non busi ness purpose, di sal l o wance u/s 36( 1) ( i i i ) of the Act was warranted and cal cul ati ng the i nterest on the i nterest free advance @ 12% made a di sal l o wance of Rs.23,76,800/-.

44. We have gone th rough the afores tated Ci rcul ar of the CBD T and we fi nd that the Board has i n the sai d Ci rcul ar accepted that the di sal l o wances made u/s 32, 40( a) ( i a) , 40A( 3) , 43B, etc. of th e Act rel ati ng to busi ness acti vi t y and agai nst whi ch Chapter VI -A i s admi ssi bl e resul t i n enhancement of the profi t of the el i gi bl e bu si ness and that deducti on under chapter VI A is admi ssi bl e on the profi ts so i ncreased by the di sal l o wance.

45. In the present case di sal l o wance made u/s 36( 1) ( i i i ) amounti ng to Rs.17,89,503/- has been uphel d by us and the sa me bei ng rel ate d to the busi n ess acti vi t y resul ti ng i n enhancement of the busi ness profi ts of the assessee, the assessee i s enti tl ed to cl ai m deduction u/s 80I C of the Act on account of enh anced profi ts at t he el i gi bl e rates i n vi e w of t he CBD T Ci rcul a r as above. We, therefore, di rect the Assess i ng Offi cer to gr ant benefi t to th e assessee of the sai d Ci rc ul ar of the CBD T and c ompute t he taxabl e profi ts thereafter. I n vi e w of the same, ground N o.7 rai sed by the assessee stands al l o wed.