AO wrongly presumed that only interest-bearing funds were used for CWIP: ITAT deletes disallowance of Interest of Rs. 2.12 Cr

The Income Tax Appellate Tribunal (ITAT) deleted a disallowance of interest amounting to Rs. 2.12 crore, which the Assessing Officer (AO) had added back on the assumption that only interest-bearing funds were used for Capital Work in Progress (CWIP). The ITAT found that the AO had wrongly presumed that the funds used were solely interest-bearing, without considering the taxpayer's claims that non-interest-bearing funds were also utilized. The Tribunal ruled in favor of the taxpayer, emphasizing the importance of accurately assessing the nature of funds used in CWIP before making disallowances of interest expenses.