Assessee, a private company, was engaged in the business of real estate development. During the year, assessee developed a residential project and followed percentage completion method for revenue recognition. Assessee incurred interest expenditure of Rs. 15.37 crores. Since, 37% of the project was found to be completed as per percentage completion method, interest of Rs. 5.68 crores was charged to the profit & loss account. During the course of assessment proceedings, Ld. AO noted that loan raised during the year were not used for the business purpose but were diverted to related concerns and no interest was charged from them. Accordingly, Ld. AO disallowed the interest expenditure amounting to Rs. 5.68 crores holding that assessee has given interest free funds and advances and share capital to sister concerns. On appeal, CIT(A) confirmed the disallowance stating that Ld. AO had clearly given detailed analysis showing the nexus between interest bearing fund and interest free advances and contention of the assessee that funds had been used for business purpose was not supported by strong evidences. Aggrieved by the same, assessee filed an appeal before the ITAT. The Tribunal observed that as the Assessee was engaged in the real estate business and buying land or acquiring lease of land is business of the Assessee. Funds were given to sister companies to either purchase of land or acquiring lease of land. All funds were given for business purposes and hence no disallowance could have been made. The Tribunal further observed that Assessee having mixed funds, the only presumption arising in favor of assessee is that the amount of advances given is out of the non-interest bearing funds. And thus all the advances even if presumed that they are not given by the assessee for the business purposes did not exceed the funds available with the assessee without interest. The Tribunal thus deleted the disallowance made. (ITA no. 753/Del/2018, dt. 07.05.2018) (AY. 2014-15)