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Tax Publishers
Disallowance under section 36(1)(iii) of interest
paid citing no levy of onward lending to parties without interest - plea of
Accounting Standard - 9 non-recoverability of interest income thereto
Facts:
Assessee
had borrowed monies at interest of 10%/12%. It was noticed by the AO that
the assessee did not charge any interest to certain parties to whom they
had lent monies. On inquiry assessee cited Revenue Recognition (Accounting
standard - 9) that the interest was not charged as even the principal portion
themselves was doubtful in recovery from these parties. This did not meet the
eye of the AO and disallowance was sustained. On appeal the CIT(A) reversed the
order of the AO. On higher appeal by the revenue -
Held
against the revenue that the applicability of AS-9 was correct and there was no
interest which assessee could levy on these parties from whom even the
principal amount that was lent themselves were in doubt. Order of CIT(A)
requires no intervention.
Ed. Note:
It is not known if the onward lending was to related parties. The tax strategy
adopted is to be noted.
Case: Dy. CIT v. Safari Biotech (P) Ltd. 2023 TaxPub(DT) 4382 (Ahd-Trib)
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