The Tax Publishers2019 TaxPub(DT) 2355 (Guj-HC)

INCOME TAX ACT, 1961

Section 36(1)(iii)

Since assessee had sufficient interest free fund available with it to be invested in mutual funds, deduction of interest expenditure on borrowed fund could not be disallowed under section 36(1)(iii).

Burness deduction under section 36(1)(iii). - Interest on borrowed capital - Own fund sufficiency -

Assessee had claimed deduction of interest expenditure. AO disallowed the same under section 36(1)(iii) on the allegation that assessee failed to establish that investments in mutual funds were not made from borrowed fund and that the same were made out of interest free funds available with it. Held: If there are funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest free funds generated or available with the company, if the interest free funds were sufficient to meet the investments and, therefore, interest was deductible.

Followed:CIT v. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom.) : 2009 TaxPub(DT) 1275 (Bom-HC) CIT v. Gujarat State Fertilizers & Chemicals Ltd. (2013) 358 ITR 323 (Guj.) : 2013 TaxPub(DT) 2220 (Guj-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :



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