The Tax Publishers2020 TaxPub(DT) 0421 (Mum-Trib)

INCOME TAX ACT, 1961

Section 36(1)(iii)

Where interest free loans were advanced to subsidiaries out of commercial expediency and also loans were given out of non-interest bearing own funds available with assessee then no disallowance of deduction under section 36(1)(iii) was called for.

Business deduction under section 36(1)(iii) - Interest on borrowed capital - Advancement of interest free loan to sister concern - Assessee pleading to have sufficient own funds

Assessee claimed deduction under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground of assessee having advanced loans to subsidiaries without charging any interest. Assessee contended that assessee had sufficient own funds to give interest-free loan to subsidiary companies.Held: Interest free loans were advanced to subsidiaries out of commercial expediency. Furthermore, assessee's interest free funds to grant loans were sufficient and thus it could be safely presumed that said loans were given out of non-interest bearing own funds available with assessee and accordingly, no disallowance of deduction under section 36(1)(iii) was called for.

Followed:CIT v. HDFC Bank Ltd. 2014 TaxPub(DT) 3351 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14


INCOME TAX ACT, 1961

Section 36(1)(iii)

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