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| The Tax Publishers2020 TaxPub(DT) 2835 (Mum-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
As investment made by assessee in capital WIP was out of sufficient interest-free funds available with it and, therefore, no part of interest expenditure pertaining to interest bearing borrowed funds could have been disallowed under section 36(1)(iii).
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Investment in capital WIP - Assessee having sufficient own funds
Assessee-claimed deduction under section 36(1)(iii). AO made proportionate disallowance of interest attributable to borrowed funds utilised towards capitalised value of work-in-progress.Held: Admittedly, assessee had self-owned funds of Rs. 920 crores which would sufficiently justify the investment of Rs. 137 crore that was made by it towards capital WIP and, it could be safely presumed that investment made by assessee in capital WIP was out of interest-free funds available with it and, therefore, no part of interest expenditure pertaining to interest bearing borrowed funds could have been disallowed under section 36(1)(iii).
Supported by:CIT v. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) : 2009 TaxPub(DT) 1275 (Bom-HC) and CIT v. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) : 2014 TaxPub(DT) 3351 (Bom-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
INCOME TAX ACT, 1961
Section 69B
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