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| The Tax Publishers2020 TaxPub(DT) 4882 (Bang-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
Since interest-free loans were advanced to sister concern out of non-interest bearing own funds available with assessee, therefore, no disallowance of interest expenses under section 36(1)(iii) was called for.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Advancement of interest free loans to sister concern - Assessee having sufficient own funds
Assessee claimed deduction on account of interest paid on borrowed funds under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground of assessee having advanced interest-free loans to sister concern. Assessee pleaded to have sufficient own funds. Held: Own funds in the form of share capital, reserve and surplus as available with assessee were much more than the amounts borrowed and, therefore, it could be safely presumed that own funds were used for the purpose of giving intrest-free loans to sister concern and, therefore, no disallowance of interest expenses under section 36(1)(iii) was called for.
Relied:ITA. Nos. 569/2015 & 229/2016 : 2018 TaxPub(DT) 3624 (Karn-HC) and CIT & Anr. v. Chaitanya Properties Pvt. Ltd., Order, dated 15-6-2018 and CIT v. HDFC Bank Ltd., ITA No.330 of 2012, judgment dated 23-7-14 : 2014 TaxPub(DT) 3351 (Bom-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2010-11
IN THE ITAT, BANGALORE BENCH
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