INCOME TAX ACT 1961

Business deduction under section 36(1)(iii) - Interest on borrowed capital -advance given to partners instead in clearing off its debts

Assessee took loans from various parties, including banks and claimed deduction of interest amount of paid to them and It also received interest-free fund from one GSL .Thereafter, assessee gave interest-free advance to its partners and Assessing Officer disallowed assessees claim. Held : Since assessee had not utilized interest-free funds received by it in clearing off its debts but had advanced interest-free funds to its partners, interest paid by it on borrowed funds was rightly disallowed by Assessing Officer.

Income tax act 1961 section 36(1)(iii)

Decision : In favour of revenue.
A.Y : 1996-97

Case law analysis :Asstt. CIT v. Rajesh Javeri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 / 161 Taxman 316 (SC); E. Hill & Co. (P.) Ltd. v. CIT [1980] 122 ITR 630 /[1979] 1 Taxman 28 (All.) and V. Jaganmohan Rao v. CIT [1970] 75 ITR 373 (SC)

INCOME TAX ACT 1961

Business loss - Allowability -Non submission of supporting evidence

Assessee was manufacturer of yarn and It incurred loss on trading of cotton bales and claimed set-off of said loss against business income but A.O disallowed this claim. Held :It was found from records that assessee had not lead any evidence regarding taking delivery of cotton bales from various suppliers either by agents or by itself and also, there was no evidence of taking delivery after processing of cotton bales from customers by assessees agents or by assessee itself and hence in absence of primary evidence of taking delivery either by assessee or by its agents from any party, assessees claim could not be allowed.