INCOME TAX ACT, 1961

Section 36(1)(iii)

Business deduction under section 36(1)(iii) - Disallowance of interest being interest referable to interest free loans and advances given to subsidiary companies - Allowability -

Assessee was engaged in business of oil exploration, manufacturing and trading of petro-chemicals, etc. AO disallowed interest referable to interest free loans and advances given to subsidiary companies under section 36(1)(iii). High Court as well as Tribunal had held that interest amount being interest referable to funds given to subsidiaries was allowable as deduction under section 36(1)(iii) when the interest would not have been payable to banks, if funds were not provided to subsidiaries. It could be presumed that investments were made from interest free funds available with assessee. Held: High Court had noted the finding of Tribunal that interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with assessee. Therefore, there was no reason to interfere with the judgment of High Court with respect to allowing interest amount being interest referable to funds given to subsidiaries as deduction under section 36(1)(iii).

REFERRED : CIT v. Reliance Industries Ltd. [IT Appeal Nos. 1550, 1592, 1775 & 1811 of 2014, 23-8-2017] : 2019 TaxPub(DT) 658 (Bom-HC)

FAVOUR : In assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 80-IA

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