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| The Tax Publishers2019 TaxPub(DT) 8131 (Coch-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
Where assessee was not able to prove with necessary evidence that failure of business of sister concern had an impact on assessee and was not able to prove that there was commercial expediency in diverting interest free funds to the sister concerns when assessee was paying huge interest on its borrowings. Therefore, interest expenditure to the extent of funds diverted to sister concerns.
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Business deduction under section 36(1)(iii) - Interest borrowed capital - Borrowed funds diverted to sister concern - No Commercial expediency
Assessee had claimed interest expenditure on advances received from its sister concerns. AO disallowed the amount of interest on allegation that the said expenditure was not debited in the books of account as well as in the profit and loss account of assessee and was incurred for non-business purposes. Held: Assessee was not able to prove with necessary evidence that failure of business of sister concern had an impact on assessee. It had not been able to prove that there was commercial expediency in diverting interest free funds to sister concerns when assessee was paying huge interest on its borrowings. Therefore, interest expenditure to the extent of funds diverted to sister concerns.
REFERRED :
FAVOUR : Against the assessee
A.Y. :
INCOME TAX ACT, 1961
Section 194A
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