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| The Tax Publishers2019 TaxPub(DT) 8380 (Kol-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
Where borrowed funds were utilised by assessee for making investment in its subsidy engaged in similar business, the business purpose of the investment as well as its commercial expediency was duly established and therefore, the interest paid by the assessee on the said borrowed funds would be allowable as deduction under section 36(1)(iii).
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Borrowed funds being utilised for making investment in shares of subsidiary engaged in similar line of business -
Assessee-company claimed deduction under section 36(1)(iii) on account of interest expenditure incurred in respect of borrowed funds, which were utilised for making investment in shares of its subsidiary company. AO disallowed the said claim of assessee. However, CIT (A) allowed such claim. Revenue contended that the said claim for interest expenditure was allowed by the CIT (A) without considering the vital aspect of commercial expediency. Held: Since borrowed funds were utilised by assessee for making investment in its subsidy engaged in similar business, the business purpose of the investment as well as its commercial expediency was duly established and therefore, the interest paid by the assessee on the said borrowed funds would be allowable as deduction under section 36(1)(iii). Hence, there was no merit in the contention of Revenue that the claim of assessee for interest expenditure was allowed by CIT (A) without considering the vital aspect of commercial expediency.
REFERRED : SA Builders Ltd. v. CIT (2007) 158 Taxman 74 (SC): 2007 TaxPub(DT) 0833 (SC) CIT v. Reliance Communications Infrastructure Ltd. (2012) 21 taxmann.com 118 (Bom): 2012 TaxPub(DT) 2082 (Bom-HC)
FAVOUR : In assessee's favour
A.Y. :
IN THE ITAT, KOLKATA BENCH
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