INCOME TAX ACT, 1961

Section 36(1)(iii)

Business deduction under section 36(1)(iii) - Interest on borrowed capital - Borrowed money was used to purchase shares - Investment for strategic purposes

Issue arose for consideration as to whether Tribunal was right in allowing the claim of interest on borrowed funds utilised for investment in shares of CESC, as a business expenditure on the ground that investment is one of the objectives of the assessee company. Held: As decided in CIT v. R.P.G.Transmissions Limited [(2013) 359 ITR 0673 (Mad) : 2014 TaxPub(DT) 0687 (Mad-HC)], Tribunal allowed the assessee's claim of interest paid on borrowed capital. Appellate authority and Tribunal found that investment made in shares by assessee by utilising borrowed capital was for strategic business purposes because companies were promoted as special purpose companies to strengthen and promote its existing business by combining different business segments and, therefore, the claim was fully allowable under section 36(1)(iii).

REFERRED : CIT v. RPG Transmissions Ltd. (2013) 359 ITR 0673 (Mad) : 2014 TaxPub(DT) 0687 (Mad-HC) CIT v. Spencers and Co. Ltd. (No. 3) (2013) 359 ITR 644 (Mad) : 2014 TaxPub(DT) 0205 (Mad-HC)

FAVOUR : In assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 14A read with Rule 8D

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