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| The Tax Publishers2020 TaxPub(DT) 0579 (Ahd-Trib) : (2020) 185 ITD 0081 INCOME TAX ACT, 1961
Section 36(1)(iii)
Proviso to section 36(1)(iii) mandates to capitalize interest on machine acquired out of borrowed fund provided such acquisition results in extension of business. As there was no finding of AO about extension of existing business of assessee, interest expenses incurred by assessee on borrowed money utilized for acquisition of machineries was eligible for deduction as revenue expenses.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Applicability of proviso to section 36(1)(iii) - Acquisition of new machinery out of borrowed fund which was not put to use during the year under consideration--No finding of AO about extension of existing business of assessee
Assessee claimed deduction under section 36(1)(iii). AO disallowed deduction proportionately on the ground of assessee having acquired new machinery out of borrowed fund which was not put to use during the year under consideration.Held: Proviso to section 36(1)(iii) mandates to capitalize interest on machine acquired out of borrowed fund provided such acquisition results in extension of business. As there was no finding of AO about extension of existing business of assessee, interest expenses incurred by assessee on borrowed money utilized for acquisition of machineries was eligible for deduction as revenue expenses.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
INCOME TAX ACT, 1961
Section 14A
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