INCOME TAX ACT, 1961

Section 250(6)

Appeal [CIT(A)] - Order of CIT(A) - Summarily rejected assessee's entitlement for claim of deduction under section 36(1)(iii) - Without adjudicating on merits of assessee's case

Noticed that assessee had diverted interest bearing borrowed funds raised from bank by way of interest free loans and advances to various companies. Therefore, AO worked out the pro rata interest expenses relating to the aforesaid funds and restricted assesse's claim for deduction of interest expenditure. Assessee assailed assessment order before CIT(A). It was submitted that as the interest bearing borrowed funds raised from bank were either deployed for giving advances in the normal course of its business or advancing of interest bearing loans to certain parties, therefore, no disallowance of any part of the interest expenditure. Attributable to the said funds was called for under section 36(1)(iii). However, CIT(A) held a conviction that assessee had in its return of income as well as in course of assessment proceedings raised a claim for deduction of interest expenditure only under section 57(iii) and, therefore, assessee's contention that interest pertaining to funds which had been deployed for business purposes was deductible under section 36(1)(iii) could not be accepted. Held: It had been the claim of assessee before CIT(A) that advances were made in the normal course of its business and assessee sought deduction of interest expenditure pertaining to such advances under section 36(1)(iii). CIT(A) ought to have considered assesse's claim for deduction of interest expenditure under section 36(1)(iii) pecifically, when the same was being raised on the basis of the facts which were already available on record, however, CIT(A) summarily rejected assesse's entitlement for claim of deduction undr section 36(1)(iii). Accordingly, matter was restored to CIT(A) for fresh adjudication on merits.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2013-14

SUBSCRIBE FOR FULL CONTENT