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| The Tax Publishers2020 TaxPub(DT) 2244 (Coch-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
Where assessee having advance interest free loan to sister concern claimed the advance to have been made out of sufficient own funds, however, without producing cash flow statements showing availability of enough own funds, matter was remanded to AO for fresh consideration with direction to assessee to produce relevant cash flow statements.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Proportionate disallowance on account of advancement of interest free loan to sister concern - Assessee pleaded to have made advances out of sufficient own funds
Assessee claimed deduction under section 36(1)(iii). AO disallowed deduction proportionately on the ground of assesse having advanced interest free loan to sister concern. Assessee contended that it had sufficient amount of interest free funds which was used for advancing to the sister companies and, therefore, no disallowance was called for. Held: Assessee had not produced cash flow statements showing availability of enough own funds for making interest free advances to sister concern. Accordingly, matter was remanded to AO for fresh consideration with direction to assessee to produce relevant cash flow statements to show that interest free funds were avialable with assessee to make such loans.
REFERRED :
FAVOUR : Matter remanded.
A.Y. :
INCOME TAX ACT, 1961
Section 32(1)
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