The Tax Publishers2020 TaxPub(DT) 4100 (Hyd-Trib)

INCOME TAX ACT 1961

Section 36(1)(iii)

Where assessee's own and interest-free funds were much more than the investments made in sister concern, there was no merit in making disallowance of interest under section 36(1)(iii), especially when commercial expediency was also proved by assessee.

Business deduction under section 36(1)(iii) - Interest on borrowed capital - Assessee had sufficient funds for giving interest free advances to sister concern -

AO made disallowance of interest under section 36(1)(iii) on the ground that the interest on borrowed funds were not utilised for business purposes. Held: As assessee had filed the financial statements to show that the interest free funds available with it at the time of investments, were much more than the investments made, there was no merit in making disallowance of interest under section 36(1)(iii), especially when commercial expediency was also proved by assessee.

REFERRED : CIT v. M/s. Reliance Industries Ltd. (2019) 102 taxmann.com 52 (SC) : 2019 TaxPub(DT) 0659 (SC) SA Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 0833 (SC) CIT v. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bombay-HC) : 2009 TaxPub(DT) 1275 (Bom-HC) Cheminvest Ltd. v. ITO (2009) 121 ITD 318 (Del) (SB) : 2009 TaxPub(DT) 1964 (Del-Trib) Pr. CIT v. M/s. E-City Investments and Holdings Company (P) Ltd. (2020) 117 taxmann.com 124 (SC) : 2020 TaxPub(DT) 0704 (SC) Addl. CIT v. M/s. Tulip Star Hotels Ltd. [Special Leave Appeal (Civil) 2012 (CC No. 7138 to 7140/2012) on 30-4-2012] : 2014 TaxPub(DT) 4813 (SC)

FAVOUR : In assessee's favour

A.Y. : 2011-12 to 2013-14



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