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| The Tax Publishers2020 TaxPub(DT) 4248 (Jp-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
Where the borrowed funds were utilized by the assessee for the current assets and not for the acquisition of the land in question, no disallowance of interest to the extent of borrowed funds could be made by AO.
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Business disallowance under section 36(1)(iii) - Interest on borrowed capital - Money borrowed utilize for capital asset -
Assessee purchased a piece of land. As per AO, borrowed funds were utilized for purchasing it. Interest to the extent of borrowed funds used for the same was not disallowed. Accordingly, AO passed order under section 154 and disallowed the same. Held:Prima facie, it appeared that assessee had made investment during the year in the current assets which is more than the borrowed funds, therefore, the borrowed funds were utilized by assessee for the current assets and not for the acquisition of the land in question. Further, while passing the order under section 154, AO had not issued any notice to the assessee and without giving an opportunity of hearing to assessee the disallowance was made. Thus, in the facts and circumstances of the case, the disallowance made by the AO was deleted.
REFERRED :
FAVOUR : In favour of assessee.
A.Y. : 2012-13
IN THE ITAT, JAIPUR VC 'SMC', JAIPUR BENCH
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