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| The Tax Publishers2020 TaxPub(DT) 4816 (Del-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
In respect of disallowance made by AO of interest expenses under section 36(1)(iii), opportunity of being heard should be given to assessee company to prove utilization of the loan in question from its evidence as well as from the bank statements.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Business purpose or not -
AO made disallowance of 15% of the interest expenses under section 36(1)(iii) on the ground that assessee had not furnished any detail regarding interest expenses paid on borrowed capital during the year to work out if such interest and financial expenses paid were exclusively utilized for the purpose of assessee's business only. Held: The issue was required to be factually examined in its entirety by AO by examining audited financials of the assessee company and keeping in view the fact that this was a case of loan advanced and availed of by the assessee company to and from its sister concern. AO shall provide opportunity of being heard to the assessee company to prove utilization of the loan in question from its evidence as well as from the bank statements.
REFERRED :
FAVOUR : In favour of assessee.
A.Y. : 2011-12
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