The Tax Publishers2021 TaxPub(DT) 0528 (Jp-Trib)


Section 37(1)

Interest on borrowed fund would be allowed since it was not disallowed by the Tribunal in past so many years because borrowed amount was used for business purpose.

Business expenditure - Interest on borrowed amount - Business purpose, in earlier year(s) interest allowed by Tribunal -

Assessee challenged the action of the CIT(A) in upholding the disallowance of Rs. 4,77,36,535 made by AO in respect of interest expenditure claimed by the assessee by misinterpreting the provisions of section 37(1) and by solely relying on the observations of the AO for assessment year 2004-05, i.e., first year of disallowance, the Tribunal had deleted the disallowance vide its order, dated 10-12-010 [ITA No. 8/JP/010]. Held: In earlier years the interest expenditure claimed by assessee were allowed by the department itself. However, in the year under consideration the same was not allowed for the reason that during the year under consideration fresh loans have been taken by assessee for repayment of old loans taken for the purpose of business. There was a direct nexus between the fresh loans and old loans because the fresh loans have been utilized for the purpose of repaying the old loan. Fresh loans partake the character of loans taken for business purposes. Interest paid on old loans was held as allowable, therefore, interest paid on fresh loans had to be allowed as the character of loan remains the same but only change of the name of the person/institution from whom the fresh loans were taken. There was thus no dispute that the matter was squarely covered by earlier decisions of the Tribunal and therefore, following the principle of consistency, the matter was decided in favour of assessee and against the revenue.

Followed:Tribunal in assessee's own case for assessment years 2008-09, 2009-10 and 2011-12 vide Order, dated 22-8-2016 in ITA Nos. 446/JP/2012, 764/JP/2013 & 158/JP/2015, Order, dated 10-12-2010 ITA No. 282/JP/2010


FAVOUR : In assessee's favour.

A.Y. : 2012-13 to 2014-15


Section 32(1)


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