The Tax Publishers2019 TaxPub(DT) 2179 (Mum-Trib)

INCOME TAX ACT, 1961

Section 36(1)(iii)

Since interest-free loans were advanced out of sufficient own funds available with assessee, therefore, no proportionate disallowance of deduction under section 36(1)(iii) was called for.

Business deduction under section 36(1)(iii) - Interest on borrowed capital - Advancement of interest free-loans - Assessee having sufficient own funds

Assessee claimed deduction under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground of assessee having advanced interest free loans to certain party.Held: Assessee was having sufficient own funds in the shape of share capital and free reserves far exceeding interest free loans advanced by the assessee. Thus, it could be safely presumed that no interest bearing funds had been diverted towards making of interest free loans and accordingly, no disallowance of deduction under section 36(1)(iii) was called for.

Relied:CIT v. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) : 2009 TaxPub(DT) 1275 (Bom-HC) and S.A. Builders v. CIT (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 0933 (SC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15



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