INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Payment of interest in case of part performance of contract -

There was business transaction between assessee and TRIL for sale of land and MOU was entered on 5-10-2007, wherein TRIL was to pay sum of Rs. 2,500 crores to assessee for a land purchase of 517 acres. Against which, sum of Rs. 1,700 crores was paid as advance. Later on, this deal was revised and area of land to be purchased was reduced and the reduced amount payable by TRIL to assessee was Rs. 600 crores and balance amount of Rs. 1,300 crore was refunded to TRIL in various instalments along with interest. AO disallowed deduction of said interest payment on the ground that MOU did not contain any clause, enabling interest payment. Held: As interest had been paid in part performance of contract during regular course of business and under commercial expediency in terms of a contract and other party had also acknowledged receipt of such payment as interest, then AO could not judge the transaction so as to disallow payment of interest as non-business expenditure.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 143(3)

SUBSCRIBE FOR FULL CONTENT