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The Tax PublishersITA No. 5822/Del/2015
2019 TaxPub(DT) 2697 (Del-Trib)INCOME TAX ACT, 1961
Section36(1)(iii)
Where car loan was the only interest-bearing loan that was taken by assessee during the year and all other funds were either interest free loans or the balance of capital account available with him then in as much as the loan was taken for the purpose of business and no question was there as to diversion of such funds having taken place, therefore, merely because assessee placed his own funds and made interest free loans for some other purposes, it was not open for AO to disallow interest on the amount taken for business purpose.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Advancement of interest free loans - Sufficient own fnds
Assessee claimed deduction under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground of assessee having advanced interest-free loan to related parties. Assessee's case was that such advances were made out of interest free own funds available with assessee.Held: Car loan was the only interest-bearing loan that was taken by assessee during the year and all other funds were either interest free loans or the balance of capital account available with him. Inasmuch as the loan was taken for the purposes of business and no queston was there as to diversion of such funds having taken place, therefore, merely because assessee placed his own funds and made interest-free loans for some other purposes, it was not open for AO to disallow interest on the amount taken for business purpose.
Relied:Reliance Utilities and Power Ltd. (2009) 178 Taxman 135 (Bom) : 2009 TaxPub(DT) 1275 (Bom-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 211-12
INCOME TAX ACT, 1961
Section 14A Rule 8D
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