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| The Tax Publishers2020 TaxPub(DT) 2814 (Del-Trib) INCOME TAX ACT, 1961
Section 36(1)(iii)
Where subsidiary companies of assessee were also engaged in the same business as that of assessee and assessee invested in shares of subsidiary companies in furtherance of main objects of its business, AO was not justified in disallowing assessee's claim under section 36(1)(iii) proportinately on the ground of assessee having made investment in shares of subsidiary companies.
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Business deduction under section 36(1)(iii) - Interest on borrowed capital - Investment in shares of subsidiary company out of borrowed funds - Business nexus
Assessee claimed deduction under section 36(1)(iii). AO disallowed assessee's claim proportionately on the ground of assessee having made investments in shares of subsidiary companies out of borrowed funds. Held: The undisputed fact is that it was not the first year of business of the assessee. It was also not in dispute that subsidiary companies of assessee were also engaged in the same business of production, generation, transmission and distribution and supply of electricity. Further, assessee did not advance any loan to its subsidiaries but had invested in shares of subsidiary companies. In furtherance of main objects of its business and, therefore, assessee was very much entitled for claim of interest paid on borrowed capital.
Applied:SA Builders (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 833 (SC). Distinguished:Thukral Regal Shoes (2016) 391 ITR 119 (P&H) : 2016 TaxPub(DT) 3810 (P&H-HC), Mahindra World City Developers Ltd. (2019) 107 Taxmann.com 16 (Mad) : 2019 TaxPub(DT) 3826 (Mad-HC) and CIT v. Abhishek Industries Ltd. 2006 TaxPub(DT) 1778 (P&H-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
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