INCOME TAX ACT, 1961

Section 36(1)(iii)

Business deduction under section 36(1)(iii) - Interest on borrowed capital - Business purpose -

AO made disallowance under section 36(1)(iii) in the hands of assessee on the ground that assessee had borrowed funds and paid interest and had given loans and advances on which no interest was received. Thus, assessee had advanced the money for non-business purposes. Held: Assessee had provided interest free advance to its staff and on the other hand interest was paid on the borrowings. It was found that assessee had taken loan for purchase of vehicle which was used for business purposes and interest was the interest paid on the car loan taken from Bank of India. Leger account of interest expenses and ledger account of bank loan account was filed by the assessee. Thus, it remains undisputed fact that the alleged amount had been paid for car loan taken from bank and was an eligible business expenditure. Thus, disallowance made by AO was deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 37(1)

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