|The Tax Publishers2021 TaxPub(DT) 0875 (Bang-Trib)
INCOME TAX ACT, 1961
Where assessee was already in the business of medical profession and it was offering income from the said business or profession, it was not possible to hold that assessee had not commenced business and thus deduction of interest on loan could also not be denied on such ground. In such circumstances, AO had to see only utilization of funds i.e. whether the said fund i.e., was used for the purpose of business.
Business deduction under section 36(1)(iii) - Interest on borrowed capital - Utilization of funds, whether for the purpose of business or not -
Assessee claimed interest on loan as a deduction from business income. AO made disallowance of said interest expenses under section 36(1)(iii) on the ground that assessee had not carried on any business activity in the year under consideration. The interest was on loan obtained for construction of the building and purchase of equipment which was in the nature of capital asset as such they were not put to use. Thus, assessee was not entitled for deduction of interest on such loan. Held: It was appropriate to note that the assessee was already in the business of medical profession and the assessee was offering income from the said business or profession and thus it was not possible to hold that the assessee has not commenced business as it was also the plea of the assessee that depreciation had been granted on the assets purchased out of this loan. In such circumstances, AO had to see only utilization of funds i.e. whether the said fund was used for the purpose of business. Thus, in these facts of circumstances of the case, matter was remanded to the file of AO for consideration afresh.
FAVOUR : Matter remanded.
A.Y. : 2013-14
IN THE ITAT, BANGALORE BENCH
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