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2013 (6) TMI 187 - ITAT COCHINDisallowance of interest paid on deposit outside the books of account - whether the provisions of section 37(1) are applicable? - Held that:- No doubt, section 37(1) is not applicable in respect of expenditure which falls within sections 30 to 36. In this case, the taxpayer admittedly borrowed funds for enhancing the working capital for the purpose of money lending business. Interest on capital borrowed for the purpose of business falls within the provisions of section 36(1)(iii). Therefore, any interest paid on the capital borrowed for the purpose of business or profession has to be allowed as deduction u/s 36(1)(iii) of the Act. In view of the above, provisions of section 37(1) may not be applicable in respect of interest on the capital borrowed for business purpose. The taxpayer claims that the funds were borrowed in the personal capacity and not in the name of business concern - Held that:- The payment of interest on the borrowed capital falls within section 36(1)(iii and hence the provisions of section 37(1) may not be applicable. Therefore, it may be immaterial whether the money was borrowed in personal capacity or not?
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