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2017 (2) TMI 167 - ITAT MUMBAIDisallowance of claim for interest expenditure under section 36(1)(iii) or 14A - Held that:- The borrowing is by way of unsecured loan, so that the same is without any stipulation with regard to the application of funds, and neither has any been stated by either the assessee or the Revenue. The assessee has a net excess of current liabilities over current assets at ₹ 3518.66 lacs as on 31/03/2006. It is this excess, no longer tied in current assets (working capital), so that it provides liquidity, that can be said to fund the investment in shares, besides the depletion in capital by way of debit balance in the profit and loss account. It is only the balance excess which, along with the share capital and the borrowed funds, finance the investment in fixed assets. For the following two years, which are the years under reference, there has been a decline in the borrowed funds, so that there has been in fact a net repayment of borrowings. It is the release of funds from fixed assets (principally through depreciation, a non-cash charge) and further accretion to current liabilities – upon realization of the spontaneous current assets, that provide the funds for investment in shares for the immediately following year, i.e., f.y. 2006-07. No part of the borrowed capital can thus be said as applied for or considered as financing the investment in shares so as to attract any disallowance, either u/s. 36(1)(iii) or u/s. 14A.
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