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2017 (4) TMI 528 - HC - Income TaxReopening of assessment - denial of deduction u/s 36(1)(iii) - Held that:- Where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings. The argument that the Assessing Officer was not competent to pass an order of reassessment in respect of any other income which may have escaped assessment other than on which reasoned to believe have been recorded is not tenable and is turned down. - Decided against assessee. Assessee appellant has taken loan for business purposes from various sources including U.P.F.C. and Bank of Baroda and had paid interest thereon amounting to ₹ 5,93,644/-. It claimed deduction of the said amount under Section 36(1)(iii) of the Act but the authorities denied the said deduction on the ground that the assessee has given interest free advances to its partners which means that it had surplus money which could have been utilised to clear off the loan so as to reduce the interest liability. In order to get the benefit under Section 36(1)(iii) of the Act it is settled in law that only three factors are relevant namely that the assessee had borrowed money for business purpose; it has utilised it for the business; and that it had paid interest on it. In the case at hand there is no dispute that the borrowing was for business purposes, it was utilised in the business and the assessee had paid interest on it therefore, the interest so paid was deductable under Section 36(1)(iii) of the Act. Accordingly, denial of deduction on any other ground is not tenable in law. Therefore, interest amount as paid by the assessee is liable to be deducted under Section 36(1)(iii) of the Act. - Decided in favour of assessee.
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