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2021 (7) TMI 1020 - AT - Income TaxDisallowance of the interest expenditure on the loan taken by the assessee - HELD THAT:- In this case, while the loan was granted to a third-party real estate developer M/S. ABW Infrastructure with strategic intent, the loan per se was for the purpose of earning interest income in terms of Agreement for effective and secured deployment of interest-bearing funds, which did not result in acquiring any controlling interest in M/S. ABW Infrastructure. In the absence of any finding that the loan from M/s. OIPL on which interest expense has been incurred, was used for personal purposes of the assessee, keeping in view the proximity of time in obtaining loan from OIPL for the immediate necessity of meeting the expenditure for conversion of land uses and also other business prospects, and in lending the idle funds to M/s M/S. ABW Infrastructure for the purpose of earning of interest on the idle funds at the same rate of interest at which the loan was obtained. The transactions are driven by business considerations and are part of the commercial expediency, we are of the considered opinion that the disallowance of interest expense on loan taken for purposes of business and against which interest income has been earned and offered to tax is unwarranted and the same qualifies to be allowed u/s.36(1)(iii)/S.37(l). We find equal strength in the argument of the ld. AR and hold that even in the alternative, such an expense qualifies as a deduction u/s.57(iii) against the interest income offered to tax, being an expenditure incurred in relation to earning of the said income as the loan was taken from M/s. OIPL and then given to M/S. ABW Infrastructure. - Decided in favour of assessee.
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