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2003 (9) TMI 53 - HC - Income TaxInterest paid on capital borrowing – deductibility under section 36(1)(iii) - Assessing Officer disallowed the claim on the ground that the assessee had wilfully and deliberately chosen not to collect its outstanding dues from the sister concern in order to accommodate the sister concern and had, on the other hand, borrowed capital from the market and paid interest thereon for which deduction had been claimed. The Assessing Officer was of the view that this amounted to diversion of funds by the assessee to its sister concern to the detriment of the Revenue and, accordingly, disallowed the claim of the assessee under section 36(1)(iii) - The language of section 36(1)(iii) is very clear in that an assessee would be entitled to deduction on interest paid on capital borrowings for the purpose of its business – Hence assessee was entitled to the benefit of section 36(1)(iii)
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