2009 (2) TMI 480 - HC - Income Tax

Interest on borrowed capital Interest on loans obtained by assessee to settle liability of its sister concern Interest paid to retain business premises of assessee allowed

Summary

The High Court of Bombay High Court, in the 2009 case of REBELLO F. I., MOHITE R. S., JJ, addressed the issue of interest expenses disallowance made by the Tribunal on an amount of Rs. 17,08,511, which was borrowed by the assessee from Canara Bank to settle a sister concern's liability. The assessee argued that the funds were used to retain business premises necessary for business activities, and therefore the interest should be allowed as a deduction under section 36(1)(ii). Both the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal upheld the deduction, citing various judgments including CIT v. Finley Mills and Addl. CIT v. Putco Pvt. Ltd. The court agreed with the authorities' reasoning, stating that the borrowing was necessary to retain the business premises, which was crucial for the business operations. The court found the findings reasonable and dismissed the appeal, asserting that the questions of law did not