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2010 (12) TMI 451 - HC - Income TaxDisallowance - Interest on loan - Business income or other sources - The assessee had given its detailed explanation to the Assessing Officer, inter alia, stating that it had borrowed a sum of ₹ 35.34 crores directly from the banks to make the FDRs, that is to say, on the one hand, the bank advanced loan to the assessee and on the other hand, the same amount was converted into FDRs - It is not in dispute that the assessee intends to pay the tax on the extra interest earned on the said FDRs, what the assessee wanted to adjust therefrom the interest paid by it to the bank against the borrowed funds - The interest paid had to be allowed under the provisions of section 57(iii) of the Act as the amount was borrowed for making and earning income, taking advantage of the EXIM policy of the Government of India as well as lower LIBOR interest rate - Decided in favour of the assessee
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