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2013 (2) TMI 553 - AT - Income TaxInterest expenses - whether the action of the assessee of providing 6% interest on the unspent amount of grant is allowable whether u/s.36(1)(iii) of IT Act or u/s.37(1) of IT Act. - held that:- since the amount in question was not in the nature of borrowings or loans, therefore the provisions of section 36(1)(iii) do not apply on these facts. Regarding deduction u/s 37(1) - held that:- On one hand the assessee has earned interest income on investment of the surplus fund and on the other hand made the provisions of interest, hence such a claim does fall under the provisions of section 37(1) of IT Act. We have been informed that the unspent surplus funds have been invested as per the guidelines and thereupon interest was earned by the assessee. On the other hand, the assessee has to pay interest that too as per the directions of the Government, hence the provisions made by the assessee is, therefore, meant for the purpose of the business, hence qualify for claim u/s.37(1) of the IT Act. - Decided in favor of assessee.
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