Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2014 (11) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 55 - HC - Income TaxClassification of expenses – Business expenses or not - Whether the Tribunal was right in holding that the interest on borrowed funds utilised for investment in shares can be treated as a business expenditure – Held that:- It is beyond any cavil that capital was borrowed by the assessee and interest was paid on the borrowed capital - The amount so borrowed was invested in shares and debentures for the purpose of business - when the amount is utilized for business purpose, the interest paid will have to be allowed as deduction in terms of Section 36(1)(iii) of the Act - The scope and ambit of Section 36(1)(iii) of the Act was considered by the Calcutta High Court in CIT v. Rajeeva Lochan Kanoria, [1994 (2) TMI 42 - CALCUTTA High Court] - when the assessee claims deduction of interest paid on capital borrowed, all that the assessee has to show is that the capital which was borrowed was used for the business purpose in the relevant year of account and it does not matter whether the capital was borrowed or not to acquire revenue asset or capital asset - if the funds are borrowed by an investment company for making investment in shares which may be held as investment or as stock-in-trade or for the purpose of controlling interest in other companies, interest paid on such borrowed funds will be deductible under section 36(1)(iii) of the Income-tax Act - there is nothing in Section 36(1)(iii) of the Act that would dis-entitle the assessee to claim deduction in respect of interest paid on the capital borrowed for the purposes of business – thus, the order of the Tribunal is upheld – Decided against revenue.
|