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2019 (3) TMI 1760 - AT - Income TaxDisallowance of the interest expenditure u/s 36(1)(iii) - interest expenditure attributable to the application of the borrowed funds for non-business purposes - HELD THAT:- As proceeded to determine the extent of reliance on borrowed capital – for financing non-business advances, ourselves, rather than remitting the matter back, for two reasons. First, the amount involved is nominal, and therefore remission would burden both the parties. Two, we have already found that no borrowed capital is invested in the amount advanced as at the year-end, while the firm is indebted to a much larger extent as at the beginning of the year, so that it’s being acutely short of interest-free capital at the beginning of the year is patent. The only presumption therefore is with regard to the date/s of the substitution of the borrowed capital with interest-free funds (in the form of trade credit), and which we have, accordingly, presumed as evenly during the year. The presumption gets validated with reference to the average interest rate on the borrowed capital, which agrees – with a minor difference, with the interest rate applied, so that the matter, which some approximation, gets resolved.
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