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2008 (8) TMI 313 - HC - Income TaxInterest Paid on Capital Borrowed Section 36 Interest Paid Rs. 27,96,55,759 - The honble Supreme Court has held that section 36(1) (iii) of the Income-tax Act, 1961, has to be read on its own terms : it is a code by itself. It makes no distinction between money borrowed to acquire a capital asset or a revenue asset. All that the section requires is that the assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account. Unlike section 37 which expressly excludes an expense of a capital nature, section 36(1) (iii) emphasises the user of the capital and not the user of the asset which comes into existence as a result of the borrowed capital. The Legislature has, therefore, made no distinction in section 36(1) (iii) between capital borrowed for a revenue purpose and capital borrowed for a capital purpose - Actual cost of an asset has no relevancy in relation to section 36(1) (iii) of the Act tribunal order disallowed the claim of interest not correct interest is allowable appeal allowed.
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