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2019 (7) TMI 741 - AT - Income TaxAllowability of interest on borrowed funds - loan taken for acquisition of share of company having similar business - proof of commercial expediency behind such loan - HELD THAT:- In the present case, we find that the assessee acquired shares of DPSC Ltd which is in the similar business to control stake is a commencement of business. Therefore in our opinion, the ratio laid down by in the case of Rajeeva Lochan Kanoria [1994 (2) TMI 42 - CALCUTTA HIGH COURT] is applicable to the facts on hand and the assessee is entitled to claim deduction of interest paid on borrowed funds. Further in the case of Divakar Solar System Ltd. [2016 (12) TMI 1079 - ITAT KOLKATA] the Coordinate Bench of Calcutta Tribunal held that the interest paid on borrowed capital needs to be allowed as deduction u/s 36(1)(iii) as it is a commercial expediency with a view to expand business and acquiring, controlling interest in subsidiary companies. Allowability of payment of Processing fee for availing loan - the said payment of processing fee is an incidental expenses on obtaining borrowed fund which is a revenue expenditure allowable u/s 37(1) - HELD THAT:- Payment of interest on borrowed fund is allowable as deduction u/s 36(1)(iii) and the CIT(A) has rightly held, the payment of processing fee to obtain such loan is an incidental expenses, since we have allowed the payment of interest as an allowable deduction, the processing fee paid on the said loan is also an allowable expenditure u/s 37(1) - Ground No.2 raised by the Revenue is dismissed.
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