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2021 (3) TMI 553 - ITAT AHMEDABADDisallowance towards interest expenses incurred on term loans availed by the assessee - HELD THAT:- Loan facility has been taken against the security of the capital asset. The diversion of loan funds for non-business purposes has not been alleged by the revenue authorities. Besides, the findings of the CIT(A) is quite vague indeed. Section 36(1)(iii) of the Act governs allowability of interest paid in respect of capital borrowed for the purposes of business or profession. As held in Dy. CIT v. Core Health Care Ltd. [2008 (2) TMI 8 - SUPREME COURT] there is no distinction in Section 36(1)(iii) of the Act capital borrowed for revenue purpose and capital borrowed for a capital purpose. The assessee is entitled to claim interest paid on borrowed capital after the asset is put to use for business purposes. The loan having been utilized for acquisition of capital asset in the earlier years is thus not an obstacle for treating interest expenditure as revenue expenditure under s.36(1)(iii) of the Act r.w.s. Explanation 8 to s.43A of the Act. The CIT(A) has wrongly applied the tests laid down for applicability on Section 36(1)(iii) of the Act in its non-descript order. We thus find merit in the plea of the assessee for allowability of interest claim in question. - Decided in favour of assessee.
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