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2023 (5) TMI 541 - AT - Income TaxDisallowance of interest u/s 36(1) (iii) - advancing interest free loans to certain parties - grievance of the revenue is that the interest income received on the loans advanced is less than the interest paid on its borrowing, thereby leading to disallowance of excess interest paid in the sum - DR argued that assessee, being a non-finance company (NBFC), the main source of income itself is only interest income, hence the assessee could not take shelter of availability of “interest free funds theory” as it is expected to earn interest income on every lending and the same should be more than the interest paid on its borrowings - HELD THAT:- This action of the revenue is not justified in the eyes of law. Once the borrowing is utilised for the purpose of business by the assessee, the interest paid on such borrowing would be squarely eligible for deduction u/s. 36(1)(iii) of the Act, irrespective of the fact whether assessee had received interest at lower rate than its borrowing rate or received nil interest. This aspect is very well settled by the decision of Hon’ble Supreme Court in the case of Reliance Industries Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and S.A Builders Ltd. [2006 (12) TMI 82 - SUPREME COURT] In any case, the issue in dispute squarely covered by the decision of this Tribunal in assessee’s own case for the assessment year 2014-15[2018 (8) TMI 2116 - ITAT DELHI] - Decided in favour of assessee.
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