TMI Blog2003 (9) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the assessee under section 36(1)(iii) - The language of section 36(1)(iii) is very clear in that an assessee would be entitled to deduction on interest paid on capital borrowings for the purpose of its business – Hence assessee was entitled to the benefit of section 36(1)(iii) - - - - - Dated:- 24-9-2003 - Judge(s) : ALTAMAS KABIR., ALOK KUMAR BASU. JUDGMENT This appeal, at the instance of the assessee, is directed against the judgment and order dated July 30, 2002, of the learned Income-tax Appellate Tribunal in I.T.A. Nos. 507 and 508 (Cal) of 1993 in respect of the assessment years 199394 and 1994-95, upholding the views expressed by the Assessing Officer and the Commissioner of Income-tax (Appeals) upon holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would be allowed a commission calculated at the rate of 12 per cent. of the price of the product as printed in the price list published by the assessee from time to time for distribution of the products, and a further commission calculated at the rate of 13 per cent. of the price of each product as printed in the price list from time to time, for the propaganda, sales promotion and market development in respect of the products of the assessee. The agreement, therefore, provided for a total amount of 25 per cent. commission to the marketing agency which as indicated hereinabove is a sister concern of the assessee. Mr. Khaitan also pointed out that since collection of outstanding dues from the market was slow, the assessee had to borrow l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the three forums below and, in particular the learned Tribunal, suffered from a misunderstanding and/or misconstruction of the provisions of section 36(1)(iii) of the aforesaid Act since the same have neither given a discretion nor any authority to the income-tax authorities to hold that there had been a diversion of funds, without any evidence to show that the sister concern or the assessee had in any way benefited in the circumstances. Mr. Khaitan also urged that whether the assessee was unable to collect its dues from the market or not had no nexus whatsoever with the deduction available under section 36(1)(iii) of the above Act, which, merely provides that such deduction would be available in a case where borrowings were made and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its outstandings to remain without charging any interest thereon while it was paying interest on the amounts borrowed by it, and that to the extent to which it would have been in a position to collect interest on the outstandings due to it from others, it could not be permitted to claim as an allowance interest paid by it, was not correct. Mr. Khaitan urged that on the same reasoning, the learned Tribunal as also the other lower authorities had erred in law in disallowing the assessee's claim under section 36(1)(iii) of the Act upon an erroneous conclusion that this was a case of diversion of funds by the assessee to the sister concern. Mr. Chowdbury, learned counsel, appearing for the Revenue, however, urged that since there was a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on interest paid on capital borrowings for the purpose of its business. No case has been made out before any of the forums below that the capital borrowing had not been utilised by the assessee for its business. Mr. Chowdhury's attempt to embellish the case of the Revenue cannot in any way salvage the position as far as the Revenue is concerned, having regard to the plain understanding of the language of section 36(1)(iii) of the Income-tax Act, 1961. For the foregoing reasons we are inclined to allow the appeal. The appeal accordingly, allowed. The orders passed by the Assessment Officer on July 30, 2002, as upheld by the Commissioner of Income-tax (Appeals) and the learned Tribunal are hereby set aside with a direction upon the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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