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2019 (1) TMI 754 - HC - Income Tax


Issues:
Challenge to disallowance of interest on borrowed funds under Section 36(1)(iii) of the Income Tax Act, 1961.
Dispute over disallowance of entire interest paid by the Appellant for business purposes.

Analysis:
1. The appeal challenges the order of the Income Tax Appellate Tribunal regarding the disallowance of interest on borrowed funds under Section 36(1)(iii) of the Income Tax Act, 1961.
2. The Assessing Officer contended that part of the borrowed funds was diverted to sister concerns, leading to the disallowance of interest claimed by the Appellant.
3. The Appellant argued that advances to sister concerns were made out of own funds, not borrowed funds, and even if they were from borrowed funds, they were for business purposes.
4. The Tribunal emphasized the need to establish commercial expediency for interest-free loans to sister concerns, questioning the benefit derived by the Appellant from such advances.
5. The judgment highlighted the wide scope of "commercial expediency" in business expenditure, citing relevant legal precedents to support the Appellant's case.
6. The Tribunal's decision was remanded due to insufficient reasoning by the Assessing Officer and the outdated legal basis of the initial judgment, requiring a fresh assessment.

This detailed analysis covers the key issues raised in the legal judgment, providing a comprehensive overview of the arguments presented and the reasoning behind the decision to remand the case for further consideration.

 

 

 

 

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