No disallowance towards Interest if there is Sufficient own funds

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No disallowance towards Interest if there is Sufficient own funds

 

DCIT v. Firstsource Solutions Ltd.

Decision:    In assessee’s favour.

 

Business deduction under section 36(1)(iii)– Interest on borrowed capital– Investment in subsidiaries– Sufficient own funds

Facts:

Assessee claimed deduction under section 36(1)(iii). AO disallowed assessee’s claim proportionately holding that interest bearing funds were diverted towards making of investments in subsidiaries. Assessee’s case was that own funds available with it was more than the value of investments made in subsidiaries.

Held:

Assessee held own funds of Rs. 23,580 lakhs, whereas investment in subsidiaries stood at Rs. 1,576 lakhs. Presumption in such case would be that assessee had used only its own funds for making investments. Further, there was commercial expediency in making said investments, hence no disallowance was called for.

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