Disallowance of interest

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sandeep (Querist)
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20 January 2012 1. A has borrowed Rs. 60 Lacs from Bank and Rs. 40 Lacs from market @ 15% p.a.
He is paying interest on the above borrowed money.

2. He has own capital at Rs. 31 Lacs, out of which he has invested Rs. 11 Lacs in FD's and Fixed Assets for the business.
There is stocks in business worth Rs. 20 Lacs.

3. 'A' has advanced loan to 'B' at concessional rate of interest, say 7.5% p.a.

According to A, he is having 20 Lacs as his capital, which he can advance at concessional rate of interest.

Whether the contention of 'A' is correct. Please advise if any judgment is in favour of 'A'.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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20 January 2012 Yes.
Please see, among others, Delhi High court decision in CIT Vs. Bharati Televenture Ltd reported in (2011) 331 ITR 502.

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