Disallowance u/s 14a or 37

Dear Friends and experts,

ABC is a subsidary of XYZ. ABC raised funds of Rs. 5 Crore through Debentures during the year. That money was advanced by ABC to XYZ to be incurred by XYZ for its project but ABC did not charge any Interest from XYZ on such advance. ABC charged Rs, 25 Lakhs Interest on Debentures for the year to Profit and Loss A/c. There is no other income for ABC for that year.

Now my query is:

1) For Income Tax Computation of ABC for that year - whether that Interest of Rs. 25 Lakhs is disallowed ?

2) IF It is disallowed, then disallowed under section 37 or 14A ?

 

Please kindly advise with explanations.

Replies (2)
As there is no any business activity during the year whole interest expense of 25 lac is disllowed u/s 37 of income tax act

Interest on capital borrowed is covered by section 36 (1)(iii). If you can justify your case that advancing of the money is for the purpose of business of the subsidiary company it will be allowed as deduction under the same section. Commercial prudence and business expediency must be there to justify your claim. Refer S.A. Builders case 288 ITR 1 as decided by the Supreme Court in this regard.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
ARTICLESHIP 08 October 2026
ARTICLE TRAINEE

S.B.G. & CO. CHARTERED ACCOUNTANTS

New Delhi

CA Inter

View Details
Company
15 October 2026
Senior Accountant

Continental Belting Pvt Ltd

Mumbai

B.Com

View Details
Company
12 October 2026
AUDIT , ACCOUNTS AND TAXATION

KDSS

New Delhi

B.Com

View Details
Company
08 October 2026
SALES TELECALLER

HIRE NOVA

Lucknow

Graduate (Any)

View Details
Company
ARTICLESHIP 22 October 2026
Articleship intern

Srinath Manikanta

Hyderabad

CA Inter

View Details
Company
19 October 2026
Accountant

Jari Saree Center

New Delhi

Others

View Details
Company
Featured 03 October 2026
Accountant

A P Lodha and Associates

Jalna

B.Com

View Details
Company
14 October 2026
GST & TDS ASSISTANT

AGGARWAL SANJAY & ASSOCIATES

New Delhi

B.Com

View Details