Latest Judgment in Income Tax...

CA. Dashrath Maheshwari (TaXpert) (15065 Points)

23 February 2008  
  • SC Ruling-Income Tax- Tribunal held that during
    the said years, no interest free advances to sister concerns were made and,
    therefore, there was no nexus between "interest bearing loans" taken and
    "interest free advances".
    However, the Tribunal found that there was no material to show that
    advances were made to sister concerns out of the firm's own income and,
    therefore, the assessee was not entitled to deduction under Section 40(b)(iv)
    of the 1961 Act.

  • whether Section 40(b) is a
    stand-alone section or whether it operates as a limitation to the deduction
    under Sections 30 to 38 of

  • Whether the claim for
    special deduction made by the assessee exclusively came only under Section
    40(b)(iv) and that it never came under Section 36(1)(iii) of the 1961 Act

  • the assessee-firm, in the
    present case, was required to prove that it was entitled to claim deduction
    for payment of interest on capital borrowed under Section 36(1)(iii) and that
    it was not disentitled under Section 40(b)(iv). There is one more way of answering the
    above contention. Section
    36(1)(iii) and Section 40(b)(iv) both deal with payment of interest by the
    firm for which deduction could be claimed, therefore, keeping in mind the
    scheme of Chapter IV-D every assessee who claims deduction under Sections 30
    to 38 is also requires to establish that it is not disentitled under Section
    40. It is in this respect that we
    have stated that the object of Section 40 is to put limitation on the amount
    of deduction which the assessee is entitled to under Sections 30 to 38. In our view, Section 40 is a corollary
    to Sections 30 to 38 and, therefore, Section 40 is not a stand-alone

  • Once it is
    found that the loans granted in August/September 1991 continued upto AY
    1997-98 and that the said loans were advanced for business purposes and that
    interest paid thereon did not exceed 18/12% per annum, the assessee was
    entitled to deductions under Section 36(1)(iii) read with Section

  • ______________________Ðashrath> Maheshwari __________________________