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.
stand-alone section or whether it operates as a limitation to the deduction
under Sections 30 to 38 of
Act?
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
?
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
section.
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
40(b)(iv)-AIT-2008-62-SC
______________________Ðashrath> Maheshwari __________________________
CAclubindia
