banner_ad

Section 37(1) and 36(1)(iii)

Tax queries 552 views 1 replies

Hi,

The facts of the case are as follows. A Co-operative Society covered under Co-operative Societies Act paid interest on share captial to the share holders, complying with the Societies Act. The Revenue disallowed such interest u/s 36(1)(iii) stating that the same is NOT paid on borrowed capital.

The querry is, whether the same interest can be claimed u/s 37(1) basing on the following arguments.

All the conditions of Section 37(1) are complied with, viz.

i) The expenditure is revenue in nature. (ii) The expenditure is wholly for the purposes of business. (iii) The same is NOT in the nature of personal and (iv) The is same is not covered u/s 30 to 36.

The fourth requirement u/s 37(1) is applicable on the following reasons.

a)The interest u/s 36 is applicable for BORROWED CAPITAL. But, the interest under discussion is on SHARE CAPITAL.

b)The Revenue disallowed the expenditure stating that the same is NOT covered u/s 36(1)(iii).

Further, the expenditure is not illegal or opposed to public policy.

Replies (1)

I guess... the expenditure for Interest on Share Capital is not for business purposes...

it in no way can be tied to a transaction with non owners.. again, it is not essential for the business.. its just an arrangement to compensate the owners for there contribution to the common fund in place of the normal dividend  that should have been paid...

But sorry to say that i dont know much about Soceities and so i can b wrong...wait for other posts please


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
22 May 2026
U.S. Financial Reporting & Consolidation Manager

Karia Overseas

Ahmedabad

CA

View Details
Company
19 May 2026
Article, CA & Paid Assistant Positions

Aggarwal Sarawagi and Co

New Delhi

CA

View Details
Company
26 May 2026
CA / MBA (Finance) / CMA / M.Com (Finance)

Sri Aurobindo Gnostic Centre of Education

New Delhi

CA

View Details
Company
14 May 2026
Financial Analyst - Remote Finance Expert

HiringBridge

Ahmedabad

CA

View Details
Company
Featured 27 May 2026
Lead Conversion Executive / Sales Closing Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
19 May 2026
Fundraising Expert

MentorsWorld Ventures Private Limited

Ahmedabad

Others

View Details
Company
14 May 2026
ICSI Trainees for 21 Months and Semi-Qualified CS

CMNITY HIRE

New Delhi

Others

View Details
Company
ARTICLESHIP 15 May 2026
ARTICLE ASSISTANT, TRAINEE AND PAID ASSISTANT

YOGESH KAPOOR AND ASSOCIATES

New Delhi

B.Com

View Details