Whether benefit of section 80V would be available to the Assessee if the borrowings were taken for the purpose of payment of tax? And whether disallowance under rule 6D should be computed with reference to the total expenditure incurred by an employee or other persons during the entire year and not with reference to each trip separately?

Last updated: 07 August 2014

Court :
Bombay High Court

Brief :
In AY 1985-86, the Assessee had paid interest on deposits and claimed deduction under section 80V of the I.T. Act 1961 as the said deposits were primarily obtained for the payment of taxes under the I.T. Act. The Assessing Officer rejected the claim for a deduction under section 80V and ordered that 15 % of the interest paid be disallowed under section 40A(8) of the Act. In Appeal, the CIT (Appeals) allowed the claim of the Assessee under section 80V of the Act. The same was also upheld by the Tribunal. The CIT (Appeals)directed the Assessing Officer to recompute disallowance under Rule 6D of the Rules on the basis of the aggregate trips of eachemployee and not on the basis of each trip undertaken by the said employee. Held that benefit of section 80V would be available to the Assessee if the borrowings were taken for the purpose of payment of tax.On analysing section 37(3) of the Act, along with Rule 6D of the I.T. Rules 1962, the court held that disallowance under rule 6D should be computed with reference to the total expenditure incurred by an employee during the entire year and not of each trip separately.

Citation :
CIT Appellant Versus M/s Mafatlal Dyes and Chemicals Ltd Respondent