Interest on Loan on assets Tax Deductible
SC ruled that the interest paid on borrowings for the purchase of capital assets but "not put to use" in the current financial year is eligible for income tax deduction. In Core Health Limited claimed deduction under section 36(1) and 36(III)of IT Act,1961 on the ground that the machinery borrowed by it by paying interest to the the tune of such amount was not put to use. IT department rejected the plea on argument that the assessee was not entitled to deductions in view of sec. 43(1), which specified the actual cost" for the purpose of assessment. Above view of revenue was rejected by both tribunal and High Court. SC held that money borrowed for the business is necessary expenditure in a business,for which assessee is entitled to deductions.
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