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.
CAclubindia
