Nirma Ltd. v. Assistant Commissioner of Income-tax
[Citation -2017-LL-1011-17]
| Citation | 2017-LL-1011-17 |
|---|---|
| Appellant Name | Nirma Ltd. |
| Respondent Name | Assistant Commissioner of Income-tax |
| Court | HIGH COURT OF GUJARAT AT AHMEDABAD |
| Relevant Act | Income-tax |
| Date of Order | 11/10/2017 |
| Judgment | View Judgment |
| Keyword Tags | business or profession • colourable device • capital borrowed • capital asset • interest paid • business purpose |
| Bot Summary: | Tax appeal was admitted for consideration of following substantial question of law: Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that interest on Special Purpose Notes was required to be disallowed when the said interest was in respect of the capital borrowed for the purposes of the business of the appellant 2. Since all the three authorities have reached at the same conclusions but by adopting slightly different routes, if we superimpose the orders of the three authorities below eliminating the repetition, the following principal objections of the Revenue emerge : i) The borrowing was for capital expenditure. The interest on such borrowing therefore, cannot be an allowable deduction. Iv) The entire transaction was a sham and colourable device to avoid tax. We may recall the assessee's claim of deduction arises out of section 36(1)(iii) of the Act under which while computing the income under section 28 of the Act, the deduction of the amount of interest paid in respect of capital borrowed for the purposes of the business or profession would be a deductible expenditure. While confirming the decision of this Court, it was held that for the said deduction, all that was necessary was that the money i.e. capital must have been borrowed by the assessee, that it must have been borrowed for the purpose of business and lastly, that the assessee must have paid interest on the borrowed amount. Under the circumstances, this Tax Appeal is allowed. |