Case Law Details
ACIT Vs Frontline Realty Pvt. Ltd. (ITAT Mumbai)
Section 36(1)(iii) of The IT Act provides as under-
(iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession :
Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction….
This section was amended twice viz: by Finance Act 2003 and Finance Act 2015. Before the amendments, a deduction was allowed in respect of interest on capital borrowed for the purposes of business or profession. The said provision has been prone to litigation on the issue of allowability of interest on borrowings for acquisition of assets for extension of business for the period during which the asset was not yet put to use. It was therefore, provided that with effect from assessment year 2004-05, no deduction will be allowed in respect of any amount of interest paid, in respect of capital borrowed for acquisition of asset for the period beginning from the date on which the capital was borrowed for the acquisition of the asset till the date on which such asset was first put to use.
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