Kerala HC Denies Interest Deduction as Borrowed Funds Were Invested as Capital in Partnership Firm

Alice Arun Thomas Vs ITO (Kerala High Court) The Kerala High Court dismissed the appeal challenging the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, which had denied the assessee’s claim for deduction under Section 36(1)(iii) of the Income Tax Act. The appellant contended that she had borrowed money from the open market and invested the borrowed funds as capital in a partnership firm of which she was a partner. According to her, the firm paid interest on such capital investment, and the interest received was used to repay the persons from whom she had borrowed the money. ...