Allowing the appeal of the revenue the Court held that , interest paid on deposits in violation of S.4 of the Kerala Money Lenders Act and S.45S of the RBI Act, is held to be not allowable as deduction , since the acceptance of deposits being prohibited by law , Explanation to S.37(1) of the Act is applicable . (AY. 2007-08 to 2012-13 )
CIT v. Arun Thomas ( 2018) 161 DTR 161/300 CTR 276 (Ker) (HC)
S. 37(1) : Business expenditure -Acceptance of deposits prohibited by law- Interest paid on deposits is held to be not allowable as deduction in view of Explanation to S. 37(1) of the Act .[ Kerala Money Lenders Act, 1958,S.4, 17 , RBI Act, 1934 S. 45S ]