Dismissing the appeal of the revenue the Court held that the expenditure claimed under section 36(1)(iii) of theIncome-tax Act, 1961 on account of interest paid on borrowed capital for expansion of business was allowable revenue expenditure. The Explanation to the proviso to section 36(1)(iii) had not made the amendment retrospective but only prospective.
CIT v. Modern Threads (I) Ltd. (2018) 400 ITR 381 (Raj) (HC) CIT v. Modern Syntex (2018) 400 ITR 381 (Raj) (HC)
S. 36(1)(iii) :Interest on borrowed capital – Borrowings for expansion of business, interest was held to be allowable as deduction-Amendment to S.36,with effect From 1-4-2004 is prospective and not retrospective.[ S. 37(1) ]