The Court held that interest on borrowed capital is held to be allowable. Presumption that investment was made from interest-free funds. Court also observed that proviso to Section 36(1)(iii) applies only to extension of business and not expansion of business. Further the proviso does not have retrospective operation. Res judicata is not applicable to income tax proceedings but principle of consistency must be followed. (AY.2010-11)
Coffeeday Global Ltd. v. Add. CIT (2021) 433 ITR 321 / 202 DTR 217/ 322 CTR 336 (Karn.)(HC) PCIT v. Amalgamated Bean Coffee Trading Co. Ltd. (2021) 433 ITR 321 / 202 DTR 217/ 322 CTR 321 (Karn.)(HC)
S. 36(1)(iii) : Interest on borrowed capital-Presumption that investment was made from interest-free funds-Disallowance of interest is held to be not justified-Expansion and Extension of business-Proviso to Section 36(1)(iii) applies only to extension of business-Proviso does not have retrospective operation-Res judicata is not applicable to income tax proceedings but principle of consistency must be followed.