| Court: | ITAT, Panaji, Goa |
| Head Notes: | Interest attributable to borrowings irrespective of its nature and type utilized in creating Capital assets or Capital-WIP which is yet to put to use/operation or commercial production therefrom yet to start has rightly subjected to disallowance by virtue of proviso to section 36(1)(iii) of the Act. From the assessment year 2004, in creating any capital asset if there is use of any borrowed fund may it be any type working capital or term loan or a loan against property commonly referred as LAP or gold loan etc., the interest thereon would not be qualified for deduction u/s 36(1)(iii) of the Income Tax Act. The decision came in favour of Department on the basis of judgement of Honourable Supreme Court of India. |
| Law: | Income-Tax Act |
| Section(s): | 36(1)(iii) of Income Tax Act |
| Counsel(s): | Shri N Shrikanth |
| Dowload Pdf File | Click here to download the file in pdf format |
| Uploaded By | Adv Milind Vernekar |
| Date of upload: | January 30, 2024 |
A fine distinction has been made in this order. The Tribunal by this order settled the position that what is not material for the purpose of capitalization of interest and what does exactly.
This clarified that once interest bearing funds are borrowed for whatever purpose, but used for the purpose of asset or in creating an asset other than stock in trade, capitalization of interest is triggered from the date of use or utilization till earlier of asset put to use or repayment of such borrowed fund with non interest bearing funds or capital.