Law:

Section:

Section 35D of the Income-tax Act, 1961 - Preliminary Expenses Where borrowings were from specified categories of financial institutions and banking institutions under Explanation (c)(i ) to section 35D(3), amount of borrowings in question was required to be included for purpose of capital employed for purpose of deduction under section 35D, even though borrowing was in nature of a bridge loan, i.e. a short-term borrowing [In favour of assessee] Dy. CIT v. Core Healthcare Ltd. [2009] 308 ITR 263 /221 CTR (Guj.) 580 Where the revenue's contention was that for the purposes of computing the figure as stipulated by sub-section (3) of section 35D, capital employed in the business of the company had to be worked out and the said definition, read with the definition of long-term borrowings, indicated that any short-term borrowing could not be treated as capital employed in the business of the company : Held that 'long-term borrowings' mean under sub-clause (i) of clause (c) of the Explanationany money borrowed by the company from Government, or the Industrial Finance Corporation of India or the Industrial Credit and Investment Corporation of India or any other financial institution, which is for the time being approved by the Central Government or any banking institution. Therefore, on a plain reading it becomes apparent that the borrowing has to be from any of the four entities mentioned in sub-clause (i) of clause (c ) of the Explanation. No time limit for the purpose of borrowing is laid down in the provision. This assumes significance when one compares the same with sub-clause (ii) of clause (c) of the Explanation wherein it is specified that it should be a period of not less than seven years. Thus, once it is established that the borrowing is from any one of the four entities as specified, the same would be treated as long-term borrowing for the purpose of working out the aggregate of capital employed in the business of the company. In the instant case, the borrowings were from the specified categories of financial institutions and banking institutions under Explanation (c)(i ) to section 35D(3) and, therefore, the amount in question was required to be included…

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