Law:

Section:

Section 36(1)(iii) of the Income-tax Act, 1961 - Interest on borrowed capital - Assessment years 1989-90 and 1990-91 - Assessee-company claimed deduction in respect of interest paid on amount borrowed on ground that it wanted to have control over another company after purchasing its shares - Though assessee was running in huge losses, yet it had advanced interest-free loan to its subsidiaries - Tribunal rejected claim of assessee holding that interest-free loan given by assessee was not for purpose of its business and that there was no justification to advance loan to its subsidiaries free of interest for purchase of shares - Whether Tribunal's finding was not perverse - Held, yes FACTS The assessee-company did not have its own sufficient funds to run its business and was running in huge losses. The assessee in the relevant assessment years claimed deduction in respect of the interest paid on the amount borrowed on the ground that assessee wanted to have control over another company after purchasing its shares. The assessee had given advance, free of interest, to its subsidiaries. The Tribunal rejected the assessee's claim holding that it was not the business of the assessee to purchase and sell the shares and also that since assessee-company was running in huge losses, there was no justification to advance interest-free loan to its subsidiaries for purchase of shares. On appeal : HELD Whether deduction should be allowed or not, whether interest-free loan advanced to the subsidiaries was for purpose of business, was basically a question of fact. No substantial question of law did arise for consideration. Otherwise also, the finding of fact of the Tribunal that interest-free loan to its subsidiaries was not for the purpose of business was not perverse, nor was there any justification to pay huge amount of interest on the borrowings and advance the loan to its subsidiaries free of interest. No interference was called for in the order of the Tribunal. [Para 7] The appeal stood dismissed. Sanjay Jhanwar for the Appellant. ORDER 1. Heard learned Counsel for the appellant. 2. In these two appeals, following questions are proposed to be considered, being the…

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