Gvk Inds. Ltd & Anr vs The Income Tax Officer & Anr on 1 March, 2011
6. I have heard both the parties and perused the material on
record. The contention of the ld.A.R is that the assessee has made
investments in the partnership firm out of borrowing money from the
various parties and Sec.14A cannot be applied to the facts of the
present case. It is also submitted that the assessee, in addition to
share of profit from the firm, also received interest on capital from the
firm and also salary from the firm, which were taxable under the head
"income from Business". Being so, the interest paid by the assessee
to be set off against the interest and salary received from the firm.
Admittedly interest received from the firm on capital is taxable in the
hands of assessee under the head "income from business or
profession". Hence, interest paid by the assessee on borrowings
used for investments in the firm as capital to be allowed u/s.36(1)(iii)
of the Act. For this purpose, we place reliance on the decision of
Delite Enterprises (P.) Ltd., Vs. Income Tax Officer in [2008] 22 SOT
245 (ITAT[Mum]) wherein held that the interest paid by the partners
on funds borrowed for investments in firm is allowable u/s.36(1)(iii) of
the Act, since the interest received from firm is taxable as bas income
u/s.28(v) of the Act. However, it cannot be set off out of salary
8 ITA No. 103/Mds/2017
received from firm is with regard to skill and workman exercised by
the assessee.